CERAWEEK: Climate change policy not enough, IRA subsidiaries changing the rules

Climate change policies around the globe are not working, and the progress being made by such rules feels more like one step forward with one step back, a panel of energy experts said March 7 at CERAWeek by S&P Global.

The passage of the Inflation Reduction Act in the US has changed the game globally, but just throwing money at the problem won't solve the issue, the experts said during a CERAWeek session that focused on where climate change policy was working and where it needs to be improved.

"It doesn't help to have money if you don't have the capacity to provide steel or cement," said Eirik WÃrness, Equinor's senior vice president and chief economist. "You have to make things smaller and more efficient."

Efficiency over electrification

"We have to improve energy efficiency," WÃrness said. "We could probably be more efficient if we did things right."

Politicians want something big to show for their legislative work, but efficiency is an invisible opportunity, said Samantha Gross, the director of the Energy Security and Climate Initiative at The Brookings Institution.

"There's not a lot in the IRA on efficiency," she said. "It's important, but it's not sexy."

The average citizen of Barcelona uses one third of the energy that a resident of Atlanta does due to the way the city is setup with close proximity of apartments, stores and business, WÃrness said.

It's about creating smart public policy that would decrease individual transportation and increase public transportation, said Sunita Narain, director general for the Centre for Science and Environment.

The alternative is not moving to electric vehicles, but providing better public transportation. However, it's expensive to build public transportation systems from scratch, Gross said.

Private investments needed

The IRA, signed by US President Joe Biden in August, allocated $369 billion to energy and climate change spending and also provides tax credits which could potentially result in much higher spending.

While the IRA provides funding, it's not enough to change the system, Gross said. Rather, it's meant to goose investment from the private sector.

"That's where the real money is," she said.

However, subsidies have always been viewed as a bad thing, Narain said.

"I think what the IRA has done is change the rules of the game," Narain said. "Now, the global rules of the game are being changed by the biggest economy."