US Inflation Reduction Act is a flawed but vital step in the climate change fight

The bill is a signal that even one of the world’s largest users of fossil fuels is willing to change tack to deal with the deadliest crisis in our history
As the US and the likes of China and India throw their economic weight into the clean-energy revolution, their participation could spark a chain reaction

Adam Au

Published: 1:30am, 19 Aug 2022

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As soon as Typhoon Mulan departed, Hong Kong returned to the deadening heat that was commonplace for most of July. It is hardly an anomaly as, nowadays, extreme weather events are driving narratives about climate change across the world.

That is why the US Inflation Reduction Act is significant. Despite all the concern about climate change, the US was all talk and no action for the longest time. Every climate proposal over the past 30 years was found lacking, and any wholesale proposed change was met with partisan defiance. Now, the act will give crucial gravitas to fight the crisis.

It will create a pathway to kick-start the clean energy transformation. Among other things, it will extend US$369 billion in subsidies and tax credits for renewable energy such as solar, wind and hydropower, as well as other eligible projects. This will help reduce overall carbon emissions and lower energy prices to build a more sustainable sector.

The act is not perfect – at best, it is a compromised version of a long-term quest for change. For example, it lacks carbon pricing or a limit on greenhouse gas emissions; it is still a long way from fulfilling US President Joe Biden’s pledge to halve carbon emissions below 2005 levels by 2030.

The US will not be able to eliminate its dependence on fossil fuels – a significant contributor to global emissions – without more radical changes. However, the act should translate into more sustainable long-term planning.

Outside the US, no one should pin their hopes for a clean energy future on one regional piece of legislation. Achieving zero carbon emissions requires massive changes to the way society functions.

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Most of the world’s need for materials including steel, cement, ammonia and plastics requires large-scale conversion of fossil fuels. Professor Valcav Smil, a Czech-Canadian scientist, made this argument in his book How the World Really Works.

Ammonia, for example, is an important base material for the fertilisers that feed the world. Plastics, steel and cement are used to create everything from small-scale tools and machines to buildings and national infrastructure. Our modern economies and their parallel material flows are inextricably linked to fossil fuels.

Even electric vehicles, one of the clear beneficiaries of the US legislation, are not as environmentally friendly as they might first appear. Although they do not emit carbon dioxide while being driven, some manufacturing processes are harmful – raw materials need to be extracted and processed using fossil fuels to make a lithium battery, for example.

Until all the energy used to process the necessary materials comes from renewable sources, fossil fuels will continue to play a role in sustaining our everyday needs.

Despite the consensus on the benefits of reducing emissions, many global environmental proposals continue to get short shrift from developing countries. The West used fossil fuels during its industrialisation over the past two centuries, and now lower-income countries say they should be able to do the same.

All this shows the perennial divide between established and emerging economies, but it does not negate the significance of the Inflation Reduction Act. Support for the law signals that the US is finally taking its leadership role seriously in the battle against climate change.

America can now work towards environmental sustainability by investing in the industrial capacity to manufacture renewables at scale. As the US and the likes of China and India throw their economic weight into the clean-energy revolution, their participation will spark a chain reaction that could be a role model for other countries.

We cannot turn our polluted, fossil-fuelled planet into a climate haven overnight. Long-term policies needs time and patience to bed down into the popular consciousness.

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In Hong Kong, our dependence on fossil fuels is similarly significant, even though local power companies are committed to gradually shifting to cleaner coal plants and natural gas. Our commitment to phase out coal for electricity generation and increase non-fossil-fuel sources will reduce carbon emissions significantly.

On an individual level, supply-side policies should go hand in hand with efforts to encourage energy saving and public transport use. To win this arduous battle, every behavioural change matters.

The fight against climate change has gone down many paths. The Inflation Reduction Act is a salutary response to a crisis that requires a greater sense of urgency than before.

However, any optimism must be balanced by scientific facts founded in the way our lives are structured today. Modern civilisation will remain dependent on fossil fuels for the foreseeable future. No technology, apps or AI will change that.

The longevity of humankind rests on coordinated action by individuals, industries and nations. The passing of the Inflation Reduction Act is an important victory that could have big results in the long term.

More importantly, it shows us that even one of the largest users of fossil fuels is willing to change tack when confronted with the deadliest crisis in our history. Perhaps it is time for the rest of the world to take heed too.

Adam Au is the head of legal at a Hong Kong-based healthcare group