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Climate, Healthcare, and Tax Bill set to become Law in the US

Published: 18th Aug, 2022


The U.S. Senate approved a bill titled the Inflation Reduction Act (IRA) 2022. The IRA has a special focus on climate, healthcare, and tax provisions to address inflation.


  • The bill is a scaled-down version of President Biden’s Build Back Better Act (BBBA), which failed to get approval from the Senate. It was the key component of President Biden’s domestic agenda. The Inflation Reduction Act (IRA) 2022 has a special focus on climate, healthcare, and tax provisions to address inflation.
  • It is a massive spending-and-tax bill that includes $433 billion in investments in health care, clean energy, and climate change and tax provisions to address inflation. It is considered as the most consequential climate law ever passed in the US.

Key Highlights of the Legislation:

  • Power to negotiate drug prices: The most popular element of the Bill is giving Medicare the power to negotiate drug prices. The legislation represents a historic expansion of Medicare’s power that was fiercely opposed by the pharmaceutical industry. It has the potential to lower drug costs.
  • Close Tax Loopholes: A new excise tax provision will raise an annual revenue of $70 billion.
    • The Bill imposes a new excise tax on stock buybacks.
  • Lower the Federal Deficit: This measure would reduce the federal deficit by a net $101.5 billion over the next decade.
  • Greater Focus on Compliance and Enforcement: The largest amount of funding would be increasing the level and number of audits performed. Over 80,000 additional IRS personnel could be hired, which would double the Service’s current workforce.
  • Climate Change Tax Incentives: The bill includes modifications to current credits and creates new tax credits to address climate change. These include credits for the purchase of new and used electric vehicles.
  • Tax deduction to low and middle-income households: It provides a tax deduction to low and middle-income households to go electric and seeks to lower the energy bills of American households.
    • The legislation imposes a 15% minimum tax on large corporations, but there are no individual income tax hikes included in the Inflation Reduction Act.
  • Assistance for clean energy Transition: The Bill aims at the largest American investment aimed toward making the U.S. a leader in clean energy.
    • It includes packages worth $369 billion for the clean energy transition.
    • The Bill provides significant investment in renewable energy through heavy tax credits for wind and solar energy projects and electric vehicles.
  • Bolster domestic production: It aims to bolster the domestic production of heat pumps and critical minerals. Tax on large and profitable companies to meet the green investment
  • Methane fee: It imposes a fee on methane leaks from oil and gas drilling. At the same time, the Bill also aims at more investments in fossil fuels.

Why does the U.S. want to invest in addressing climate change?

  • To address extreme weatherevents and climate change: The U.S has been engulfed with threats of extreme climate events. This includes heatwaves, wildfires, cyclones, floods, and hurricanes that have become frequent and intense in the past few years.
  • Build Back Better Act (BBBA): Climate action has been a priority since Joe Biden came into office. He introduced the Build Back Better plan which was a multi-trillion deal with key provisions for climate change.
  • The U.S. aims to achieve its climate targets through the Bill:
    • It will help the nation get closer to its climate target of reducing 50-52% emissions below 2005 levels by 2030.
    • The investments in the Bill could reduce greenhouse gas emissions by 31 to 44% by 2030.

Issues with the bill:

  • Bill doesn’t talk about global climate finance
  • Backing fossil fuel sector
  • Does not take into account the communities that are dependent on fossil fuel
  • Handcuffs the expansion of oil and gas with renewable energy development.
  • Insufficient to meet targets agreed in Paris Agreement: It is a mere step toward achieving the climate target agreed upon in the Paris Agreement, where Article 2 states global temperature should be limited to below 2°C.

Similar climate packages announced by other countries:

  • “Invest in Kisida” by Japan: It has been brought in May 2022, aiming for a $1.1 trillion investment to bolster the Japanese economy. As part of the plan, the country aims to transitionto clean energy and achieve a 46% reduction in greenhouse gas emissions by 2030.
  • “Fit for 55” by European Union: In June 2021, the European Union (EU) proposed a similar ‘Fit for 55’ plan to reduce emissions by 55% by 2030. The plan is yet to meet its fate by becoming a law.


This Bill could be a turning point for global climate action as the US is one of the largest emitters of greenhouse gases globally. However, it does not address any issues of global climate finance which is a major impediment to global climate action. It can be considered as baby steps toward achieving the climate target agreed upon in the Paris Agreement, where Article 2 states global temperature should be limited to below 2°C.

The bill may not be addressing the climate crisis holistically, but such historic initiatives by the US, which is also the largest contributor to greenhouse gas emissions can be a benchmark for other large emitters to push their climate action programs.

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