adminThe historic US climate deal that has now passed both chambers of Congress is being touted as one of the most ambitious decarbonisation commitments made by any government to date. Is it?
Many countries have passed climate regulations and invested in green infrastructure, but the scale of the Inflation Reduction Act has few parallels. The bill devotes US$374 billion to climate and energy measures over the next decade, with a focus on subsidies that make it easier and cheaper to live more sustainably.
When you combine public and private investments aimed at accelerating the energy transition, China is by far and away the biggest spender, according to data compiled by energy research group Bloomberg NEF.
Neither the IRA nor Europe’s Green Deal appears likely to change that. China spent US$297.5 billion last year on the energy transition, while EU member states devoted US$155,7 billion and the US$119,7 billion, using the BNEF methodology.
When comparing international efforts, it can be tricky to untangle where government expenditures end and private ventures begin, and analysts frequently lean towards more qualitative analysis. One major distinction between the US plan and models pursued by other major emitters like the European Union and China is that the American plan doesn’t rely on carbon pricing.
“Compared to a policy mix of regulations, targets and investments as used by the EU and China, the US is taking a different approach to climate by opting for a massive spending bill,” said Belinda Schäpe, a climate diplomacy researcher on EU-China relations with E3G.
Carbon pricing has long been championed by economists as a first step toward decarbonization and has been embraced by dozens of nations, although debates about its effectiveness rage. A growing group of political scientists argues that a better approach is to make clean energy and greener technologies more accessible, much like the approach now being taken by the US.
The EU’s Green Deal, approved in 2020, aims to retool how the continent’s economy works by redesigning everything from farming to how cities are built. The bloc plans to spend 30% of its €2 trillion budget for 2021-2027, or about €600 billion ($612 billion), to fight climate change, and that doesn’t include individual member state investments and subsidies, according to the research firm Rhodium Group. Bloomberg
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