How the Inflation Reduction Act will change our country (and our planet)

[MUSIC PLAYING] DAN RICHARDS: From the Watson Institute for International and Public Affairs at Brown University, this is Trending Globally. I'm Dan Richards. Last year, the biggest piece of climate legislation in American history was signed into law. However, it wasn't always touted as such. Even its name avoided the subject.

SUBJECT 1: This huge new bill. It's called the inflation--

SUBJECT 2: Reduction Act. It is a hard-fought victory--

SUBJECT 3: Inflation Reduction Act--

SUBJECT 4: Is Inflation Reduction Act.

DAN RICHARDS: This quirk actually puts it within a long lineage of federal climate legislation, according to our guests on this episode, Leah Stokes and Jeff Colgan.

LEAH STOKES: That actually continues a trend, I would say. The fact that Congress is sort of responding to the energy crisis and that that's the way it's branded and focused is pretty much how Congress has done climate and clean energy policy in the past.

JEFF COLGAN: In many ways, the progress we make on climate change is best done when the word climate is never mentioned at all.

DAN RICHARDS: Jeff is a political scientist and director of the climate Solutions Lab at Watson. Leah is an associate professor of environmental politics at the University of California at Santa Barbara, and she actually helped to write the climate-related measures in the Inflation Reduction Act. To understand the relationship between the science and the politics of climate change in the US today, you couldn't ask for two better guests.

As they explain on this episode, the Inflation Reduction Act's name is just one example of how this legislation was shaped as much by the politics of a closely divided Senate as it was by the science of climate change. I spoke with them about the contents of the bill and how it will hopefully contribute to the global effort to slow climate change.

We also discussed its political ramifications because, along with reshaping our electrical grid, the Inflation Reduction Act might also rearrange America's political landscape. We started with the name of the bill and what it can tell us about the politics of climate legislation in America. Here's Leah.

LEAH STOKES: The times when we've had the federal government act on climate or clean energy more broadly is when we've had energy crises. So in Nineteen Ninety-Two, Congress passed a law called the Energy Policy Act. It had a really important provision for wind energy that basically kickstarted the industry. In Two Thousand-Five, Congress again passed a law called the Energy Policy Act, and it again had a really important provision that kickstarted the solar industry, a different tax credit.

And so it's kind of part of the trend that the focus is really on the energy crisis on inflation because it turns out that 40% of inflation was being driven by fossil fuels at the time that the law was passed.

JEFF COLGAN: In many ways, lots of the progress we make on climate change is best done when the word climate is never mentioned at all. So Biden's presidential campaign was always about jobs, jobs, jobs. And when I think climate, I think jobs.

And I think that is part of the way that we make the progress sticky and that we build constituencies who see, yeah, these are benefits that my family, my local community are appreciating, and we still get to drive to work or we at least we still get to heat our homes, and we still get to do all of the things that Americans expect from a modern lifestyle, but now we're doing it without fossil fuels that have been so problematic in the past.

DAN RICHARDS: And so, what are some of the major climate components of this bill? Because it's a massive bill, it also deals with other things like prescription drug pricing, but there's a huge component for dealing with climate change. What are the main features of it?

LEAH STOKES: It's a bit hard to unpack. A lot of folks will say it's $370 billion, but that's actually not true because a big part of the spending is uncapped tax credits. So that basically means that somebody made a guess about how much money we're going to spend on things like people adopting heat pumps or solar panels getting deployed or wind energy or even newer different technologies like batteries.

But we don't actually know. That's just a guess. And the people who made that guess, the Congressional Budget Office and the Joint Committee on Taxation, they tend to be kind of conservative. So it's not really $370 billion. Then if we want to break that money down, whatever that money ends up being, maybe a trillion dollars at the end of a 10-year period-- we'll find out-- if we want to break that down, we can think about it in a variety of buckets.

So the first one is about clean energy deployment at a large scale, sort of like corporate deployment grid-scale deployment. We have extensions and modifications of bedrock tax credits like those ones I mentioned that were passed in Nineteen Ninety-Two and Two Thousand-Five. Those are extended out for more than a decade. They're going to help out wind, solar, and for the first time, batteries.

