The climate measures in the budget reconciliation package now before the U.S. Congress could unlock an investment boom in clean energy, zero-carbon transportation and efficient manufacturing that would allow us, as a nation, to reverse the course of rising greenhouse gas emissions that threaten our future.
Simultaneously, these investments will help the U.S. maintain its role as an economic leader in a global economy that prioritizes zero-carbon solutions. Oh, and investment creates jobs, lots of them.
After deadly floods in Louisiana, grid failures in Texas and devastating wildfires in California, who wouldn’t want strong steps to meet the climate crisis with impactful, 21st-century solutions?
For investors, the proposed federal investments for zero-carbon infrastructure, renewable energy, electric vehicles and climate innovations will provide the policy signals we and other investment firms need to confidently fund breakthrough technologies.
Once investors know that the government is serious about taking action to bring the economy into the 21st century and competing with nations already aggressively deploying these technologies, climate and tech investors will increase commitments in these areas.
For example, take transportation electrification. Transportation now emits a greater volume of greenhouse gases than any other U.S. sector, with carbon exhaust from cars, trucks, airlines and shipping adding up to 29% of total U.S. emissions. Despite the temporary reductions in travel-related emissions during the pandemic, transportation emissions were still climbing at last measure and are likely to keep growing. This should alarm us all.
But with the reconciliation bill’s tax incentives for purchasing electric vehicles making these cars much more affordable for Americans — up to a $12,500 credit if you buy an EV made in the U.S. — plus the bill’s incentives for manufacturing and deploying EV charging infrastructure, we’d see rapid adoption of clean electric transportation and a steep drop in transportation emissions.
Couple the transportation incentives with the reconciliation package’s Clean Electricity Performance Program (CEPP), which encourages utilities to hasten their steady transition to clean energy — from a national average of 40% today to 80% by 2030 through incentive payments and penalties — we’d see a precipitous drop in overall emissions.
Transportation and electric power together currently account for more than half of U.S. greenhouse gas emissions. These provisions will spur a broad energy generation transition that can also power the EV cars, trucks and fleets of the future.
As investors, we view the budget reconciliation as a long-term catalyst for sustainable growth, and growth translates to jobs. The Economic Policy Institute estimates that the budget reconciliation provisions, on their own, could create up to 3.2 million new jobs per year. Through our existing investments, we have seen firsthand how infusions of capital, from both public and private sources, can stimulate job creation, from hourly wage positions all the way up to highly skilled engineering roles. The budget reconciliation will create economic opportunities for all.
There’s clearly a market for climate action: The Global Commission on the Economy and Climate found that bold climate action globally could deliver $26 trillion in economic benefits through 2030. We need this funding to go as far and as fast as possible to avoid a global rise in temperatures of 1.5 degrees C, which experts collectively agree is the tipping point into catastrophic, irreversible climate change. Government policy can both signal and pave the way for broader private-sector investments, as it did decades before with pollution legislation.
And what will happen to these investment dollars if Congress does not pass the infrastructure and budget reconciliation packages? The cost of inaction is far higher than the costs outlined in the budget reconciliation legislation. The climate measures in the bill add up to $700 billion over a decade, or $70 billion a year.
Climate change-induced extreme weather disasters in the U.S. alone cost roughly $100 billion each year. If measures are not passed, individual citizens will keep paying higher tax and energy bills. Meanwhile, investors will instead put money into companies and sectors in other geographies that are focused on next-generation renewable energy, EV charging and other technologies supported by policy and will look for clean infrastructure plays on other continents where their investment dollars go farther and create faster returns.
In a no-action scenario, the United States will face long-term negative consequences as its economic leadership fades and its OEMs and supply chains gradually lose their position as global leaders. The U.S., as a nation, will in turn lose the financial capacity to mitigate or respond to the devastating local impacts of climate change.
We have an urgent need to address the climate crisis now, with the public and private sectors each maximizing their tools to ensure long-term economic and environmental sustainability. The federal policy tools and opportunities are clear, and the private sector is ready to respond with investment capital.
We urge Congress to pass a budget reconciliation bill and allow its strong climate measures to reap benefits for all.