Signed into law by President Joe Biden just over a month ago, the Inflation Reduction Act is already prompting corporations—from automotive titans such as Honda and Toyota to lesser-known manufacturers of batteries and solar panels—to spend billions on new technologies and facilities that will help curb their carbon emissions.
About $369 billion of the climate bill’s $740 billion in spending is earmarked for climate action, in the hopes that it will spur new investments in things like wind and solar power, efficient appliances, electric vehicles, community-level clean energy solutions, and smart agricultural practices. This would help get the nation on track to meet the United States’ commitment to cut greenhouse gas emissions by 50 to 52 percent below 2005 levels by 2030 in the hopes of staving off the worst climate consequences.
But there’s another way of calculating the value of the Inflation Reduction Act: money not spent.
The social cost of climate pollution
Quantifying the toll that climate pollution takes on different aspects of society—public health, agriculture, housing and infrastructure, and productivity—has always been a complex undertaking. So, beginning in 2010, as part of an Obama administration task force, a group of U.S. government economists from across a variety of agencies came together to devise a formula for calculating the economic impact of introducing a single ton of carbon pollution to the atmosphere. They labeled this figure, which could be represented in dollars, the social cost of carbon.
Seeing how much it costs us to add an extra ton of carbon to our atmosphere has its uses. But from a policymaking perspective, it may be even more worthwhile to calculate how much we can save—simply by avoiding that extra ton. And that’s exactly what the White House did recently when it released a new report from the executive branch’s Office of Management and Budget (OMB). The report uses social-cost-of-carbon modeling to determine just how much money we all wouldn’t be spending on climate-related costs as a result of the programs and policies set forth by the Inflation Reduction Act.
The estimate? As much as $1.9 trillion between now and 2050.
That’s a staggering number of dollars to keep in taxpayers’ pockets. But when you stop to consider what, exactly, we won’t be spending that money on, it’s even more impressive. The OMB’s report singles out three areas, in particular, where significant savings will likely be achieved: by avoiding negative health impacts (including deaths from extreme weather, such as heat waves, and the spread of climate-fueled diseases); reducing property damage from sea level rise and natural disasters; and alleviating the costs associated with increasing temperatures—costs that can be reflected in everything from higher crop insurance premiums (not to mention, food costs) to soaring home air-conditioning bills.
A game changer for decarbonization
In the weeks since the climate bill’s passing, results from other studies have also inspired optimism. One nonpartisan, energy-focused think tank projects that, by 2030, the act could create as many as 1.3 million jobs and prevent up to 4,500 premature deaths and nearly 120,000 asthma attacks by reducing fine particulate matter—all while cutting U.S. greenhouse gas emissions up to 43 percent below 2005 levels. (Like other studies, this one supports the idea that the Inflation Reduction Act will put the country within striking distance of its climate goal.)
Another major think tank that studies global economic trends predicts the act will be “a game changer for U.S. decarbonization,” and sees it cutting annual household energy costs an extra $112, on average, by 2030. This is in part thanks to the related prediction that clean energy could be supplying more than 80 percent of all U.S. electricity by that same year.
Do the math
Before any skeptics counter with, “Well, the OMB’s $1.9 trillion figure surely represents the high end of the savings estimate, which the White House has every reason to trumpet,” they should consider this fun fact: The OMB’s low-end savings estimate comes out to more than $745 billion. This means that the money we would save over the next 18 years as a result of the bill’s climate components—even if we were to use the most conservative of models—is still greater than the total cost of the Inflation Reduction Act itself. (By $5 billion, if you want to be precise about it.)
What’s more, that $1.9 trillion is likely a lowball calculation. In its report, the OMB notes “the interim social cost of carbon estimates are currently significantly underestimated because they do not account for many important climate damage categories, such as ocean acidification.” The figure also doesn’t include cost savings from other types of pollution that will decline, such as nitrogen oxide (NOx) and sulfur dioxide emissions (think acid rain), nor does it consider the act’s impact on international climate emissions.
Given that the Inflation Reduction Act is already driving companies to innovate and create new jobs—and considering that nearly all projections have it saving taxpayer money by the trillions, saving lives by the hundreds of thousands, and easing the burdens associated with climate change and pollution for pretty much everyone—it’s hard to believe that some people are still vehemently opposed to it. Predictably, opponents are cynically trying to cast it as a “massive spending bill” and hoping that the sight of its $740 billion price tag alone, without any added mention of what we’ll actually be getting for the investment, is enough to sway public opinion and turn people off.
It won’t work. Anyone who has ever saved up and shelled out the money to replace, say, a worn-out, energy-hogging home appliance with a new, energy-efficient version thereof understands the difference between investing and merely “spending.” And anyone who has ever made a household budget and happily discovered a way to save on future expenses understands that any money that you’re not forced to spend fixing tomorrow’s problems becomes money that you get to spend on the things you actually want—and need.
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