We also have a huge bucket of money to do domestic manufacturing in a wide variety of industries. Everything from electric vehicles to batteries, to critical minerals, and even heat pumps.

DAN RICHARDS: Quick interruption here because that's the second time that heat pumps have come up, and it won't be the last, actually. So in case you're not familiar, heat pumps are electrically powered home heating and cooling systems. Typically, they are much more efficient than traditional boilers and furnaces, and they don't require fossil fuels to do the job.

They're just one increasingly visible example of the type of win-win-win technologies that now exist in the world of green energy. They're not just better for the climate, they're cheaper for consumers, and they're nicer to use. And this bill isn't just working to promote the manufacture of green technology like heat pumps in the US. It's also helping more Americans to purchase them, which brings us to the next part of the bill, as Leah explained.

LEAH STOKES: A third bucket is consumer-facing incentives. So there are a bunch of different programs to help people get a heat pump to get solar panels on their roof to buy an electric vehicle, even a used electric vehicle. So those are things that everyday Americans can access. There's also significant funding for environmental justice.

That's things like a bunch of money to create a green bank to help folks put solar panels on their roof or retrofit an affordable housing building or put heat pumps in a school in a low-income community. There's also money to clean up ports to help environmental justice communities engage in the process of setting environmental laws and also doing things like electrifying low-income communities.

And finally, C, it took a while. The last bucket, I would say, is there is a bunch of money for other harder-to-decarbonize industries. So things like $20 billion for climate-smart agriculture, a bunch of money to clean up heavy industry. So it's quite a sprawling bill. It touches a lot of the parts of climate pollution from the economy.

And I think it's hard for people to wrap their head around it because that was probably like three minutes just to explain, at a very high level, what was even in the bill.

DAN RICHARDS: Well, I love someone who does podcasts and has a sense of what a three-minute-long answer is.

LEAH STOKES: Yeah, that was long. But the bill is long. I mean, if you read the bill, it would take you a little longer. It's like 750 pages, so.

DAN RICHARDS: No, I will take that summary over reading the bill any day. Do you have like a favorite thing that's in this bill, something you're most excited about?

LEAH STOKES: Well, there's a bunch of different parts of the bill that I worked on, like your little babies or your children or whatever. Some parts of the bill that I worked on died on the cutting room floor like many things that were once in the bill, but there's now going to be money to help low and moderate-income folks electrify their homes.

That's going to be deployed out through state energy offices, and probably a million Americans are going to be able to retrofit their homes, put in heat pumps, insulation, that kind of thing. So that's pretty cool and exciting. In addition, when we lost this really big part of the bill that I had been working on, the Clean Electricity Performance Program, it was basically a federal clean electricity standard. We managed to get a bunch of other little pieces in as replacements.

There's around $18 billion to help utilities retire dirty infrastructure and replace it with clean infrastructure. So that's exciting. And there's another $5 billion for states to kind of define things that they want to do on climate to move faster. And that was the kind of flavor of what we wanted to do. We wanted folks to be moving faster and to be ratcheting up ambition.

So those are things that I worked on that I'm excited about, I'm proud about, and that I hope are going to really move the needle not just on reducing carbon pollution but also doing it in an equitable way.

JEFF COLGAN: One of the great things about having Leah here, I mean, she is not only a professor and a very serious academic who's contributed to our understanding of climate politics but also the fact that she has kind of gotten her hands dirty in doing some of the real work to design climate policies and help get them passed.

I will say I mean, other than any one part of the bill, the thing that I maybe love most about it is that Biden and his congressional allies went big, that they didn't just kind of try to chip away at these small things. Now, did they go big enough? Of course not. Not for environmentalists.

We understand the scope of the problem and the need to get there, but the idea of a bill that is going to have really kind of a seismic shift on the American economy and the American Industrial base that was the kind of thing that we needed. Whether it delivers all those results, well, that's, to a certain extent, still to be seen. But I think the intent is there.

How far is it expected that this legislation might get the US towards its commitments into international agreements like the Paris Accords? So the short answer is nobody knows for sure. Of course, we've had some really smart people model the expected results for it, including a group at Princeton led by Jesse Jenkins, who estimates that this bill would get us about 2/3 of the way there from where we were prior to the bill to getting to the Paris commitments.

