Two weeks ago, Senator Joe Manchin of West Virginia announced he would not join fellow Democrats in supporting major new spending to combat climate change and transition to a low-carbon economy. Last night, we got the news that Manchin had reached agreement with Democratic leadership in the Senate to do just that.
Sen. Manchin had cited concerns about inflation as a reason for his opposition to new spending. At the time, Resilience Intel reported that it was polluting industries that have had the most significant direct impact in driving prices up, across the whole economy, and major climate investment is a way to address and contain inflation.
That Resilience Intel article also found:
“The effect of shifting to climate-smart distributed clean energy systems will be a more agile, stable, inclusive, and consumer-friendly economy—one where small towns and Main Street economies can diversify and thrive. The status quo, with heavy dependency on polluting energy systems, cannot deliver that kind of sustainable economic recovery.”
A few things have shifted since Manchin floated his most recent blocking of new climate investment:
- It became clear to many in West Virginia that reinforcing dependence on fossil fuels was not going to lead to better economic outcomes for most people;
- The Federal Reserve moved to increase interest rates by 0.75% again, which suggests mainstream banking and finance will not drive as much everyday economic activity as before;
- The overall economic output of the US economy declined for the 2nd consecutive quarter.
The Financial Times is reporting, today:
“Data published by the commerce department on Thursday showed gross domestic product fell 0.9 per cent on an annualised basis in the second quarter, or a 0.2 per cent fall from the previous quarter. This follows first-quarter GDP data showing the US economy shrank 1.6 per cent in the first three months of 2022.”
In other words: it was already true that climate investment would benefit people and communities, and would counteract key drivers of ongoing inflation, but now it will be much harder to hide that fact. Those left out of economic recovery and hit hard by inflation will be less likely to see any short-term boost to economic prospects without a structured, targeted intervention to steer the economy away from costly and counterproductive polluting practices.
- Climate investment is a needed boost right now, which can benefit people and communities and guard against further economic backsliding for the most vulnerable.
- It is also a way to create jobs; decentralized energy systems require more people doing more things, both in the physical world and in the data universe.
- It was estimated that blocking the Build Back Better plan cost West Virginia 10,000 jobs, even as the state was largely left out of the post-lockdown jobs boom happening across much of the country.
The new Senate bill is called the “Inflation Reduction Act of 2022” and would address inflation by:
- Closing tax loopholes and raising revenue;
- Aligning tax incentives with clean innovation, new investment, and more affordable pricing for consumers;
- Investing in energy security;
- Making clean energy incentives permanent, so they don’t need to be renewed every year;
- Acting to expand Affordable Care Act coverage and reduce healthcare costs.
Finance Committee Chair Sen. Ron Wyden, Democrat of Oregon, explains:
“For the first time, the tax code is going to reward emissions reductions, and encourage the development of new clean energy technologies as soon as they come online. No longer will Congress need to legislate technology by technology, making it easier to bring new technologies to market. Importantly, this is permanent energy policy. Congress will no longer need to extend these incentives every few years, giving companies and states certainty to plan clean energy projects and create jobs.”
This realignment of taxes and incentives would not only steer new investment to clean energy and expand access and affordability for lower income communities; it will be the most aggressive decoupling of job creation from fossil fuels in American history. For the first time, national legislation, taxes and incentives for small businesses, and everyday economic activity will align with a transition away from climate pollution.
There is still a journey ahead, for this legislation to become law. All 50 members of the Senate Democratic conference must vote in favor, including Arizona Senator Kyrsten Sinema, who has not publicly signed on, as of 1:30 pm EDT today. Then, the House of Representatives—where a sizable Progressive Caucus wants far more comprehensive climate action—will have to agree.
So, this isn’t yet legislative victory. The big news, though, is that the United States may be about to pass the most consequential climate legislation in its history. It is estimated the new spending and incentives in the Inflation Reduction Act of 2022 will support 40% reduction in overall US emissions by 2030.
If this legislation becomes law, it would position the US to lead with more strength and credibility in international negotiations on climate cooperation. The fiscal responsibility, risk reduction, and innovation elements of the legislation could also give the US much greater flexibility to support mobilization of climate finance.
In short, this legislation could motivate a global raising of climate ambition, with more money from more countries moving into climate-smart manufacturing, infrastructure, and agriculture. It could also have a significant impact on the world’s ability to address urgent intersecting crises while fostering sustainable transformation.