Renewed US decarbonization efforts offer climate benefits and economic transition

Renewed US decarbonization efforts offer climate benefits and economic transition

December 1, 2022

When US President Joe Biden officially rejoined the Paris Agreement on his first day in office, his message was clear: the United States wants to be a leader on the issue of climate change. Since then, the Biden administration has demonstrated through numerous initiatives that decarbonization will be a priority in federal policy. These efforts not only represent progress for climate action in the US but also present companies with an invaluable opportunity to participate in the transition to a decarbonized economy.

How is the US government working towards deep decarbonization?

This announcement was followed by the August 2022 signing of the Inflation Reduction Act (IRA), a cornerstone of Biden’s legislative agenda thus far. At over US$350 billion, this law includes the largest investment in climate action and clean energy in American history. Among a flurry of other climate provisions, this landmark piece of legislation provides:

  • tax credits for electric vehicles and charging stations
  • significant investments in clean energy infrastructure, including manufacturing through wind and solar power
  • rebates for home energy efficiency
  • the establishment of a national green bank to drive further investment
  • funds for restoration of coastal habitats and forest conservation
  • grants to help disadvantaged communities affected by pollution.

Estimates for the overall reductions in greenhouse gas (GHG) emissions resulting from the IRA range from 31% to 44% below 2005 levels by 2030. Alongside other acts, such as recently renewed climate talks with China, this shows the US is moving in a positive direction on the 1.5 °C target set in the Paris Agreement. 


More specifically, with the IRA and other efforts, the Biden administration has honed in on decarbonization as a key policy priority. The federal government is implementing measures to reduce its carbon footprint, including Scope 3 emissions within its supply chain. For example, the Biden administration has established a program to prioritize low-carbon products in federal procurement of construction materials. It has also proposed requiring major federal contractors to publicly disclose their GHG emissions and climate-related risk and set science-based reduction targets. Considering the US federal government is the single largest consumer of goods and services in the world, these initiatives will touch a large portion of the market and have a significant impact; it would also make the US the first national government with such requirements.

Other regulatory measures will likely accelerate progress even further. For example, the Security and Exchange Commission (SEC) is currently working on finalizing new standardized rules that will greatly expand sustainability reporting requirements for public companies, with more details expected in early 2023. Additionally, tougher regulations have recently been enacted that require companies to use remote sensors to monitor for methane leaks. Finally, the White House recently loosened rules that had previously restricted employers' consideration of environmental, social, and governance (ESG) funds for pension plan investments.

On the global level, the Biden administration also put forth a proposal for an Energy Transition Accelerator (ETA) at the recent COP27 in Egypt. This would be a new credit program in the voluntary carbon market, through which Global South countries would initiate clean energy projects and secure funding through the sale of high-quality carbon credits. There are proposals to include requirements that purchasers of credits commit to reaching net zero by no later than 2050 and use standards aligned with the Science Based Targets Initiative (SBTI), as well as proposals to exclude fossil fuel producers. Proponents believe that, by providing verified, fixed rate, and advanced purchases of carbon credits, the ETA can facilitate private investment to help provide more reliable finance streams for clean energy projects in Global South countries.

What does this mean for business?

With temperature rising more quickly in the US than the global average, the general populace is increasingly aware of the need to protect communities. In the recent midterm elections, roughly half of voters identified climate change as “very important” or “one of the most important” issues. Some have even credited the Democrats’ relative success in the most recent election cycle to their climate policies. Furthermore, people are not only prioritizing climate at the polls - they are choosing it at the cashier counter. In our recent Climate Action Awareness Report, 60% of US consumers said that a climate-friendly label is very important or of top priority when they shop.

This also corresponds with increasing interest from the private sector and a growing understanding of businesses’ role in climate action. For example, ESG funds have grown increasingly popular in recent years, reaching an annual investment record of US$69.2 billion in 2021, while corporate climate pledges have also accumulated. The IRA will enable companies to meet these goals by drastically increasing the availability of renewable energy and providing incentives to companies to decarbonize. Alongside increased regulations, the long-term nature of the investments allows businesses to move forward with confidence in their climate strategies. Thus, by facilitating industrial decarbonization, these policy changes are expected to reduce risk and foster green economic growth.

Ultimately, these trends represent a potential paradigm shift in US politics and economics. Buoyed by pressure from investors and greater public awareness of climate change, the impacts of the IRA and other acts will accelerate progress towards decarbonization in the US and reverberate across the globe. In order to stay competitive in the future, companies must prioritize taking bold climate action today.

Check out our academy to learn more about corporate climate strategies, or read about our network platform to learn how to track your company’s Scope 3 emissions.

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