And that's obviously good. 2/3 is a lot better than nothing, but it also points to the fact that the job's not over and that we need to do some further things in the future, not only at the federal level but at the sort of state and local level to make sure that the efforts to change how utilities behave, how we generate our power, how we manage our cities, all of that has to change.

LEAH STOKES: When the bill was being built from the ground up, leader Schumer's office was very focused on tracking potential carbon reductions. This was the heart of what they were doing. And the White House was, of course, very involved too with folks like Sonia Agarwal, who's now runs energy innovation, which is one of the modeling groups actually that modeled it from before, during, and after.

So they were looking very hard at OK, here's a line item in the bill. What is this line item going to do? How much carbon pollution is it going to reduce? How much money are we putting into it, and how much carbon pollution are we going to get out likely? Some of those things are super hard to estimate, and some of those things aren't even really about carbon pollution, first and foremost.

Things like reshoring manufacturing in the United States isn't really about carbon pollution, but it is about making sure that the law becomes sticky that we can actually access these technologies when we need them that we don't have to bring them across the oceans just to put a solar panel on someone's roof. So some of these things are a little bit harder to estimate what the carbon pollution is, but they did a really, really thorough job of figuring that out.

And when there were cuts that had to be made because Senator Manchin wanted them, they were really conscious about how is that going to affect the amount of carbon pollution cuts we're going to be able to deliver at the end of the day. So when Schumer and Manchin announced, to everyone's surprise, that they had come to a deal, they said that it would cut carbon pollution about 40% below Two Thousand-Five levels by Two Thousand-Thirty.

And why does that matter? Well, the president has said he will cut carbon pollution in half by 50% by Two Thousand-Thirty. And that is in line with what scientists say is necessary to limit warming to 1.5 degrees.

DAN RICHARDS: You brought up the idea of a law needing to be sort of sticky and harder to repeal. And maybe this is more of a question for the modelers of the world, but how much does that factor in? Is there any way to factor in, like, oh, well, we could propose this incredibly ambitious thing, but if it causes a backlash and gets repealed in two years, it's actually not going to be that great for us over the next decade. Does it like--

LEAH STOKES: No, that is a political science question, and actually, I've written a whole paper about that. It's called "Electoral Backlash Against Climate Policy." And it was a story of in Ontario, Canada, when they passed this really ambitious law for clean energy.

Folks got wind energy in a lot of communities, and people didn't want it. And they deployed it so fast, and they didn't really do any consultation or community benefit sharing with the communities. And so there's a huge backlash, and they ended up sort of freezing the policy, and wind energy went dormant for quite a while. So that can definitely happen.

I think the political economy theory at the heart of this bill is really that the bill is going to create good-paying, including unionized jobs in every corner of this country. And the early analysis are already showing that they're overwhelmingly going to rural areas to more Republican conservative districts, and that is going to change the politics because if there are people who are employed in red districts who are working for battery manufacturing or wind turbine facilities, they're going to want to keep this law in place.

And I think it could be pretty sticky. And in general, at the federal level, American laws are fairly sticky. Think about the Affordable Care Act and all the ink that was spilled and the speeches that were given on the floor about how the Republicans were going to repeal this terrible Obamacare law and, well, it still exists today. So hopefully, that will be how it plays out to for the Inflation Reduction Act.

DAN RICHARDS: One thing you both have touched on, too, is the challenge of like implementation in this bill. There was the challenge of getting the bill passed, but there's so many technical, logistical legal things that need to continue to get sort of ironed out in the process of these effects being manifest. And I was reading something in your hometown paper, I believe.

LEAH STOKES: In Santa Barbara?

DAN RICHARDS: Yeah, about an issue you were having installing solar panels on your roof. And it's a small example of a hang-up towards some sort of green transition, but multiply it over municipalities and states, it reminds me a little bit of sort of NIMBY-type debates with housing, and there's the scale of that how quickly it can have a big effect.

I wonder what do you see as the role of local and state governments in terms of hindering this legislation or accelerating it.

LEAH STOKES: It's going to be huge because some of the policies are actually implemented by the states through what we call state energy offices, for example. I work with an organization called Rewiring America. Its mission is to electrify a billion machines because right now there's a billion, machines in the United States that are running on fossil fuels that we need to electrify, and we can.

