The US Climate Bill Is a Bigger Deal Than Most People Realize

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While the United States fancies itself a global climate leader, the country is coming off a decade of tumultuous policy: It signed the Paris Agreement in 2015, withdrew two years later and didn’t rejoin until 2021. Now, as the country counts down to midterm elections and the start of annual climate talks in Egypt, Americans are taking stock of whether President Joe Biden has lived up to his promises.

For Leah Stokes, the answer is a solid “yes.” Stokes is a professor of political science at UC Santa Barbara, and one of many individuals whose advocacy factored into the Inflation Reduction Act that became US law in August. The IRA, Stokes says, has the potential to bring the US closer to meeting its climate targets: It both cuts emissions from the power and transportation sector, and provides incentives and tax credits for Americans considering electric vehicles, home-solar setups, home electrification and more efficient appliances.

While the Congressional Budget Office anticipates the US government spending $374 billion over the next decade through the many policies tucked into the IRA, Stokes expects the number to be much larger — perhaps as high as $1 trillion. That’s because many of the financial incentives are “uncapped” and thus the government will provide them as long as companies and people meet the criteria set out for them.

All of that will make it easier for Americans to rely less on fossil fuels, which will in turn have an impact on voting preferences. That’s also why Stokes thinks the climate bill has the potential to shape policy. “When you break the political relationship between getting to work and heating your home and the cost of fossil fuel, that really helps not only with your democracy, quite frankly, but also with decarbonization,” she says.

Stokes joined the Zero podcast to talk about how the IRA came together, her wish list for more green policies and why “carrots” are more important than “sticks” in incentivizing behavioral change. This is an edited version of highlights from Zero’s interview with Stokes. You can listen to the full conversation below, and read the full transcript here.

Akshat Rathi: Climate policies typically involve carrots and sticks. Carrots in the form of subsidies such as tax credits and sticks in the form of regulations such as carbon pricing. The new US climate bill is all carrots. Will that be effective in the long term?

Leah Stokes: If we look at American politics, the price of gasoline at the pump is very important. And just raising the price of energy is not really a very politically smart thing to do. People’s choice to fill up their car or not is not going to be changed by increasing the price of oil slightly. Instead, they’re gonna get mad at you because now it’s slightly more expensive to fill up their car. Opponents to carbon pricing will weaponize it, they’ll say, “Oh my gosh, all the increase in the price of oil was because of the carbon price,” whether or not that’s true. So I don’t think that it’s a very effective policy. Using fossil fuels is what we would call inelastic, meaning very hard to change. If we want to break our dependence on fossil fuels, what we have to do is get people electric machines. And then a household will not care if the price of oil goes up.

Akshat Rathi: Let’s take your favorite example: heat pumps. There is a heat pump tax credit, that is about $2,000 for a product that can cost $10,000. Now, for a median income of an American of about $60,000, that’s still a steep upfront price. Is that the way you think more homeowners will be able to get heat pumps?

Leah Stokes: Tax credits are usually used by wealthier Americans. So we shouldn’t assume that somebody who’s going to use that tax credit is only going to make $60,000 a year; they’re probably going to make more. That has led to, for example, wealthier people having more solar panels on their roof or EVs in their driveway. It’s not the best way to go about it, but keep in mind that when a wealthy person adopts a new technology, they actually bring down the cost for everybody else.

Let’s say you’re a wealthy person. It’s not a question of, you know, “Oh my gosh, this machine costs $10,000 and I’m only getting $2,000 back.” It’s actually a question of, “I could get a gas furnace, and it’ll cost me, I don’t know, $8,000. Or I could get a heat pump, and it will cost me $10,000. Which one should I get?” We need to get that marginal cost covered. So that people realize, if I pay a little bit more upfront, I get that heat pump. That heat pump heats and cools my home, too. It also replaces my air conditioner.

Akshat Rathi: The midterms are coming up. Let’s talk about the worst-case scenario. The Democrats lose both the House and the Senate. How resilient do you think the IRA is in the face of such a challenge?

Leah Stokes: The IRA is going to be very resilient. The Republicans talked a big game, when it came to repealing the Affordable Care Act. They never repealed it. In the US, what political science research shows is that when you pass a law, it becomes pretty sticky. And it’s actually quite hard to repeal it. So once we have companies building heat pumps in the US and solar panels and electric vehicles, including in Republican districts, they’re gonna say, “What do you mean, you’re gonna get rid of this policy, we need this policy, we’re making a lot of money in employing people.” So I think it’s actually going to be quite sticky.

Let’s say the House and Senate went Republican — we still have the Democratic president. And therefore they couldn’t really repeal the law, because President Biden would just veto anything that actually managed to pass. So I think we have at least two solid years to really make progress on this.