CLIMATEWIRE | A surprise climate and energy agreement between Sen. Joe Manchin and Senate Majority Leader Charles Schumer promises a large U.S. emissions cut of 40 percent that seemed out of reach just a few days ago.
The announcement marked a startling reversal, breathing new life into the prospects for federal climate legislation two weeks after talks between the two senators broke down. The agreement would offer President Joe Biden a major political victory just before the midterm elections by delivering on his campaign pledge to spend hundreds of billions of dollars to boost clean energy deployment.
“The Inflation Reduction Act of 2022 will make a historic down payment on deficit reduction to fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40 percent by 2030,” Schumer (D-N.Y.) and Manchin (D-W.Va.) said in a statement.
The bill includes $60 billion to boost domestic clean energy manufacturing, including $30 billion in production tax credits for solar panels, wind turbines, batteries and critical mineral processing. It also offers lower- and middle-income motorists a $7,500 tax credit for clean vehicles, while states and electric utilities would see $30 billion in grants and loans to expand clean energy. The bill also includes $60 billion for environmental justice communities and a fee on methane emissions that will rise to $1,500 a ton by 2026.
Biden praised the deal last night, saying it’s “the action the American people have been waiting for.”
“We will improve our energy security and tackle the climate crisis — by providing tax credits and investments for energy projects,” Biden said in a statement. “This will create thousands of new jobs and help lower energy costs in the future.”
Experts say the United States cannot meet the emission targets of the Paris climate accord without federal action. The United States is currently on track to cut emissions 24 percent to 35 percent of 2005 levels without additional federal actions, according to a recent analysis by the Rhodium Group, a research firm. Those cuts would largely be driven by a combination of renewable energy and electric vehicles, but those estimates were highly variable and dependent on commodity prices and economic growth.
Those declines in greenhouse gases would fall far short of the 50-52 percent reduction in emissions Biden targeted by the end of the decade. The bill announced yesterday also falls short of Biden’s goal, but it would bring the country closer to the president’s target.
Many analysts and lawmakers were still sifting through the details of the 725-page bill last night. Still, many Democrats were eager to declare victory.
Sen. Ron Wyden, the Oregon Democrat who leads the Senate Finance Committee, hailed the bill as a “historic victory.”
“For the first time, the tax code is going to reward emissions reductions, and encourage the development of new clean energy technologies as soon as they come online. No longer will Congress need to legislate technology by technology, making it easier to bring new technologies to market,” Wyden said in a statement. “Importantly, this is permanent energy policy. Congress will no longer need to extend these incentives every few years, giving companies and states certainty to plan clean energy projects and create jobs.”
The agreement, called the “Inflation Reduction Act of 2022,” offers $433 billion in new spending, with $369 billion of that funding going toward climate change and energy security. Some of that money be used as tax credits for renewable energy, hydrogen, nuclear and offshore wind.
The bill would raise $739 billion in revenue, most of it through an increase in the corporate tax rate to 15 percent ($313 billion) and prescription drug reform ($288 billion).
As part of the bill agreement, Manchin said that he had an agreement with Schumer, House Speaker Nancy Pelosi (D-Calif.) and Biden to take up permitting reform as a separate action in the coming weeks. That reform would benefit infrastructure for fossil fuel projects as well as clean energy projects. It would also require 60 votes to pass the Senate.
Despite the agreement, the bill still faces a series of pitfalls.
The bill must undergo negotiations among Democrats in the House and Senate, including progressives who want far more action. It leaves out tax relief provisions that some House Democrats had sought, and it includes an increase in corporate tax rates and a carried interest loophole that Sen. Kyrsten Sinema (D-Ariz.) has opposed.
It must also undergo a review by the Senate parliamentarian to ensure it can pass muster as a budget reconciliation bill.
Schumer and Manchin said the bill would be taken up next week ahead of the August recess. Because it is a budget reconciliation bill, it only needs 51 votes in the Senate — or the support of every Democrat, with Vice President Kamala Harris acting as tiebreaker.
Democrats had appeared poised for a repeat of 2009, when a cap and trade bill died in the Senate. The apparent failure this summer generated a clamor among climate activists for Biden to declare a climate emergency and use his executive powers to slash emissions. But the announcement yesterday revived hope among Democrats and their allies that the U.S. might finally pass its first major piece of climate legislation.
“Holy shit. Stunned, but in a good way. $370B for climate and energy and 40% emissions reduction by 2030. BFD,” tweeted Sen. Tina Smith (D-Minn.).
Sen. Brian Schatz (D-Hawaii) called the bill “the biggest climate action in human history.”
“The planet is on fire. Emissions reductions are the main thing. This is enormous progress,” he said in a statement.
The bill would dwarf the $90 billion spent on clean energy tax credits as part of the 2009 stimulus package. It would likely lead to more immediate emission reductions than the infrastructure bill that passed last year, which funneled research and development dollars into emerging technologies that are unlikely to be built at scale this decade. And it would exceed the $300 billion in clean energy spending called for in the “Build Back Better Act” that Manchin opposed last year.
Evergreen Action, a progressive advocacy group, said the bill is an “opportunity for a major breakthrough in America’s fight against climate change.”
“This bill has the potential to be the single largest investment in clean energy in American history,” the group said in a statement. “Making major investments in clean energy is one of the best ways Congress can lower inflation and shield Americans from the volatility of fossil fuel markets.”
Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2022. E&E News provides essential news for energy and environment professionals.