Aug 23, 2022 - Energy & Environment

White House: Climate law could slash related damages by up to $1.9 trillion

Illustration of the Capitol building open with money coming out.

Illustration: Aïda Amer/Axios

The Democrats' new climate law could cut related damages by as much as $1.9 trillion through 2050 by reducing impacts from extreme weather events, sea level rise and more, according to a new White House analysis shared first with Axios.

Why it matters: The economic ramifications of climate change are potentially staggering, eating into U.S. GDP by the end of the century, reports have warned.

  • The report states it is OMB's first-ever published estimate of avoided climate-related costs due to the effects of particular legislation.

Zoom in: The analysis, published online this morning by the White House Office of Management and Budget, uses underlying modeling work done by Princeton University, as well as Energy Innovation, a climate think tank, and Rhodium Group, a consulting firm.

  • The bill, these outside modeling groups show, has the potential to cut U.S. emissions by up to one billion metric tons of carbon dioxide annually by 2030.
  • By cutting emissions from the world's second-largest emitter to the tune of up to 40% below 2005 levels by 2030, the new law could reduce the likelihood of the most damaging climate change outcomes.

Yes, but: Those groups' models only projected the law's effects out to 2030, so OMB determined the bill's potential longer-term impacts by using a metric known as the social cost of carbon.

  • This metric assigns a present dollar value to the future cost of each additional ton of greenhouse gas emissions.

Reality check: The three modeling groups each made their own relatively optimistic assumptions about the law's impacts on energy markets and other aspects of society.

  • In reality, as OMB itself notes, implementing the law brings a host of challenges that will determine the actual emissions reductions.
  • For example, the clean energy workforce needs to be swiftly and dramatically scaled up.

The intrigue: The OMB's full results finds that the "cumulative climate-related benefits" from the Inflation Reduction Act could range from between $0.7 and $1.9 trillion through 2050.

  • The OMB says these benefits include fewer health impacts, such as averting premature deaths, as well as reducing property damage from sea level rise.
  • However, the office also makes the case that the report presents "significant underestimates" of the avoided damage, because many impacts, such as ocean acidification, are not in the models.
  • In addition, the report only shows the domestic impacts of the law, so any international repercussions it may have, such as by motivating other countries to further slash their own emissions, are missing.

What they're saying: "The calculation is a vast underestimate of the true benefits of reducing carbon pollution," Gernot Wagner, a climate economist at Columbia Business School who was not involved in the OMB report, told Axios via email.

  • This is both because of the unquantified avoided climate risks and how clean technologies may be deployed, he said.
  • "It does a straight up accounting of the currently known effects. It doesn't — can't — project how this Act has the potential to revolutionize the clean-energy race more broadly," Wagner said.
  • "There are plenty of positive tipping points along the way. First nobody has heat pumps, induction stoves or electric cars, before they become the obvious default. Emissions reductions will be all the larger as a result," he said.

The bottom line: It's clear that part of the White House's case for the new law's benefits is the reductions in climate-related threats, which is a novel one for any administration to make. It is likely to resonate within the climate community, but the analysis' broader influence remains to be seen.

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