On the Issues: Inflation Reduction Act, Gas Prices and Sanctions, and More

Twice a month, we’re compiling the most relevant news stories from diverse sources online, connecting the latest environmental and energy economics research to global current events, real-time public discourse, and policy decisions. Keep reading, and feel free to send us your feedback. Here are some questions we’re asking and addressing with our research chops this week:

What would the passage of the Inflation Reduction Act mean for household utility costs?

Senators Joe Manchin (D-WV) and Chuck Schumer (D-NY) surprised Congress last week by introducing the Inflation Reduction Act, which contains a host of provisions that aim to decrease US greenhouse gas emissions and accelerate a national transition to clean energy. Among other investments, the bill would provide funding for electric vehicle subsidies, green hydrogen, carbon capture, and environmental justice programs. Researchers estimate that the Inflation Reduction Act could reduce net greenhouse gas emissions in the United States by about 40 percent by 2030, compared with 2005 levels. Experts also predict that the bill could reduce electricity costs for households. In an issue brief published this week, Resources for the Future (RFF) Resources for the Future (RFF) Research Analyst Nicholas Roy, Fellow Kevin Rennert, and Senior Fellow Dallas Burtraw discuss their projection of the savings that the Inflation Reduction Act could facilitate for electricity consumers. “Retail costs of electricity are expected to decline … over the next decade, saving electricity consumers $209–$278 billion” at the national level. “The average household,” they add, “will experience approximately $170–$220 in annual savings from smaller electricity bills and reductions in the costs of goods and services.”

What policies are under consideration for keeping gasoline prices low for consumers—and are the options viable?

Governments opposed to Russia’s invasion of Ukraine have struggled to balance two goals: reducing dependence on Russian fossil fuels, the purchase of which indirectly funds the invasion, and shielding citizens from high energy prices. The European Union, for example, reached an agreement to ration natural gas across the bloc this winter if supply shortages arise. In the United States, several members of Congress have proposed a national ban on exports of crude oil, which RFF Senior Fellow Alan Krupnick and Senior Advisor Jan Mares examine in a recent blog post. “Changing the export regulations on US oil will not have an appreciable effect on reducing gasoline prices for consumers,” they note. Krupnick and Mares also argue that banning US oil exports won’t affect global demand for fossil fuels: “Whether or not the United States is exporting crude oil, [global] demand for oil will persist.”

How is climate change affecting the frequency and intensity of extreme weather events?

Intense rainfall in Missouri and Kentucky last week led to deadly flash floods in St. Louis and Appalachia. Meteorologists classified both storms as “1,000-year rain events,” which gives them a 0.1 percent chance of occurring within a 12-month period. Warmer temperatures in both regions allowed the atmosphere to soak up exceptional amounts of water vapor that winds then transported from the Gulf of Mexico. The storms in Missouri and Kentucky emptied that water during a brief amount of time, producing flash floods. Jason Samenow, weather editor at the Washington Post, delves into the role of climate change in natural disasters like these and the difficulty of communicating that connection in a recent episode of Resources Radio. “In the last decade—in the last five years in particular,” says Samenow, “we’ve seen an acceleration in the warming and in the number of these extreme weather events.” This shift affects how meteorologists like Samenow talk about their work with the general public. “[Meteorologists] can’t really tell a weather story responsibly without putting it in a climate-change context … You have to connect the dots. If you don’t do that, you’re not being a responsible journalist and telling the whole story.”

Expert Perspectives

Introduced by US Senators Last Week, the Inflation Reduction Act Would Provide Tax Credits for the Purchase of Electric Vehicles

For individuals who earn more than $150,000 per year, and married couples who file taxes and earn a combined income of less than $300,000 per year, the Inflation Reduction Act would offer a $7,500 tax credit on the purchase of some types of electric vehicles. “The setting of income caps in the proposal makes the electric vehicle tax credits more cost-effective, and lower caps would make them even more so,” says RFF Senior Fellow Joshua Linn. “Income caps are also more cost-effective than tying the tax credit to the vehicle’s price.” In a blog post published when Congress was debating the Build Back Better Act last winter, Linn notes that this type of electric vehicle subsidy is more equitable, stating that an “income-based subsidy is more progressive than others … [L]inking the subsidy to the vehicle price is less effective and less equitable than linking the subsidy to household incomes.”

Unprecedented Funding for Disadvantaged Communities and Environmental Justice

A congressional summary of the climate investments in the Inflation Reduction Act highlights “$60 billion in environmental justice priorities to drive investments into disadvantaged communities.” RFF Senior Fellow Margaret Walls notes some ways in which the bill disburses this money and the scale of the investment itself: “It allocates $2.8 billion for a new environmental justice block grant program,” says Walls, which communities that are disproportionately affected by pollution and climate change could use for their own projects. “Is this big money? Yes. For perspective, the Community Development Block Grant Program at the US Department of Housing and Urban Development has an annual budget of about $3.3 billion, and the Environmental Protection Agency last year budgeted $250 million for environmental justice and civil rights.”

Get more analysis from RFF experts about the various components in the Inflation Reduction Act.

Energy Security and Decarbonization: An RFF Policy Leadership Series Event with US Deputy Secretary of Energy David Turk

On Thursday next week, August 11, Deputy Secretary of the US Department of Energy David Turk will join RFF President and CEO Richard G. Newell for an event in RFF’s Policy Leadership Series. Their conversation will cover the Biden administration’s ongoing response to high energy prices, the policies and technologies needed to combat climate change while ensuring a just and equitable clean energy transition, and more. This is a hybrid event with the option to attend in person or virtually. RSVP to the event here.

Modeling Major Climate and Energy Provisions in the Inflation Reduction Act

Modeling experts from RFF, Energy Innovation, Princeton University’s REPEAT Project, and Rhodium Group have examined the Inflation Reduction Act’s climate and energy provisions and projected their effects on US emissions reductions and costs for US retail electricity consumers. On Wednesday, August 10, these experts will meet virtually for an RFF Live webinar to discuss their analysis, key provisions in the legislation, and their work to inform the conversation surrounding the proposal. RSVP to the event here.

Revitalizing Coal Communities through Investment

A new report coauthored by RFF Senior Research Associate Wesley Look, Research Analyst Sophie Pesek, and other colleagues examines the implementation of a program called the Partnerships for Opportunity and Workforce and Economic Revitalization (POWER) Initiative, which was established by the Obama administration and provided $410 million across 200 US counties between 2015 and 2020. “The majority of coal counties did not receive POWER grants,” the authors say, noting “low levels of federal funding explicitly designed to support communities impacted by the decline of coal.”

Critical Materials in the Supply Chain

In a recent episode of Resources Radio, Helena Khazdozian, a senior technology manager at the US Department of Energy’s Critical Materials Institute, discusses why certain materials are important to future decarbonization efforts. “Critical materials actually are, in a lot of ways, like building blocks for clean technologies,” says Khazdozian, “and a lot of times, they’re difficult to substitute out.”

#ChartOfTheWeek

Data Sources: Pan-Arctic Ice Ocean Modeling and Assimilation System developed at the Applied Physics Lab at the University of Washington. Graphic produced by Zachary Labe. Accessed July 24, 2022.

Arctic sea ice continues to melt at rates higher than the historical average. The chart above illustrates this deviation: average ice thickness has decreased by about 0.75 meters (2.46 feet) since the 1980s.

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