The Inflation Reduction Act and COP27: What the United States’ New Climate Legislation Means for International Climate Diplomacy

Mark Goldberg: What is the Inflation Reduction Act?

Casey Katims: The Inflation Reduction Act is a really significant investment in transitioning to a clean energy economy and accelerating action across the United States to tackle and confront the climate crisis. It is the single largest investment in climate action that the United States has ever made, and it’s really an investment in our future.

It includes $369 billion in climate provisions and is estimated to reduce emissions by around 40% from 2005 levels by 2030, in addition to curbing climate damages by around $1.9 trillion. So this legislative package is nothing short of historic and really significant.

And there’s going to be a lot of positive outcomes on both a macro and micro level. For example, some of the key climate investments in the Inflation Reduction Act include the expansion of clean energy tax credits and $315 million for air monitoring so communities know what’s in the air that they breathe. It also includes a 30% tax credit for installing solar panels on residences, and up to $14,000 for homeowners to make homes more energy-efficient. It also includes help for consumers to purchase electric vehicles and decarbonize transportation, including through tax credits for both new and used electric vehicles. It also includes $1 billion for clean school and transit buses, garbage trucks, and other heavy-duty vehicles as well as billions of dollars for the U.S. Postal Service to electrify its fleet, which is the largest government fleet in the nation. And it also includes $60 billion for manufacturing solar panels, batteries, and other clean energy technologies in the U.S., which we know will create jobs and increase our country’s energy security.

The Inflation Reduction Act Will Help the U.S. Meet Paris Agreement Targets

MG: You mentioned that the climate provisions included in the Inflation Reduction Act could reduce emissions from the United States by 40% by 2030. How does that compare with the climate pledges the U.S. has made under the Paris Agreement?

CK: The Biden Administration has made a commitment under its NDC — or nationally determined contribution, which is a country’s commitment to lower its emissions in line with Paris Agreement targets — to reduce U.S. emissions by 50-52% from 2005 levels by 2030.

It’s important to note that the 50-52% commitment is not how we get to full decarbonization by midcentury. Rather, it’s a near-term target. By the end of the decade, we need to halve our emissions in order to make sure that we’re on a path to reaching net-zero by midcentury. What this package does is provide a pathway for that target to be within striking distance. It’s not all of the way there. There’s still that 10-12% gap that we’re going to need to close in order to meet that contribution of 50-52% by 2030. And it’s also not assured, right? That is what modelers are predicting, but what we have to do is really capitalize on the promise of the Inflation Reduction Act and roll up our sleeves together. And what we know at the U.S. Climate Alliance is that the work that state, local, and federal leaders do over the next few years is going to be really critical to maximizing the emissions reduction potential of the package.

It’s really significant because it puts that target within striking distance. Without it, we would have been in a really challenging position to reach that 50-52% mark. I think we’ve got our work cut out for us in terms of both closing the remaining gap and maximizing the potential of the package.

How Will This Impact International Climate Diplomacy at COP27?

MG: The Inflation Reduction Act comes at a potentially opportune time. In just a few weeks from now, in early November, the world will gather in Sharm el-Sheikh for the latest round of high-stakes, high-level international climate diplomacy at what is known as COP27. For those who don’t follow this quite as closely, can you explain what COP27 is? Why is it significant? But first, what is COP27?

CK: COP is really important as a stage for nations to come together and influence the actions that we’re taking at home and in partnership with our fellow nations to confront the climate crisis. Obviously, COP21 back in 2015 is where the Paris Agreement was first developed and provided the framework that sort of underpins what the U.S. Climate Alliance is. It is a really critical venue on the international stage.

COP27 is going to be focused on a few important themes, including mitigation, adaptation, financing, and collaboration, under a collective banner of implementation, focusing on how we are actually doing the work to reach the targets that all of our governments have set out to meet. It’s going to be a really critical opportunity for the United States to show up on the international stage, for the Biden Administration and their fellow national partners from countries around the world to report on the steps that they’ve taken in the previous year and what steps are going to be taken in the years to come to reach the targets that we’ve all set out together.

MG: What impact do you foresee this new U.S. climate legislation having, if any, on the contours of diplomacy at COP27 in early November?

CK: I think that the Inflation Reduction Act really allows the United States to walk onto the global stage at COP27 with an air of credibility that we have set out ambitious targets for reducing our emissions and cutting them in half by the end of the decade. And I think the Inflation Reduction Act allows the Biden Administration as well as governors, mayors, and other subnational actors to walk onto that global stage with a very clear picture about the new tools and resources that are at our disposal in order to do the work of reaching that 2030 target. And at the same time, it allows them to really make sure that our international partners understand that we are serious about the work that we’re doing and that we’ve got this new modeling and this new analysis to suggest that we are putting ourselves on a pathway to reach that target by 2030.

And that’s why COP27 comes at such a critical moment for the United States and the global community. By being able to demonstrate the credibility of President Biden’s commitment, the U.S. will be in a better position to ask and urge international partners to step up their own climate commitments. You know, that’s one of the things that the president and the Biden Administration have really focused on: raising the ambition of our international partners, making sure that everyone is coming to the table to confront the crisis that we believe poses an existential threat to humanity. And we have to demonstrate that we’re doing our part in order to ask our fellow partners around the world to do their part as well.

MG: You mentioned earlier that some of the key themes at COP27 will include mitigation and financing. Is there anything in the Inflation Reduction Act that speaks to financing or mitigation, or are we going to have to wait for other announcements from the Biden Administration to that end?

