$374 billion is a lot of money. But China and the EU are spending as much or more on the transition away from fossil fuels. 

The historic US climate deal that has now passed both chambers of Congress is being touted as one of the most ambitious decarbonization commitments made by any government to date. Is it?

Many countries have passed climate regulations and invested in green infrastructure, but the scale of the Inflation Reduction Act has few parallels. The bill devotes $374 billion to climate and energy measures over the next decade, with a focus on subsidies that make it easier and cheaper to live more sustainably. 

When you combine public and private investments aimed at accelerating the energy transition, China is by far and away the biggest spender, according to data compiled by energy research group Bloomberg NEF. Neither the IRA nor Europe’s Green Deal appears likely to change that. China spent $297.5 billion last year on the energy transition, while EU member states devoted $155.7 billion and the US $119.7 billion, using the BNEF methodology. 

When comparing international efforts, it can be tricky to untangle where government expenditures end and private ventures begin, and analysts frequently lean towards more qualitative analysis. One major distinction between the US plan and models pursued by other major emitters like the European Union and China is that the American plan doesn’t rely on carbon pricing. 

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(Source: Bloomberg, August 15-2022)