The Inflation Reduction Act (IRA) could reduce economy-wide CO2 emissions by 35-43% below 2005 levels by the end of the decade, according to a new analysis by the Environmental Protection Agency (EPA).
EPA also reported that in the electric power industry, IRA could bring down emissions from 49% ro 83% by 2030. According to the report, IRA could help decrease emissions in all “end-use sectors”, and most significantly in residential and commercial facilities.
EPA’s Office of Atmospheric Protection, which produced the analysis, said that it made these estimates by modeling results from peer-reviewed literature, state reports, and modeling and analysis funded by EPA, Utility Dive reported.
“The economy is interrelated and complex, and the investments made in the IRA are far reaching — analyzing the impacts of these changes requires the use of sophisticated energy economy models that can capture the breadth of the IRA’s incentives,” the report said.
Additionally, EPA said that the IRA is a complex piece of legislation, requiring detailed assumptions to account for the various potential outcomes resulting from its many provisions. Consequently, the analysis includes caveats and limitations, along with “clear limitations in modeling”.
Relevant: Inflation Reduction Act May Cut US Emissions By 40%
The analysis followed two scenarios to assess IRA’s potential impacts: one where IRA was passed and one where it was not. The EPA conducted estimations for the IRA scenario using three models: moderate, pessimistic, and optimistic. The report’s findings are based on the moderate model.
In a scenario without the IRA, the EPA projected economy-wide emission reductions ranging from a minimum of 26% to a maximum of 33% by 2030. In contrast, the IRA is expected to yield minimum reductions of 35% and maximum reductions of 43%.
According to the report, the effects of specific IRA provisions remain uncertain because there is a lack of guidance or final decisions. For example, the Treasury Department has not yet issued guidance regarding the clean hydrogen production tax credit.
“Although it is clear from the modeling that the Inflation Reduction Act results in reduced costs for clean technology and that this is expected to make additional federal, state, and private climate action more likely, this report does not model the effects of these prospective additional policy impacts of the IRA,” the researchers said.
The EPA’s analytical approach encompasses several models, including the multi-model study Emissions and Energy Impacts of the Inflation Reduction Act. This study contrasts scenarios with and without the IRA. Additionally, the analysis draws insights from the Energy Information Administration’s 2023 Annual Energy Outlook, a report from the Department of Energy assessing the Inflation Reduction Act and bipartisan infrastructure law’s impacts, and a study conducted by the National Renewable Energy Laboratory, which also focuses on the IRA and the bipartisan infrastructure law.
Read more: Carbon America CEO: The Inflation Reduction Act Is A Game Changer For The Industry
