George Favaloro, Head of Climate Solutions, North America at South Pole, asks whether the Inflation Reduction Act has overlooked the best defence against extreme weather.
One year on, America’s most ambitious effort yet to help mitigate the worst impacts of climate change – the Inflation Reduction Act (IRA) – is taking shape. But as we look back, it is clear that we have overlooked investing in one of our best defences against extreme weather – nature itself.
The horrific wildfires in Hawaii and a deadly hurricane on the East Coast shows the US is no stranger to outbreaks of extreme weather events caused by climate change. The consequences of which are becoming more frequent, costly and deadly.
The IRA is spurring investment in green technology and nature-based solutions to the tune of almost US$370 billion through grants, loans and tax credits to public and private entities. Carve-outs for initiatives and incentives aimed at tech solutions, such as carbon capture storage, are the most sizable of all. Tax credits are set to reduce climate tech costs by an average of 40%. However, tax credits for nature-based solutions need to match those being handed out to tech solutions if we are to build the US’ adaptation and resilience against climate-related disasters.
While tech solutions are crucial for mitigating the effects of climate change, no technology can fully replace nature’s capabilities. This was well said in a White House’s National Climate Taskforce report last year: “There is often an assumption that tackling the climate crisis requires only technological solutions or that ‘innovation’ means ‘technology’”.
Twenty years ago, the world stood still as Hurricane Katrina ripped up New Orleans in 2005, causing 80% of the city to be flooded for weeks, displacing 1.2 million people and causing over US$100 billion in damage, some of which is still being repaired today.
Investment in stronger natural defence barriers could have helped prevent this damage – mangroves, for example, can reduce wave height by 66%. In New Orleans, mangroves have historically served as a natural buffer to flooding and storm surges and so the loss of its coastal marshlands is one reason for the high severity of flooding after Hurricane Katrina.
For a long time, nature-based solutions have been thought of as a way to just reduce carbon, rather than shield us from its consequences. It’s true, America’s forests absorb carbon emissions at a rate equal to 10% of US annual GHG emissions, and a targeted reforestation campaign, aimed at 148 million acres of degraded land, could capture up to 535 million metric tons of carbon dioxide each year. That’s over 80% of annual US carbon dioxide emissions.
However, more intense hurricanes are set to occur after the 2020 season that broke records with 30 named storms. It is clear we need to urgently invest in preparing ourselves. Technology is a big part of the solution to the climate problem, but our damage is catching up with us and we need nature’s help.
The IRA did not forget nature by any means – US$2 billion will go to protecting coastlines, US$20 billion to farmers who are working to increase carbon storage and reduce emissions, and US$5 billion for forest management workers that can reduce the risks of wildfires – but the quickest way to drive capital to cause is by unlocking private finance.
Scale at speed
Investment into nature also needs to rapidly scale if we are to have a chance of meeting the UN’s target of tripling finance for nature-based solutions by the end of the decade. Yet there is not the same influx of private sector capital as the market for carbon capture storage technology or direct air capture. Tax credits like 45Q have opened the floodgates for private finance towards technology solutions as it promises a 30-70% cost decrease for direct air capture and a 70+% cost decrease for carbon capture storage. Fiscal carve outs within the IRA therefore should be also designed specifically towards nature-based solutions.
There is already a system in place to facilitate complimentary private sector finance, the voluntary carbon market, so it is worth considering that for nature-based solutions to scale, there needs to be adequate incentives to do so, which the IRA can provide as it does for tech solutions currently.
Private sector companies that commit to reforestation to support carbon sequestration, dedicate finance to the restoration of ecosystems and degraded habitats, or adopt regenerative agriculture practices, should be incentivised to do so by paying less tax because of the strides they are making in decarbonising and supporting nature’s role in mitigating and adapting to climate change. But the IRA must be careful in its efforts not leave out nature-based solutions that perhaps don’t always get the limelight such as biochar.
The immense capability of nature to strengthen our climate resilience means we need to drastically rally more private finance with every fiscal tool available. One year on from the IRA’s passing, Hawaii and Florida’s aftermath of destruction tell us one thing: investing in nature cannot wait.