DAN RICHARDS: Like cars. You mean like machines--

LEAH STOKES: Like your furnace or your hot water tank, your car. It's interesting. I've been starting to think about how if you own a home, you're kind of operating a fossil fuel power plant. And people haven't thought of it that way, but it's true like you're a power plant operator. It's just that your power plant heats water and warms air.

And the cool thing is that there's now technologies available for you as the power plant operator to run it on clean electricity rather than on dirty fossil fuels. So you can get a heat pump which both heats and cools your home with clean electricity and will likely lower your electricity bill your energy bills. You can get a heat pump hot water tank. You can get an induction stove rather than your gas stove, for example.

And folks are starting to realize the really important health benefits of doing that, too, irrespective of the climate benefits. So that's what needs to happen all across the country. And we need local governments to make that really easy for folks to get a permit to change out their furnace. We need states to put out more incentive programs.

Up in Maine, there's a program called Efficiency Maine, and now about one in six households in Maine have a heat pump. And they're not using, for example, as much oil or propane, delivered fuels that's super, super expensive to run your house on. And people really like heat pumps because they heat your home more consistently. They also give you air conditioning.

So folks in Maine are like super excited about having heat pumps, actually, and that's because there's a state program that made it more affordable for everybody to do it. So that's what we need to have happening all across the country. It's going to take the federal legislation but also state and local action to kick-start that. And that's some of the work that, for example, Rewiring America is doing to try to make sure that happens in a really robust way at the state and local level.

JEFF COLGAN: When we talk about shifting to a green economy or a low carbon economy. We should know also that it's not just about the electricity sector and the home furnaces and all the rest which, of course, are really important. But when we think about, say, the experience here in Rhode Island, we have the offshore wind project, first offshore wind project in the country, off of block Island that really highlighted how many other industries that you wouldn't think of necessarily as climate industries but are going to be really essential for making the kind of energy transition that we want to see in the country.

And so right now in Rhode Island, there are some jobs that might not be labeled as climate-related but are all about ship construction for building the right kinds of ships to service offshore wind farms and providing the right infrastructure, the right ports. When we're building these offshore wind farms, these are enormous structures. Even just the blades of each wind turbine like the length of a football field. So they're just massive beasts, and getting the right kind of industrial structures to do that is important.

And it's also, to Leah's point, an opportunity for these climate-related industries to provide local jobs. I think that's an essential part of the transition that we're talking about. And last point on this, I'll just say part of what we've been doing at the Climate Solutions Lab here is to help highlight some of the benefits from having an economic shift towards a decarbonized world. And so we always hear in the media about the costs and the billions of dollars this is going to cost, and that's real, and we're not denying that.

But we also want to point out that there are some real benefits that come with it. And so you can go to the website that we created, type in any zip code in the country and find out some of the benefits that would accrue to that community in terms of reduced asthma cases, shorter commute times, more local jobs, et cetera, and get some real numbers on that they got in a real sense of why this might provide some upside that isn't just about the environment. It's also about sort of other more tangible things as well.

DAN RICHARDS: Totally anecdotally, in the last two years, I'd say even in the last year, there's been some flip where people I know who are-- and I'm in a certain demographic-- but all of a sudden, everyone's interested in an electric car. It was like an exponential growth moment. Have you guys sensed that at all or?

LEAH STOKES: Yeah. No, it's not just sensing it. It's happening. You can see it in the data the EV demand has gone through the roof and is outpacing projections that modelers were making, for example. And it's not surprising. I mean, I have had an EV for five years, maybe or something like that now, and charging basically free. I mean, like filling up your car, it doesn't cost money, essentially.

So when you compare that to folks filling up their car, and it's costing like $80, $100 every single time, that's a really big difference. And energy innovation has shown that you can buy an EV, and within the first month of driving it off the lot, the difference in terms of the cost between an EV and a combustion engine car it's paid for itself essentially.

Plus, they know that they're really great cars. They don't need as much maintenance. They don't have as many moving parts that break. I have never once taken my car in to be serviced since I got it five years ago. It's like very easy to use, I would say.

