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We need better than the Inflation Reduction Act

Against false solutions, for system change

Thomas Hummel provides analysis of the environmental and economic impact of the Inflation Reduction Act which was signed into law last week.

On August 16, Joe Biden signed the Inflation Reduction Act (IRA) into law. The bill was passed into law entirely along party lines, with a 51-50 vote in the Senate through reconciliation, with Vice President Kamala Harris casting the tie-breaking vote, and a 220-207 vote in the House. The legislation, which aims to reduce greenhouse gas emissions, came at the apex of yet another summer with extreme temperatures and raging forest fires, in which 2,000 people died in a single week from the heat in Spain and Portugal alone.

Amid all this chaos, we have to ask: is this new law really a “Manchin Miracle,” or is there a man behind the curtain, working his tricks to keep us focused on the apparent marvel so we forget the unreality it all rests upon?

The IRA is the largest piece of climate legislation in United States history by many orders of magnitude. On the surface, this may appear to be a cause for celebration, but of course, the truth is much more complicated. Let’s take a quick look at the content of the law, analyze the motivations behind it, and assess where activists might place themselves in relation to it in the context of the broader fight for climate justice.

What’s in the IRA?

To begin with the broadest strokes, the law claims that it will cut carbon emissions by 40 percent relative to 2005 levels by 2030. Putting aside for a moment the dubious modeling, and the ten percentage points that have disappeared relative to Biden’s initial promise, the legislation seeks to achieve this reduction through several corporate and household incentives.

The law first will bring in $470 billion through a raising of the minimum corporate tax rate, increase funding for IRS enforcement against higher income earners with more complex tax fillings, introduce fees on methane emissions, and implement modest prescription drug reform. $385 billion will then be spent tackling climate change, prescription drug and vaccine coverage, and “energy security,” through tax credits for renewable manufacturing, assistance to energy companies to make the transition, forest restoration, and the promotion of sustainable agriculture. The law also throws billions at the development of Manchin’s unicorn project, “carbon capture” technologies that supposedly help mitigate the emissions from fossil fuels while encouraging individuals to purchase electric vehicles through substantial personal tax credits.

The law also gives Medicare the ability to negotiate the cost of some drug prices, which will undeniably have a significant impact on many people’s lives. But this section of the law will only take effect in 2026, and will extend to only ten drugs, expanding to sixty in 2029. These unnecessary delays in delivering essential cost savings for patients in need of these drugs like insulin carry the additional political risk of a Republican President and Congress being given credit for lowering drug prices by voters.

The Ugly Parts

Even before we get into the ugliest bits, the law as already explored is problematic. Carbon capture and hydrogen are both totally unproven technologies that the fossil fuel companies favor because they present the possibility to continue business as usual with minimal disruption to their current practices. The models used that are projecting a 40 percent reduction in emissions are as a result based on unrealistic expectations of carbon capture becoming a viable technology, relying on problematic net-zero metrics, and have no scientific evidence to support their projections.

The law has been described as being “all carrot and no stick.” Former climate advisor to Bill Clinton, Paul Bledsoe describes the law as “trying to allow consumers and businesses to decide which of these technologies make most sense in the marketplace.” In other words, this law is oriented entirely toward market-based solutions. There is almost no direct investment into renewable energy production, with almost everything ultimately being left up to the private sector. The “40 percent reduction by 2030” modeling that the law is based upon was done by the Rhodium Group, and is based upon the assumption that this law will dramatically alter market conditions in favor of renewables. The IRA values the continued ability of corporations to profit over the need to address the apocalyptic contradictions between our economic system and the long-term ability of the earth to support decent life for both humans and the countless species we share this planet with. The IRA, in short, is nothing more than a green capitalism law.

