In a little over a week, President Biden will lead the U.S. delegation at the COP26 climate negotiations in Glasgow.
At this point, it remains unclear if he will arrive in Scotland ready to show off an ambitious climate change program all but signed into law, which could galvanize stronger global action, or if he will attend the event empty-handed, a scenario that almost certainly will lead to a massive global letdown. The stakes are high.
Build Back Better?
The cornerstone of President Biden’s Build Back Better agenda, currently in the final stages of negotiation in Congress, was supposed to be the Clean Electricity Performance Program (CEPP), a set of carrots and sticks that would push American utilities to roughly achieve 80 percent clean electricity by 2030.
It is a complicated arrangement designed to pass through the arcane budget process, but in essence it would reward utilities that expanded their clean electricity generation by more than 4 percent per year over the course of the decade, while penalizing utilities that grow clean energy slower than that 4-percent-per-year rate.
President Biden has announced a goal of cutting emissions in half by 2030. CEPP alone is thought to tackle a full one-third of those reductions.
The problem, however, is that Senator Joe Manchin (D-WV) nixed the entire idea in recent days, leaving the Democrats in Congress scrambling to assemble alternative proposals. For a very short period of time, an economy-wide carbon tax seemed to have life. “I’ve had a carbon pricing bill in my desk for the last three years just waiting for the time,” Senator Ron Wyden (D-OR), chairman of the Senate Finance Committee, told the New York Times on October 16, shortly after Sen. Manchin shot down the CEPP.
But a carbon tax seemed to quickly lose favor in the ensuing days. Not only did Sen. Manchin pour cold water on it, but Senator John Tester (D-MT), who is otherwise supportive of much of the proposed climate provisions in the sprawling budget package, also was not keen on it.
Another idea proposed by Sen. Tina Smith (D-MN), the principal architect of the CEPP, suggested a program that would reward states rather than utilities for ratcheting up clean energy. The idea was akin to a “race to the top” for renewable energy, with similar financial carrots that were in the CEPP, but without the penalties imposed on laggards. Without the penalties, perhaps Sen. Manchin would sign on.
At the time of this writing, it is unclear if that proposal, or some other version, will survive in the final deal. The problem with any and all climate policy that makes deep emissions reductions is the fact that anything with teeth has to get approved by Sen. Manchin, who represents coal-heavy West Virginia, and personally profits from a coal brokerage, while also taking in massive donations from oil, gas, and coal interests.
According to E&E News, Sen. Manchin took in more than $400,000 in donations from fossil fuel companies in just the past few months. While he may support modest climate provisions, he has powerful personal incentives to block deep decarbonization.
Biden goes to Glasgow
The seeming demise of the CEPP sent panic through the budget negotiations. President Biden called in Congressional Democrats for meetings on Tuesday, where he reportedly made clear that failing to pass climate action was not an option.
“The prestige of the United States is on the line.”
“The prestige of the United States is on the line,” Biden reportedly told the group, according to Rep. Ro Khanna (D-CA). “I need this to go represent the United States overseas. I need people to see that the Democratic Party is working, that the country is working, that we can govern.”
Various global leaders have already started to hint at results of COP26 falling short of what is needed. But a failure by the U.S. Congress to pass climate change legislation would deliver a massive blow to global efforts.
The Biden administration has suggested it has other tools at its disposal. The budget bill, while it may not contain CEPP, still has hundreds of billions of dollars in incentives for clean energy, electric vehicles, and other programs. The significance of these incentives should not be overlooked, and for now, they are thought to survive the negotiations.
On October 21, during a CNN town hall-style event, President Biden suggested that the $150 billion that was supposed to go to the CEPP, could be funneled back into climate programs rather than cutting that tranche of money altogether. “The fact of the matter is we can take that $150 billion, [and] add it to the $320 billion in the law, now that he’s prepared to support tax incentives,” Biden said, seemingly referring to the suite of tax credits for clean energy included in the budget bill.
Despite the loss of the CEPP, keeping the $150 billion and rerouting it to strengthen the tax incentives would be a big win.
The EPA also has plans to regulate fuel economy standards for cars and trucks, regulate methane from oil and gas wells, and potentially regulate CO2 from power plants. An analysis from the Rhodium Group finds that achieving the 50 percent emissions reduction by 2030 is technically possible without the CEPP, but will be much harder to achieve and will require aggressive and decisive regulatory action. But rulemaking is lengthy, and vulnerable to the whims of federal courts. Regulatory action is a poor substitute for strong legislation.
The irony for Sen. Manchin is that while he nixes a plan that would result in enormous federal dollars flowing into his state to support the energy transition, the coal industry is still on its way out, and could even face stiffer regulation that does not come accompanied with compensation. He has a once-in-a-generation choice – there is big-time federal money on the table to support energy transition, including for his home state. If he turns it down, there won’t be such an opportunity for many years, by all accounts. That still won’t save the coal industry.
At the time of this writing, Democrats were voicing increased optimism that they can clinch a deal on a slimmed down $1.5-$2 trillion budget package, and they are vowing to include strong climate programs. But they still have not found an idea that can be approved by Sen. Manchin. The world watches with the Glasgow talks just days away.