What does Joe Biden’s spending bill mean for climate change?

When Joe Biden was running as the Democrat nominee for President, he promised a massive spending bill that aimed at expanding social services and investing in climate change initiatives. However, in an effort at compromise and to secure the required votes to pass, the bill has been streamlined. Despite the reduction, it is still historic in the amount that is going towards climate initiatives. This bill comes at a time when the Climate Change Conference (COP26) is being held to come to an agreement on how to mitigate the effects of climate change, which many are warning may be irreversible.

Originally intended to be a 3.5 trillion USD spending bill, the now slimmed 1.5 trillion USD bill does include funding in areas which Biden promised. 555 billion USD is being allocated to climate change initiatives including expanding tax credits for clean energy – which is worth $320 billion, investing in clean energy sources and investing in infrastructure that would help the US adapt to the impacts of climate change. Furthermore, the bill would create a Civilian Climate Corps, which would create job opportunities for the young, whilst mitigating the effects of climate change. Analysis by the Rhodium Group found that the bill can help America achieve its promise to reduce greenhouse gas emissions by 45%-51% below 2005 levels by 2030. This is close to the goal agreed upon by the U.S. in the Paris Climate Accords which was to cut emissions by 50%-52%. However, most of the climate initiatives in the spending bill will likely take time before any effects can be visible as they could come under criticism. Some Republicans are sceptical of the economic upsides of the bill believing only that the 555 billion USD price tag would increase the national debt.

Spending on initiatives to mitigate climate change are widely supported by the American people, as a greater number of Americans are affected by extreme weather patterns such as hurricanes. However, the Republicans have been opposed to any action on climate change as they claim it hurts US businesses and jobs. Although some policies may hurt certain businesses in the short-term, the long-term consequences of climate change such as rising temperatures will have an everlasting effect on sectors such as agriculture and an increased cost of maintaining businesses under climate change.

Biden has indicated that the spending bill will be fully paid for by increased taxes on corporations and on wealthy Americans. The proposed taxes include a surtax of 5% to individuals with an income over 10 million USD, an additional 3% on income over 25 million USD, and a baseline of 15% corporate tax for corporations that report profits of more than 1 billion USD to shareholders. Theoretically, this should raise even greater tax revenue for the government, however, it may simultaneously encourage these wealthy individuals to use tax loopholes to avoid taxes and corporations moving their liabilities to countries which are considered ‘tax havens’. Furthermore, it is still unclear whether this tax on the rich can gain support from both the moderates or the progressive wing of the party as they may see it as not enough or too much.

Notably, the spending bill does leave out policies such as paid family leave, free community college and the decrease in the price of prescriptions, which had been supported by the left of the party. The omission of these key policies which Biden had originally intended to include may have consequences for the Democrats in the upcoming midterm elections in 2022. Voters may punish the inability of Democrats to pursue their own agenda, which would cause them to further struggle in an evenly split Senate and a narrowly held majority in the House of Representatives.

The spending bill is still what Joe Biden promised – large spending on climate change –however, it remains to be seen whether it can pass both Houses of Congress. If the bill were to pass, it will send a message to other countries how serious America is in the fight against climate change, at a time when other developed nations have been reluctant to do so.

By Nami Kumagai

Sector Head: Edward Raftery

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