US Climate Action: Legislative Muscle and Funds Now Driving Green Regulations and Policies

US climate agenda is now firmly taking root.?In this effort, Inflation Reduction Act of 2022 (HR 5376, 2022) comes out as a key milestone.?This act is a logical progression in a series of measures already initiated and not one of intervention. This has followed from President Biden making climate action as the centerpiece of his campaign pledge. He backed up that pledge with an executive order in first week of his presidency. Since then, he has been moving in a very determined way with follow up executive orders to regulatory agencies issued through the Financial Stability Oversight Council. Creation of the “Office of Federal Chief Sustainability Officer” and linking public procurements to the climate end goals further demonstrate this administration’s support for climate action.

These actions, while decisive, were still vulnerable to the vagaries and changing priorities of politics. ?However, the “Inflation Reduction Act of 2022” has clarified and solidified these initiatives and allocates money to ensure their relevance and execution.?Through a legislative endorsement, The United States has lined up a $370 billion war chest dedicated to climate action. For those catering to sustainability and climate action offerings market, it is very important to understand the thrust of this massive funding infusion to understand how the sustainability and climate action is set to play out in US context.?Afterall, public investment and intervention to a great extent determine shape and direction of the things to come.?Hence, a summarized overview of salient aspects of these proposals is an imperative.?Overall, the climate action effort launched through this act will be led by multiple agencies and fought on multiple fronts going by the fund allocation. ?Tax measures and funding are two key aspects of this multi-pronged legislative strategy which now shapes budgetary action to combat climate change, need to be examined in some detail.

The first strategy is focused on taking appropriate taxation actions to further climate action objectives.?This approach is designed to provide tax credit for activities which furthers climate action such as clean energy, emission free transportation and green buildings, At the same time this strategy penalizes climate damaging industries like fossil fuels through additional fees and regulatory / recapture taxes.

Highlights of the tax intervention strategy is captured in Figure 1. Energy and transportation are two main culprits of greenhouse gas emissions and are specifically noted. Figure 1 shows that tax measures will back-up harnessing renewable energy, promoting investment in industry-linked clean energy, and supporting low emission biofuels.

To tackle transportation linked emissions, tax credits have been extended to clean commercial vehicles as well as the purchase of preowned electric vehicles. Likewise, buildings powered by clean energy as well as energy efficient commercial buildings can receive tax credits. On the penalty side, hazardous substances including oil, petrol products and coal will be subject to additional taxes. While these penalties represent good progress and are strong deterrents, environmentalists are disappointed there is so far no commitment to cap coal and fossil fuel usage.

The second legislatively backed strategy is to ensure budgetary funding that supports prioritized climate actions. Agencies engaged in combating climate change causes and effects are receiving additional funding. Agencies can use these funds to finance their own activities as well as to incentivize partner and customer actions through loans, grants, incentives, or subsidies. This covers a very broad swath as shown in Figure 2. Agencies such as the Environmental Protection Agency (EPA), National Oceanic and Atmospheric Administration (NOAA), Council on Environmental Quality (CEQ), Bureau of Land Management (BLM) and National Park Service (NPS) are tasked with specific mandates on climate action. Some of the federal departments are also vested with major responsibility. While Department of Energy (DoE) is tasked to increase production, distribution and adoption of clean energy, energy efficiency and clean energy technologies, Department of Transport (DoT) is entrusted with responsibility get work going on aviation linked emissions.

Within this framework the United States Department of Agriculture (USDA) is responsible for conservation, carbon sequestering, and creating of carbon sinks. Electronic Vehicle (EV) adoption by the United States Postal Service, school buses and the heavy vehicles used for garbage collection are some of the highlights of intervention in automotive sector. Low emission construction material for highways and federal buildings are other areas of the transportation and building sectors that is undergoing green initiative transformations. In addition, covering water conveyance system by solar panels seeks to address both GHG emissions and water evaporation contributing to water stress.

Overall, the “Inflation Reduction Act of 2022” represents significant progress in achieving milestones outlined in terms of the Nationally Determined Contributions (NDCs) at the heart of the Paris Climate Agreement.?These measures are projected to help deliver a substantial portion, of the 51% 2030 emission reduction goal.?These measures also target net zero electricity generation by 2035 and cutting substantial emissions from transportation sector. The US government is becoming fully engaged and taking concrete environmentally friendly actions, as well as providing legislative cover, and budgetary resources to make good on the promises made in the 2020 elections.

About Tata Consultancy Services

Tata Consultancy Services (TCS) is an IT services, consulting and business solutions organization that has been partnering with many of the world’s largest businesses in their transformation journeys for over 50 years.?TCS’ proactive stance on climate change and award-winning work with communities across the world have earned it a place in leading sustainability indices such as the MSCI Global Sustainability Index.

TCS Intelligent Urban Exchange? (IUX) for sustainability is an enterprise software solution from TCS Digital Software & Solutions. It is an advanced AI and ML powered solution that delivers comprehensive insights, recommendations, and metrics for environmentally clean organizational and value chain operations. The aggregate system-wide impact of TCS IUX for sustainability results in substantial emissions reduction, cost savings, and resource conservation. while also advancing corporate environment stewardship, compliance, and social responsibility.

Article Reference

"Text - H.R.5376 - 117th Congress (2021-2022): Inflation Reduction Act of 2022."?Congress.gov, Library of Congress, 16 August 2022, https://www.congress.gov/.

Learn More:

Visit the https://www.tcs.com/what-we-do/products-platforms/tcs-intelligent-urban-exchange page on https://www.tcs.com

Email Us: [email protected]

About the Author:

Dwarika Mishra is Head of Product Management at TCS and a specialist in sustainable operations.