Democrats’ budget would fund massive clean energy plan

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The Congressional Democrats’ $ 3.5 trillion budget plan would fund a sweeping transition to cleaner energy, but it is expected to meet opposition from parts of the energy industry and their industrial customers over provisions likely to increase their costs.

The plan calls for paying cash to utilities that make a rapid transition to cleaner fuels and imposing financial penalties for those who move slowly, one of many largely untested programs in the package. Others include tariffs on imports based on the greenhouse gas emissions of their production and the creation of unprecedented fines for oil and gas producers for leaking greenhouse gases into the atmosphere at from their wells, pipes and reservoirs.

The plan gives wind and solar power developers and other cleantech companies some of their most desired provisions, including a big increase in tax credits for new wind and solar power units.

Oil and gas companies warn, however, that the plan potentially makes the United States more dependent on foreign energy sources by making American oil and gas more expensive.

“We would be concerned about any policies that put American oil and gas production at a disadvantage,” said Anne Bradbury, managing director of the American Exploration & Production Council, which represents independent companies.

The Democrats’ budget plan would have far-reaching implications for companies like Valero.


Photo:

Eddie Seal / Bloomberg News

Donors are, however, considering penalizing imported fossil fuels through tariffs to boost US businesses.

Some industry group executives declined to comment to the public because key details of the plan are not announced or unfinished. Many companies are divided because provisions in the proposal that increase certain costs are potentially overruled by other subsidies for their customers and operations.

The electric utility industry is pushing for parts of the plan, including tax credits to get consumers to use electric vehicles. But he warns he will fight Congress if the new rules propose heavy penalties on the use of the industry’s largest fuel source, natural gas. These are the types of details that Congress will start negotiating over the next few weeks.

“Electricity companies and their customers cannot be penalized for maintaining system reliability as we work to meet our clean energy goals,” said Emily Fisher, chief counsel at the Edison Electric Institute , an investor-owned utility trading group.

Democratic Senate leaders last week announced the outline of the plan – with White House backing – including climate and energy initiatives with anti-poverty and education programs.

President Biden addressed the Virtual Leaders’ Climate Summit from the White House in April.


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Anna Moneymaker / Bloomberg News

But Congressional budget plan included few details, all of which are being negotiated as Democrats try to get it passed without a Republican vote through a process called reconciliation. The details will be filled in by several committees, each made up of progressive and moderate Democrats seeking to pull the measure in different directions.

Several moderate Democrats have yet to commit to the package, and each is likely needed to get the 50 votes needed to pass.

On the other hand, progressive supporters may balk if party leaders reduce their proposals.

“I’m encouraged, I just want to reserve judgment until I do the full analysis,” said Senator Brian Schatz (D., Hawaii).

Environmentalists and the clean tech lobby see the pact’s call for more renewable energy, electric vehicles and fossil fuel sanctions as the biggest national political issue this year. In recent weeks, several had complained that climate initiatives were being overlooked and now say the scale of the new plan is surprising.

Solar panels forming part of a power plant can be seen near Mojave, California.


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patrick t. fallon / Agence France-Presse / Getty Images

“This is designed both to get the emissions where they need to be and to create a lot of jobs in the process,” said Jeff Navin, a former Department of Energy official whose current company represents solar energy. and other cleantech customers. “I don’t think anyone thought Joe Biden would go this far on climate, and if even half of that survives, it will be the biggest federal climate action in history.”

The package is designed in large part to meet President Biden’s key climate commitments. That includes creating a clean energy standard, which Biden has pledged to help eliminate emissions from power generation in the United States by 2035.

This clean energy standard mimics state-level requirements that higher amounts of electricity come from wind, solar, or other zero-emission sources. It should be changed to go through reconciliation and possibly create a system of payments to reward utilities for complying quickly or penalties for slower when transitioning to cleaner fuels.

Budget reconciliation can offer Democrats a way around a partisan deadlock and further President Biden’s political goals. The WSJ explains how the process works and why divisions within the party could cause the process to fail. Photo illustration: Carlos Waters / WSJ

It also creates the possibility of friction between progressives and moderates, since the standard as currently conceived would treat natural gas as a clean energy source as long as it is combined with equipment to capture, use or sequester carbon dioxide produced during gas combustion.

The plan also includes significant tax incentives for clean energy and low emission vehicles. Lobbyists in the cleantech industry have called this their most important request. Mr. Biden and others have sometimes pegged such a program at $ 300 billion, though the Senate plan is silent on these types of spending breakdowns.

By comparison, Congress spent around $ 90 billion on its biggest spending effort on climate initiatives to date, as part of the stimulus package after the financial crisis more than a decade ago, Jesse Jenkins said. , a professor at Princeton University who studies energy systems engineering and policy. .

These big initiatives in the new plan include many of the measures the researchers considered most likely to be effective, he added. And if combined with other regulatory efforts and pending legislation, it could help the country make significant progress towards an effective emissions reduction target by 2050, Jenkins said.

The package “is a great sign of progress on the legislative action that will meet the moment,” said Sam Ricketts, co-founder of Evergreen Action, a frequent intermediary between Mr. Biden and conservationists who had criticized the president in recent weeks for not paying more attention to climate spending.

Some of the provisions to encourage emission reductions could also be used to pay for the plan, a requirement as part of the reconciliation. Tariffs, for example, are likely to raise funds from foreign aluminum and steel, like a one-of-a-kind levy on imports from high-emission countries that the Union European proposed Wednesday.

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Large construction and construction companies that import these materials are likely to be reluctant to the idea. And large industrial energy consumers like Dow Inc.

combat the potential increase in energy costs from a clean energy standard.

If you run one of these companies, “do you really feel like you want to pass 15-20% more costs on to consumers at a time when everyone is worried about inflation?” Said Kevin Book, managing director of analysis firm ClearView Energy Partners LLC. “It’s pretty scary.”

In a statement, Dow’s vice president of government affairs Kevin Kolevar said the company is committed to achieving net carbon neutrality by 2050.

“In the absence of a federal regulatory carbon price in the United States, Dow believes that a voluntary emissions cap for hard-to-reduce sectors would further reduce carbon emissions at a lower cost than a standard approach. clean energy, ”Kolevar said.

But for many companies, the effects of tariffs, the clean energy standard and other measures are unclear – and potentially contradictory – which may neutralize them as opponents, Mr. Book said. Many businesses will find tax credits and subsidies too good to fight if the rules are crafted carefully, and progressives have so far been effective in pushing the Democratic leadership to support ambitious agendas, he said. he declares.

Write to Timothy Puko at [email protected]

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