The Inflation Reduction Act, the tax and climate bill President Biden signed into law last week, could reduce the costs from climate-related damages by up to $1.9 trillion, according to an analysis by the Office of Management and Budget (OMB).
The analysis published Tuesday is based on three models crafted by Rhodium Group and Princeton University. They found the law’s climate provisions could potentially cut up to 1 billion annual metric tons of carbon dioxide by the end of the decade, nearly meeting the White House target of cutting emissions in half relative to 2005 by 2030.
To model the reductions beyond 2030, the analysis uses the “social cost of carbon” metric, or the financial damages associated with a projected future level of carbon pollution. The analysis notes that the model assumes yearly reductions through 2030 will continue at a comparable pace through the next two decades, which is likely a conservative estimate.
Meeting these projections could reduce financial damages from climate impacts by between $700 billion and $1.9 trillion up to 2050, the OMB models found. In addition to reduced property damage from climate disaster, the savings would also come in the form of fewer negative health impacts and fewer energy costs associated with hotter temperatures.
In the nearer term, the models project the law could save between $34 billion and $84 billion a year by 2030.
The analysis, first shared with Axios, notes that the projections are entirely theoretical and do not account for every eventuality that may be involved in implementing the complex law.
“Implementing the Inflation Reduction Act will come with a set of challenges, and real-world [greenhouse gas] emissions reductions will be impacted by complicated economic interactions,” the report states. It also notes that the social cost of carbon estimates are likely low “because they do not account for many important climate damage categories, such as ocean acidification, and because of such omitted damages and other limitations and assumptions.”
However, OMB added, the numbers do not include any potential benefits to other parts of the economy, which could produce further reductions in emissions.