While $385 billion is certainly a substantial chunk of cash in absolute terms, it is only a fraction of what a scientific assessment has deemed necessary to substantially tackle climate change. Sunrise has estimated that it would take $10 trillion to robustly address climate change, while the Sanders camp has estimated it would cost about $16 trillion (a substantial portion of which would go to poorer countries to help them transition or develop sustainably). And let’s not forget to compare how this law stacks up against U.S. military spending. This Inflation Reduction Act is a one-time $385 billion dollar cost, while for 2022 alone, the U.S. military budget stands at $777.7 billion. Militarism for escalating inter-imperialist competition gets the clear priority, while work to combat the worst catastrophes in history gets to take home the scraps.

The REALLY Ugly Parts

Now begins the descent to a still lower ring of capitalist hell.

Senator Schumer, claiming the need for compromise, has given enormous concessions to fossil fuels in order to get this law passed through reconciliation. The extent of the concessions has caused some commentators to go so far as to declare this a “climate suicide pact.””

The expansion of renewables in the law is contingent upon the massive expansion of domestic oil production, framed as an attempt to increase energy self-sufficiency. The law allows for the Department of the Interior to issue new onshore wind and solar rights on federal lands if the oil and gas leases had been held in the four months prior. In the case of offshore wind, it requires the auction of offshore oil and gas leases of at least 60 million acres in the year prior. It requires the sale of drilling rights in the Gulf of Mexico and Alaska, and would make the approval of any renewable power projects on federal lands contingent upon their future sale. In short, this law massively expands the production of domestic fossil fuels and locks the U.S. into a fossil fuel future for decades to come.

The IRA falls on its face in only taking account of greenhouse gas emissions domestically, but given the extent of the fossil fuel production slated for export, it’s questionable to what degree the law represents a net positive for global emissions at all.

A sunrise over Kachemak Bay in Alaska, part of the Cook Inlet before it is destroyed by oil drilling.
The sunrise over Kachemak Bay in Alaska, part of the Cook Inlet that will be leased for oil drilling later this year. Photo Credit: Beeblebrox.

To what degree does this law stack up against what the IPCC, a conservative, consensus-based body, has been counseling is necessary to avoid the worst outcomes of global heating? In 2019, the IPCC released a special report concluding that the only way to avoid civilizational collapse is through radical change at an unprecedented pace, scale, and scope. This meant halving global emissions by 2030, with the biggest polluters such as the U.S. taking on a bigger share of that goal. Nothing in the law comes close to matching the pace or breadth of change that is necessary.

Further fossil fuel development is a death sentence for hundreds of millions of people. This law not only leaves the fossil fuel companies’ power, dominance, and revenues intact, but increases their death grip.

The New Cold War takes precedence

As stated above, almost all of this new drilling is slated for export, which should make us scratch our heads about what the hell it has to do with “domestic energy security.” In reality, it has absolutely nothing to do with security for U.S. energy, and everything to do with trying to cement a favorable balance of power in the West’s favor. As I’ve explored in a previous article, the war in Ukraine has caused enormous difficulties for the U.S., which has been forced to balance a united front against its Russian rivals with its allies’ dependence on Russian energy imports. Even before this law, the U.S. and its allies were leaving no stone unturned to increase domestic gas production to replace Russian energy imports for its allies and cement its European united front.

So is this actually a compromise for Schumer and Biden? Or does it in reality hand them absolutely everything they want – including the ability to save face and blame the supposed “concessions to fossil fuels” on the need to compromise with Manchin? Quietly, they are wholeheartedly in favor of these “concessions!”

Let’s not forget that Biden’s first year of drilling permitting outpaced Trump’s by 34 percent. Despite the common notion that the Democrats are somehow the better party on the environment, the facts do not bear this out. Instead, they bear out that Biden and the democrats love to drill.

Let’s also not forget that Biden could issue an executive order declaring a climate emergency today. He would then have the power to suspend offshore oil and gas leases, stop new fossil fuel investment and oil exports, and increase direct investment into clean energy. Biden will not do any of these things because he does not want to. It simply does not fit in with U.S. interests toward maintaining global hegemony.

There is one final way that the law is more about imperialist competition than it is about the environment, and that has to do not with Russia, but with the U.S.’s main rival for world hegemony, China.

