Climate Policies in Budget Package Signal Investors - Analysis

The Potential for a Clean Energy Investment Surge

The current budget reconciliation package under consideration by the U.S. Congress possesses the potential to initiate a substantial investment surge within clean energy, zero-carbon transportation systems, and advanced manufacturing processes. This, in turn, could enable a national reversal of the escalating greenhouse gas emissions that pose a threat to our future.

Strengthening U.S. Economic Leadership

Concurrently, these investments are poised to reinforce the U.S.’s standing as a prominent economic force in a global landscape increasingly prioritizing zero-carbon solutions. Furthermore, it’s important to recognize that investment inherently generates employment opportunities – and significant numbers of them.

Responding to Climate-Related Disasters

Following the recent devastating floods in Louisiana, the Texas power grid failures, and the catastrophic wildfires in California, isn’t a robust response to the climate crisis, utilizing impactful 21st-century solutions, a logical imperative?

Policy Signals for Investors

For the investment community, the proposed federal investments in zero-carbon infrastructure, renewable energy sources, electric vehicles, and climate-focused innovations will deliver the crucial policy signals needed to confidently allocate funding towards groundbreaking technologies.

Investor Confidence and Technological Advancement

Once investors are assured of the government’s commitment to modernizing the economy and competing with nations already actively deploying these technologies, investment commitments within the climate and technology sectors will inevitably increase.

The Case of Transportation Electrification

Consider, for instance, the electrification of the transportation sector. Currently, transportation accounts for the largest share of U.S. greenhouse gas emissions, contributing 29% of the national total through exhaust from vehicles, trucks, aircraft, and maritime shipping.

Despite temporary emission reductions during the pandemic, transportation emissions were still on an upward trajectory and are projected to continue increasing, a trend that warrants serious concern.

Incentivizing Electric Vehicle Adoption

However, the reconciliation bill’s tax incentives – offering up to a $12,500 credit for electric vehicles manufactured within the U.S. – will substantially enhance the affordability of EVs for American consumers. Coupled with incentives for the development and deployment of EV charging infrastructure, we can anticipate a rapid increase in the adoption of clean electric transportation and a corresponding decrease in emissions.

The Clean Electricity Performance Program

Integrating these transportation incentives with the reconciliation package’s Clean Electricity Performance Program (CEPP) – which incentivizes utilities to accelerate their transition to clean energy from a current national average of 40% to 80% by 2030 – will result in a significant overall reduction in emissions.

Synergies Between Sectors

Together, transportation and electric power currently represent over half of U.S. greenhouse gas emissions. These provisions will stimulate a widespread energy generation transition capable of powering the electric vehicles, trucks, and fleets of the future.

Economic Growth and Job Creation

As investors, we recognize the budget reconciliation as a catalyst for long-term, sustainable growth, which directly translates into job creation. The Economic Policy Institute estimates that the provisions within the budget reconciliation could generate up to 3.2 million new jobs annually.

Our existing investments have demonstrated how capital infusions, from both public and private sources, can stimulate job creation across a spectrum of roles, from hourly positions to highly skilled engineering positions. This legislation will foster economic opportunities for all.

The Economic Benefits of Climate Action

The market for climate action is demonstrably present. The Global Commission on the Economy and Climate has determined that ambitious global climate action could yield $26 trillion in economic benefits by 2030. It is crucial that these funds are deployed swiftly and effectively to prevent a global temperature increase exceeding 1.5 degrees C – a threshold widely considered the tipping point for catastrophic, irreversible climate change.

Government policy can both signal and facilitate broader private-sector investments, mirroring the impact of pollution legislation enacted decades ago.

The Cost of Inaction

Conversely, what will be the consequences if Congress fails to pass the infrastructure and budget reconciliation packages? The cost of inaction far outweighs the expenses outlined in the proposed legislation. The climate measures within the bill represent an investment of $700 billion over a decade, equating to $70 billion annually.

The Financial Impact of Climate Disasters

Climate change-induced extreme weather events already inflict approximately $100 billion in damages each year within the U.S. Without proactive measures, citizens will continue to face rising tax and energy bills. Investors, in turn, will redirect capital towards companies and sectors in other regions prioritizing next-generation renewable energy, EV charging, and other technologies supported by favorable policies.

Long-Term Consequences of Delay

A failure to act will result in long-term negative consequences for the United States, as its economic leadership diminishes and its original equipment manufacturers (OEMs) and supply chains gradually lose their competitive edge on the global stage. The nation will subsequently lose the financial capacity to mitigate or respond to the devastating local impacts of climate change.

A Call to Action

Addressing the climate crisis urgently, with both the public and private sectors maximizing their respective tools, is paramount to ensuring long-term economic and environmental sustainability. The federal policy tools and opportunities are readily available, and the private sector stands prepared to respond with investment capital.

We strongly urge Congress to enact the budget reconciliation bill, allowing its robust climate measures to deliver benefits for all.