The Inflation Reduction Act (IRA), which was enacted a year ago to curb inflation, included landmark investment funds for credits and subsidies to advance a range of climate change initiatives. Many of those green initiatives were a top priority this week at the United Nations Climate Ambition Summit in New York City.
Michael Berkowitz, executive director of the University of Miami’s Climate Resilience Academy, attended the summit that aims to drive the transition to a more sustainable, climate-resilient global economy. He defined “resilience” as “a community’s capacity to withstand the shocks they face, whether they be climate-related, a pandemic, earthquakes, spurts of racial tensions, etc.”
According to Berkowitz, “what will make communities more resilient is if they use the money and funding in the right kind of way—to make their communities more equitable and vibrant, inclusive and community-led, more sustainable, and utilizing multiuse infrastructure.”
Berkowitz, who also is the Eric T. Levin Endowed Chair in Climate Resilience, noted that the IRA together with the CHIPS and Science Act, also passed in August 2022, and bipartisan infrastructure legislation provide nearly $2 trillion to advance climate and resiliency goals.
“It’s really an opportunity to make fundamental changes to communities, to strengthen their capacities through trainings, job stimulation, and infrastructure construction. All those capacities they’re building in will make them more resilient to whatever the next shocks may be.”
Yet the urban resilience champion cautioned that poor infrastructure decisions can cause fragility in communities. He cited the harm caused by the construction of the Cross Bronx Expressway in New York and the I-95 expressway in Miami that severed existing communities and prompted health concerns.
While he applauded the intent of the Justice40 Initiative, the federal government’s goal to earmark 40 percent of green investments to benefit historically marginalized, underserved disadvantaged communities, Berkowitz said he is worried that the green investment funds will unfairly benefit urban communities that have established design teams and larger budgets—better positioning them to meet the eligibility requirements.
“In order to build an infrastructure project, let’s say new coastal protection or an improved water system—like all of the aging water systems in Flint, Michigan—those jurisdictions have to put together more concrete planning to access the money through the government,” he pointed out.
“That effort tends to fail more often than we’d like it to do,” Berkowitz said. “Because that work—the engineering drawings, the permitting, the regulatory approvals—takes time and money and oftentimes gets derailed. Many jurisdictions don’t have the technology or financial resources to make the most of the opportunities that the IRA has presented, that’s the problem. It’s often a case where the rich get richer.”
The IRA contains some two dozen tax provisions to help families save on their energy bill and to accelerate the deployment of clean energy technologies.
David Kelly, an economics professor and academic director of the Miami Herbert Business School’s M.S. in Sustainable Business program, contrasted the IRA’s green funding component with previous environmental legislation.
“Previous bills that have passed have been more regulation focused. Light bulbs or power plants have to meet a level of efficiency or emissions must be limited,” he said. “But this legislation focuses on subsidizing green technologies as opposed to putting limits on brown technology. Getting money to someone for doing something is easier than drafting a rule that says, ‘you can’t do this.’ ”
Kelly noted a range of other green bills—for carbon tax, cap, and trade, among many others—that did not pass, and the legal bottlenecks that dragged on for years. For example, when coal companies sue on the grounds that new cleaner technologies are not feasible or practical. Given the deeply divided Congress, he recognized the “political rationale” for the subsidy approach.
Subsidies, though, are not a panacea, he stressed.
“A lot of times, you’re subsidizing an expensive technology that may or may not work. Electric vehicles (EVs), for example, are very expensive, and they’re probably similar in terms of emissions to gas cars. Hybrids might be better still than EVs,” Kelly said. “I’m not sure EVs are doing all that much, and you’re spending a ton of money. Whenever they subsidize, they pick winners, and the winners they pick are often not the right ones, not the ones that can best reduce emissions.”
In his estimation, the subsidies that are offered tend to be consumer-facing and easy to sell to the public. “So, there’s good and bad to this whole idea of subsidizing everything,” Kelly said.
In the year since the IRA was enacted, Kelly noted that solar investments, in particular, have seen a big boost, which is a credit to the approach. Yet permitting and hook-up for solar systems continue to be challenging and have created backlogs.
And while a lot more people are buying EVs, he’s not so sure that’s attributable to the subsidies or simply the fact that people like the gas-free cars.
“The EV subsidies are being inhibited by the ‘Buy America’ aspect [required in the legislation] that requires that most of the car be made in America, and that’s hard to do especially with the batteries,” Kelly said.
The cars tend to be expensive and, with such demand, sometimes carmakers raise their prices. So, even with the subsidy offset, the cost to the buyer is high.
He pointed out, too, that popularity of subsidies varies around the country. Solar, for example, is more popular in Arizona than Maine or Michigan because of the consistent sunshine and limited tree canopies. EVs tend to be more popular in urban areas such as Miami where the charging stations are far more prevalent and the driving distances more manageable.
In terms of the green legislation supporting true environmental impact, Kelly said that he is concerned about longer-term implementation.
“The subsidies can be implemented right away, and that’s something they’re already doing. But, especially for resiliency investment money, you need more infrastructure,” he said. “You have to set up mechanisms where people can apply and then have government oversight to assess applications, decide who is most eligible, prevent fraud, and establish measures for success. That has to be developed and takes time.”