For example, the IRA seeks to give a competitive edge to domestic car manufacturers by extending the current tax credits for electric cars past the first 200,000 sold. As currently written, this would mean a competitive edge to Chinese car manufacturers new to the such as BYD. Cars not built in North America will not qualify for this credit. The United States also seeks to gain an edge in the new car-battery market over China by only extending the credit for cars with batteries made from materials and components from the U.S. and countries it has trade agreements with. The percentage of components that have to meet these requirements is to increase with time under the law, in an attempt to encourage domestic lithium mining and refining. Apart from the auto industry, the legislation incentivizes companies who are making use of the law to buy their components and raw materials from the U.S. or its allies, excluding China. This comes on the heel of legislation that just made it through congress, investing $280 billion to push for the creation of domestic production of semiconductors. This was legislation driven by concern about the position of Taiwan in relation to China, and the virtual monopoly Taiwan currently holds on semiconductor manufacturing.

What does the IRA do for working people?

It’s worth asking what the IRA really offers the significant sections of working people who are struggling tooth-and-nail to get by in this country. Perhaps most significant of all for working people is the provision that allows Medicare to negotiate drug prices. Beyond that, it’s hard to see how tax credits for expensive new electric cars and solar panels on private homes are going to help people who are struggling week by week to keep food on the table and a roof over their heads. Are there any provisions in the law to improve public transportation? Making it free and more accessible? Nothing like that can be found. The law stuffs corporations with “green” profits, and shouts above the heads of the struggling working-class, “let them eat cake!”

What now?

It’s been interesting to see how different sections of the climate movement have responded to this legislation. On the one hand, there’s Jacobin, who, in their strategy to defeat their supposed class enemies by imitating them, admits that the IRA does not go far enough, but concludes with a sigh that unfortunately, “it’s all we’ve got.” This defeatist logic stems from the type of political thinking inspired by DSA founder Michael Harrington: “the left-wing of the possible.” The logic of Jacobin’s defeatism is the same as the logic that caused the German SPD to kneel down before their own destruction at the hands of German fascism. Jacobin and the SPD of the 1930s are similar insofar as both are incapable of imagining a world in which ordinary people become the prime movers of history. In both cases, working people taking history into their own hands is our only way out of the crisis. There simply are no alternatives. Jacobin’s political imagination has shrunk so much that they cannot conceive of the possibility of a world where capitalist institutions and the functionaries who man them do not hold the reins.

If this comparison seems too dire, let’s remember that according to the UN, 700 million people are estimated to be displaced from Africa by climate change induced famine and drought by as soon as 2030. If Marine Le Pen is getting 41 percent of the vote now, and her international counterparts are rising furiously in popularity along with her, how much worse will this be when hundreds of millions of people show up at the doorstep of Europe, trying to collect a bill for the lives stolen from them by western capitalism’s climate destruction? “It’s all we’ve got” isn’t good enough. If economic crisis alone wouldn’t have been enough to usher in a new age of fascism, climate change certainly will, and the capitalist class, overwhelmed by instability, will be more than happy to give them the reins. Not defeatism, but militant popular action from below holds the only way out.

In contrast to Jacobin, some climate NGOs and grassroots groups have come out more strongly against the law. Biden is seeking to balance U.S. imperial needs with his climate goals. But where did those goals come from? They have been forced upon him by the tireless climate activism of the past decade. What the law should indicate for grassroots groups is that the strategy of pushing electeds to pass legislation will never be enough to get the job done. Nor will direct sabotage, as Andreas Malm has recently been calling for, ever add up to the system change we need. Rather, we need to turn our organizing efforts to the people who have the power to shut down the system, and create something new in its place based upon economic equality and environmental justice: the international working class. It’s not through romanticism, but rigorous analysis of the situation that revolutionary socialists conclude that there is no path that avoids the barbarism of climate destruction and fascism except through the collective activity of our class.

Let’s reject false solutions, and start building the kind of movement that can win real ones.

Featured Image Credit: Photos courtesy of United States Senate and Senate Democrats via WikiMedia; modified by Tempest.

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Thomas Hummel View All

Thomas Hummel is a member of the Tempest Collective living in New York City.