There are many lessons for Australia in President Joe Biden’s Inflation Reduction Act, passed this week by US Congress, but perhaps the main one is: Never Give Up.
A month ago I wrote here that this country, and the rest of the world, had a big problem because America was out of the carbon emissions reduction game, which would make most other countries think they might as well give up too. Without the US reducing emissions, we’re all cooked.
It was because the US Supreme Court had gutted the EPA’s [Environmental Protection Agency] ability to deal with global warming, and more importantly, Biden could not get his climate action bill through Congress because of opposition from two Democrat Senators, Joe Manchin and Kyrsten Sinema.
But Biden didn’t give up: This week Manchin and Sinema both voted for the renamed bill, and it passed.
Rebranding the legislation was an obvious, but brilliant piece of marketing – it’s called the Inflation Reduction Act (IRA), but it’s in fact a climate bill with – as Paul Krugman wrote in the New York Times, a “side helping of health reform”.
What’s more, on climate it’s aimed at helping households – not industry – reduce emissions, which is the other brilliant thing about it, and that’s why Manchin and Sinema voted for it.
The Albanese government should take careful note, because 43 per cent is both difficult and not enough.
The work on getting Biden’s bill up did not start last month when Manchin and Sinema officially scuppered the earlier version. It began in 2020, when Australian scientist and climate activist Saul Griffith founded a non-profit body called Rewiring America.
Griffith, his work in the United States done, is now back in Australia to lead the local version of the same organisation – Rewiring Australia. I spoke to him at length last week.
He told me: “As soon as Biden became president, we started working with Chuck Schumer’s office (Charles Schumer is the US Senate Majority Leader) on analysis of what it would take to hit Biden’s emission reduction targets and have been working pretty much daily with weekly check-ins with Schumer’s office since, doing the behind-the-scenes calculations and numbers and strategy of how you get the emission reductions required.”
What Griffith and his team managed to do was move the conversation toward demand-side electrification, and away from industrial emissions.
“That shifted the focus to the household, where people get to lower their energy bills a little bit, and away from the traditional climate narrative of, it’s all industry’s fault and it’s all about electricity production,” he said.
“If you really look at all of the energy flows, which is work I’ve been doing in the US for 10 years, you can get enormous emission reductions just by helping households choose renewably powered electrification for their heating systems and their vehicles.”
So as their names imply, Rewiring America and Rewiring Australia are dedicated to reducing carbon emissions by converting household appliances, heating and vehicles from gas to electricity, where possible powered by rooftop solar panels and lithium batteries.
Joe Biden’s ‘Inflation Reduction Act’ commits $US369 billion ($530 billion) to spending on climate change, the largest amount of money dedicated to emissions reduction anywhere in the world, including $US57 billion ($82 billion) to help disadvantaged families electrify their homes, saving them money and creating a lot of jobs.
The rest of the money is mostly tax rebates for the majority of households, which are not capped, so if they’re popular then the $US369 billion will be the minimum spend, rather than the maximum – it’s an estimate of the cost rather than a legislated spending commitment.
The key to getting the bill across the line was the storyline that households would win, that electric appliances would be subsidised, and energy bills would be reduced.
As Saul Griffith told me: “In communications politically for the last decade in the US, as it was in Australia, it was stories about what you have to lose. You’re going to lose jobs, you’re going to lose your barbecue, you’re going to lose your weekend, you’re going to lose all of these things.
“Those same cynical arguments were prosecuted in the US as well and because we’d done the modelling of the energy systems, we could see that you could now tell a story where households would win, so you’re changing the politics from a politics of fear to a politics of winning and hip-pocket economics for the American people. That really was quite transformative.”
In Australia, the entire focus of the emissions reduction effort has been on electricity production and industry, which is what the Albanese government’s Climate Change Bill – passed by the lower house last week – is all about. That is, spending on renewable energy transmission and reducing the emissions of big businesses.
But according to Saul Griffith: “Australia’s actually quite similar to America when you’re looking at the domestic economy – about 42 to 45 per cent of our emissions are coming from our households and if you include small businesses, it’s about 70 per cent of Australian domestic emissions, meaning emissions that aren’t exported or aiding our exports.
“The risk for Australia is if we continue to focus on our industrial emissions and our export emissions, we really aren’t going to lower those emissions this decade because we don’t yet have green steel, we don’t have green hydrogen, we don’t have seaweed that cows can eat at scale yet to stop them emitting methane, we’ve still got significant agricultural emissions. So, we don’t have the technology on the table to make a significant dent in our exports and industrial for export emissions this decade.”
Saul Griffith and Rewiring Australia are now turning their attention to changing the conversation in Australia toward households – subsidising electrical appliances and heating, rooftop solar and household batteries.
America’s $US369 billion is equivalent to $527 billion. Australia’s population is one-eighth of the US, so the pro-rata amount for the Australian government would be about $66 billion.
That’s about three times what the Albanese government plans to spend, and no doubt Treasurer Jim Chalmers would explain that we can’t possibly match what the US is doing because of the size of our deficit.
Sure, but the Australian budget deficit is 3.4 per cent of GDP; America’s is 5.8 per cent.
It’s a matter of priorities … and commitment.
Alan Kohler writes twice a week for The New Daily. He is also editor in chief of Eureka Report and finance presenter on ABC news
