Federal Policy Building Blocks to Support a Just and Prosperous New Climate Economy in the United States
The report estimates the socioeconomic impact of federal climate policies under three mitigation scenarios. These mitigation scenarios focus on tax incentives, climate-friendly infrastructure investments, and sector-based performance standards—many of which have been enacted in the 2021 Bipartisan Infrastructure Law and the 2022 Inflation Reduction Act.
Effective and immediate federal policies are needed to meet U.S. climate goals. The Biden administration has committed to reducing U.S. economy-wide greenhouse gas (GHG) emissions by 50–52% below 2005 levels by 2030 and equitably achieving economy-wide net-zero GHG emissions by 2050. Near-term policies are needed to reduce emissions this decade and set up the economy to eliminate or remove remaining emissions by midcentury. This will require a combination of different policy tools, such as spending on infrastructure, tax incentives, sector-based performance standards, economy wide carbon pricing, and policies to enhance natural and working land sinks and deploy carbon removal technologies. Many of these decarbonization policies have been enacted in the 2021 Bipartisan Infrastructure Law and the 2022 Inflation Reduction Act.
Federal policies to enable the shift to a net-zero economy also present significant economic opportunities. Scaling up demand for low-carbon products and services can create jobs, spur economic activity and enhance U.S. competitiveness in a rapidly growing global sector, particularly when paired with domestic manufacturing incentives.
However, that does not mean a net-zero transition is without its challenges. As high-emissions industries see shrinking demand, there is risk of an unmanaged transition leaving behind workers and communities dependent on those industries. Federal policies are required to ensure this climate-smart growth builds inclusive and equitable economies at the local, regional, and national scale, while redressing current economic, racial, gendered, and geographic injustices.
Building on previous WRI analysis which compares the progress towards a net-zero emissions economy under different mitigation scenarios, this report estimates potential economic impacts these scenarios may generate by 2035. These mitigation scenarios focus on tax credits for various clean technologies, climate-friendly infrastructure investments and sector-based performance standards, which form the building blocks for a successful decarbonization strategy. We assess how different combinations of policies, which increase in ambition across these mitigation scenarios, can generate economy-wide benefits. Additionally, our analysis evaluates the extent to which the addition of different policy levers, specifically domestic manufacturing and family-sustaining wage requirements, can further enhance the economic outcomes and help advance a just and equitable energy transition.
- This report uses the Economic Impact Analysis for Planning (IMPLAN), an input-output framework, to estimate the impact of proposed federal climate mitigation policies on employment. The policies include tax incentives, infrastructure investments, targeted spending and sector-based performance standards.
- The model compares a reference scenario (RS) with an extended tax credit (ETC) scenario, an advanced tax credit (ATC) scenario and a net-zero (NZ) scenario. These scenarios lead to a 50, 63, and 100 percent reduction in net GHG emissions (relative to 2005 levels) by 2050, respectively.
- Assuming new investment does not displace investment elsewhere in the economy, and employment does not fall with proposed wage increases, the model finds that all decarbonization scenarios would create more jobs by 2035 than the RS.
- Compared with the RS, the ETC and ATC scenarios would add 0.4 and 0.9 million net jobs, respectively, while the net-zero scenario could add 2.3 million net jobs. New clean energy jobs would be concentrated in construction in the building and electricity sectors.
- Some subsectors and regions would lose jobs, so geographically targeted investments and policies would be needed for equitable outcomes in all communities. Domestic content regulation could avoid sectoral losses and spur manufacturing, but its unintended effects need to be carefully monitored.
- Additionally, elevating the wages of underpaid workers in the energy economy to family-sustaining levels induces economy-wide benefits that amount to a significant share of the costs of increasing wages.
U.S. ClimateVisit Project
Advancing climate action on federal, state and local levels to ensure a sustainable, prosperous and just future for all Americans.Part of Climate