The Inflation Reduction Act isn't just poised to cut carbon pollution. It could also save up to $1.9 trillion over the next three decades.
The Office of Management and Budget assessed the bill's benefits, releasing the analysis on Tuesday. The analysis is based on modeling from Princeton University, Rhodium Group and Energy Innovation, all of which have found the bill could cut carbon by roughly 40% by 2030.
The OMB analysis runs out to 2050, though, and assumes that the rate of emissions reductions modeled by the three groups in 2030 would continue for the next 20 years. It then looks at what those continued emissions cuts could mean for public health, property and other livelihoods that would otherwise be put at risk by the climate crisis. This is the OMB's first published estimate of avoided climate-related damage as a result of legislation.
The report uses what's known as the social cost of carbon, an economic metric that puts a dollar price per ton on the benefits of not emitting carbon dioxide or other greenhouse gases. Lowering carbon dioxide emissions will slow climate impacts like extreme heat and sea level rise, and it will also result in a drop in air pollution tied to burning fossil fuels.
Previous estimates of what climate change could cost the federal government range between $25 billion to $128 billion annually. Those costs come from addressing climate change-fueled distasters after they happen and include disaster relief, flood and crop insurance, health care spending and wildfire management.
OMB said in the report that there are likely "significant underestimates of the full public benefits of reducing greenhouse gas emissions," since it only focuses on domestic emissions reductions and excludes other potential impacts like ocean acidification. The law could very well spur more aggressive climate action abroad, which is vital since the U.S. is only responsible for roughly 14% of the world's annual carbon dioxide emissions. (Though, it should be noted, the country is the largest historical carbon polluter.)
Gernot Wagner, a climate economist at Columbia Business School, agreed, telling Axios that the OMB analysis doesn't include assumptions about potentially unquantifiable climate damages or how the law will speed up research and deployment of clean energy and all-electric technology. Bringing down the costs of those technologies here could again have knock-on effects by making them cheaper around the world, further spurring their adoption.
The Inflation Reduction Act "will help ease the burden that climate change imposes on the American public, strengthen our economy, and reduce future financial risks to the Federal Government and to taxpayers," wrote OMB associate director for Climate, Energy, Environment and Science Candace Vahlsing in a briefing.