And then, when it comes to heat pumps, people are excited because they actually provide a better heating experience in your home. They deal with humidity better. They give you air conditioning as well. In a lot of places, they lower your energy bills. So I think people are really excited about heat pumps because they're better.

And again, the data is showing that heat pump sales actually outpaced gas furnace sales last year for the first time. So we're at that inflection point for heat pumps too, even if people are saying, oh, it's impossible to get a contractor-- I mean, that's flipping really fast. If more people are buying heat pumps than buying gas furnaces, that means the industry is starting to shift.

JEFF COLGAN: It's worth saying, too, from a global perspective, it's really exciting to see some of the take-off in trends in this country and in Europe, but we got a long way to go. And a big part of the problem, of course, is going to be in the global South and getting these technologies adopted around the world. And it has to happen this way in some sense where it's going to be the global North is the innovators, and then the technology diffuses.

But when we think about the timeline and up against the challenge that we're facing, the faster we can push that diffusion around the world, the better.

LEAH STOKES: But the interesting thing, as Jeff was saying, is that when you deploy a technology at a large scale like solar panels or batteries or electric vehicles or now heat pumps, what happens is you learn how to do it more cheaply and the costs start to fall. This is an engineering idea called the learning curve or the experience curve. The more you build a semiconductor or a cell phone, the costs come down.

And so the cool thing is that as the West, Europe, and North America and increasingly also, for example, East Asia, adopts heat pumps at this massive scale and starts manufacturing them more and deploying them more, that's going to bring down the cost. And it's going to make it a lot easier to help developing countries also get access to these technologies at a cheaper price.

This is what we've seen happen in solar, for example. If you had tried to put solar in developing countries at the beginning of the solar revolution, it would have been exorbitant, really, really expensive. But as work from Greg Nemat, a scholar at the University of Wisconsin, shows, through this experience curve of different countries leveling up and deployment or in manufacturing, they've actually brought down the cost globally for this technology so that now it's affordable to put it in for example, in India.

That's the kind of dynamic that we need to see for all the clean technologies.

DAN RICHARDS: So would you say this bill is sort of part of creating that transition out of an entrepreneurial phase into a bigger industry growth phase? Is that a fair way of kind of thinking about it, or is it still in the investment, in experimentation, and innovation?

LEAH STOKES: It depends on the technology to some extent. And we haven't talked about the other bills that went alongside the Inflation Reduction Act. So there was something called the IIJA, which some people just know as the bipartisan infrastructure law. Basically, the law that was passed before in a bipartisan way that invested in things like clean school buses and public transit.

So there's a bunch of technologies in that bill which are more in the innovation development phase like, for example, carbon capture and sequestration and hydrogen. So those technologies which a lot of money has been poured into and not a lot to show for it are much more in the research and development demonstration phase. And so that law has a bunch of demonstration money.

By contrast, the technologies that we've been talking about are in what we would call the deployment period. So solar panels, they work. We know how they work. Let's just make more of them in the United States, stick them on more people's roofs. Help low-income folks get them. So, for example, there's like $7 billion for low-income solar in the inflation Reduction Act.

So it depends on the technology. And some technologies you can put sort of endless money into, like nuclear fusion, and you never quite seem to get to the deployment phase.

JEFF COLGAN: That's right. I mean, I think some of the money that's being deployed through the inflation Reduction Act will help address some concerns around racial disparities that we've had for a long time that I think are really important and worth flagging. So one study that I think is quite striking is we can see that households that are people of color have a lower adoption rate of some clean technologies than white households.

And that's true even when you control for income. Often that's related to historic practices and zoning and all those other things that are involved. But I think to the extent that we can start, as I say, when we move out of this sort of entrepreneurial innovation stage to the deployment phase, we're able to start to address those kinds of issues as well.

DAN RICHARDS: So some of these future challenges and projects that are still more in entrepreneurial phases brings up a final question, which is what would you guys hope to see in a future climate bill? Let's say we get another bite at the apple of this size at some point in the next few years. And I'm sorry if that's upsetting to even have to imagine, given how much work you've just put into the most recent one, but you know what are things you'd love to see in the next one?