CK: One of the key provisions in the Inflation Reduction Act is this $27 billion pot of money that is commonly referred to as a green bank. It provides $27 billion for states and other entities to deploy zero-emission technologies and reduce climate pollution in disadvantaged communities through this new greenhouse gas reduction fund. The green bank financing provided through the Inflation Reduction Act is a really critical tool that will enable state, local, and other leaders across the country to leverage federal funding to secure additional financing on top of what is provided in the bill. I actually think this is a very novel concept that demonstrates the role of both financing and deployment of these zero-emission technologies with a very important focus on justice and equity, and on serving communities that have historically been overburdened and underserved. This $27 billion pot of money, I think, demonstrates on the international stage the work and the role that financing can play in confronting the climate crisis.

MG: But it’s not additional international financing. It’s more of a novel model for doing climate financing that is being applied in the United States, correct?

CK: Yes, it’s a $27 billion pot of money that is deployed domestically.

State-level Leadership Is Key to Meeting U.S. Climate Targets

MG: I was interested in speaking with you specifically because you lead a coalition of U.S. states that are committed to climate action to the Paris Agreement, even as under the previous administration, the U.S. federal government opted out. What role do states play in international forums such as COP27 specifically or more broadly in international climate diplomacy?

CK: The U.S. Climate Alliance is a coalition of U.S. governors who came together in the face of the Trump Administration announcing its intent to withdraw from the Paris climate agreement, to send an important signal to the global community that states and governors were going to continue to push forward and stay committed to the goals of the Paris Agreement in reducing our emissions and confronting the climate crisis despite what was happening at the federal level at the time. And during the Trump Administration, the Climate Alliance played a really important role in demonstrating durability and sustainability of U.S. climate action in the face of significant uncertainty at the federal level.

We are obviously in a very different position right now where we’ve got President Biden, who is committed to confronting the climate crisis — who actually ran on confronting the climate crisis — and has delivered the single largest investment in climate action in U.S. history. But governors and states still have a really important role in delivering on our emissions reduction goals here in the United States because of the unique system of federalism that we have in the U.S., where the Constitution delegated some powers to the federal government, but a significant number of powers are vested at the state level and states and governors continue to have primacy over a number of really critical climate areas like transportation and the power sector.

On the international stage, our governors come to COP27 and other international forums to demonstrate that they are going to continue to use the authority vested at the state level to decarbonize our economies across sectors in partnership and collaboration with the Biden Administration. It’s been really wonderful to see that the Biden Administration shares that commitment to collaboration and partnership in their national climate strategy that they present on the international stage. The Biden Administration speaks to the critical role that governors and states will play in reaching our 2030 targets and beyond. On the international stage, what we will present is a united front — governors and the Biden administration standing together with this really strong, durable, interconnected national climate framework, demonstrating that you’ve got all levels of government in the United States committed to working together to meet our goals.

MG: California’s announcement that it will be phasing out the sale of gasoline-powered cars is a great example of how states are driving climate ambition and action. And given the size of California’s economy, this is a big deal. Is the potential impact of state-led climate action appreciated at the international level?

CK: There certainly needs to be more education on the international stage about how critical it is for states to continue pushing the ball forward, and the example you pointed to is exactly right. California adopting these latest targets for decarbonizing transportation is a really fabulous example of the significant impact that state climate action has in the United States.

But importantly, they also have authority under the Clean Air Act that is embedded in statute at the federal level that enables them to set more stringent requirements than the federal government. That same provision of the Clean Air Act in the United States allows other states to follow California’s lead rather than the federal government’s. That means that California’s impact is not only vested in the size of their own population and the size of their own economy, but in their legal authority to lead the way in partnership with other states. In our alliance, we have 17 governors who have already adopted all or parts of California’s last clean cars program. Six have adopted their advanced clean trucks rule, and we’ve already seen a number of states announce their intent to follow California’s latest step. Once again, the impact of states in confronting the climate crisis, using the tools that they have at the state level, cannot be understated.

MG: I guess, lastly, are there any other examples of actions taken at the state level that you think deserve broader international recognition?

CK: I probably have more examples than we’ll have time for on this podcast, but I’ll name just a few. In Washington state, they are moving forward with updating their energy code to restrict natural gas use in heating commercial buildings, which is a pretty novel step.

In just the last few weeks, we’ve seen states putting forward ambitious goals and standards that advance climate action across several sectors. Massachusetts is one of those. Massachusetts just signed into law a bill that looks at renewable energy, transportation, and buildings, and, of particular note, it shows how states can empower other levels of government to enact their own actions. And what Massachusetts’ bill does is it allows cities and localities in the state to remove fossil fuels from construction projects. Again, a pretty novel step that they took.

Louisiana, among other states, has advanced climate provisions through executive order, demonstrating what governors can do on their own. And in 2020, Governor [Jon Bel] Edwards in Louisiana created a Climate Initiatives Task Force through executive order, and the same task force has now unanimously approved the Gulf South’s first state climate action plan. That sets Louisiana on a path toward net-zero by 2050, which is significant, because Louisiana is in a region where a lot of states are not necessarily taking those kinds of actions.

Those are honestly just a few examples, but across our huge coalition, we’ve got 23 states that have set economy wide greenhouse gas goals. We have 14 states that have net-zero greenhouse gas emission goals. We’ve got 22 states with renewable portfolio standards, we have 18 states that have set 100% clean electricity goals, and the list goes on. So, you know, the ways that states can move forward are innumerable and our governors really are leading the way.

MG: Casey, we’ll have to leave it there. Thank you so much for your time.

CK: Thank you so much. I appreciate it.