LEAH STOKES: No, definitely not upsetting. There were many things left on the cutting room floor. So we tried to get a clean electricity standard passed through the law. It was called the Clean Electricity Performance Program, and it basically required utilities to clean up their electricity mix at a rate of 4 percentage points a year, which is about double the historic average, so to move faster to move at the pace and scale that's necessary.

I think what we still got in the law gets us moving in that direction. Whether or not it does at the pace that we need to is an open question. I think we need more on workforce training. We're clearly going to need more electricians. We're clearly going to need more folks going into households to install these HVACs, all these kinds of changes that need to be made.

So I think that more on workforce training would be very important and exciting. And I think that we will see how far the investments that we have get us on reducing the racial gap in terms of adoption of clean energy technologies. There is that $27 billion for the Green Bank, and that's going to be revolving to some extent. There's $3 billion for the EJ community block grants.

But we don't know how far that's going to take us, and it's probably not going to take us far enough. So I think additional investments, particularly in disadvantaged communities, to really fully deliver on the promises that President Biden and Leader Schumer have made, I think that those are going to be really important things because, for example, the home energy retrofit programs that I worked on to help a million households, for example, electrify that's only a million households.

There's like 170 million households I think that we have to electrify, and so it's not enough.

DAN RICHARDS: Jeff

JEFF COLGAN: Big picture, the things that we could do much more on, are coal and methane. Coal and methane are the two areas where we have the technology now to just not use coal for most applications, certainly for burning it for electricity generation. We should just not do that anymore and retire coal plants at the fastest rate possible.

And then on methane, I mean it is just embarrassing the sort of inefficiencies that we have around methane. The International Energy Agency estimates that we could eliminate 75% of methane leakage around the world at zero net cost. We are essentially letting this gas out of our pipelines. That's actually a valuable gas.

We could burn it-- and that has problems as well. But it's actually much better to burn it than to just let it leak into the atmosphere. And so the opportunities there are large. Recently, the head of the International Agency pointed out that at the moment, big oil and gas companies are making massive windfall profits in part thanks to the Ukraine war, and some of those profits can and really should be reinvested in reducing methane leakage and flared gas as well.

And so those opportunities are right there, kind of low-hanging fruit. If I had my dream US Senate makeup for tomorrow, that's the kind of opportunities that I think are waiting to be had without, in any way, modifying what Leah said, which is that I'm much happier with the world in which we have an Inflation Reduction Act versus the one where we don't.

LEAH STOKES: With the methane fee in it, although not high enough. So I forgot to talk about the methane fee when I did the overview, so there you go. There's too much in the law.

DAN RICHARDS: Well, for listeners who want to learn more about any of the things we've talked about in this episode, we'll put a link to your podcast Leah in the show notes of this episode. It's called A Matter of Degrees.

LEAH STOKES: Yeah, we just wrapped up season three of A Matter of Degrees, and there's, I don't know, maybe 30 episodes up already that are super cool go into different topics of climate change. And it's a narrative podcast meaning that we interview people, and it's scripted, and it's like a very highly produced podcast. If people like podcasts, I think they will like A Matter of Degrees.

And you can pick lots of different topics you want to learn more about. You want to learn more about justice and what we need to do more to create equity? We have an episode on Justice 40. You want to learn more about coal plant debt? We have a coal plant data debt episode. It's called The Win-win-win Strategy to Retire Coal, I believe. We got it all.

DAN RICHARDS: Jeff, Leah, thank you so much for coming on to the show.

LEAH STOKES: Oh, thanks so much for having us on. It was great to be here.

JEFF COLGAN: It's my pleasure. Thanks, Dan.

DAN RICHARDS: This episode of Trending Globally was produced by me Dan Richards. Our theme music is by Henry Bloomfield. Additional music by the Blue Dot Sessions. If you like the show, leave us a rating and review on Apple Podcasts or Spotify or wherever you listen. It really helps others to find us.

And better yet, if you have a friend who you think might like the show, tell them about us. We'll put a link to Leah's phenomenal podcast, A Matter of Degrees, in the show notes. If you like this episode, you will love her show. If you have any questions, comments, or ideas for guests or topics, send us an email at trendingglobally@brown.edu. Again that's all one word, trendingglobally@brown.edu.

We'll be back in two weeks with another episode of Trending Globally. Thanks.

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