Will Biden Be Forced to Give Up What Some Say is His Best Shot at Tackling Climate Change?

Much of the debate over President Biden’s massive infrastructure proposal has been over its $2 trillion price tag. But the most powerful tool for tackling the climate crisis in the American Jobs Plan, in the view of many environmentalists, isn’t money, but Biden’s proposal to create a national clean electricity standard.

That idea—a mandate for increasing the share of U.S. electricity that comes from carbon-free sources every year—has been taking a beating in the political gauntlet of Capitol Hill.

Biden’s national climate policy adviser Gina McCarthy began dampening expectations for its survival last week, although she told POLITICO that the White House would “fight like crazy” to retain the standard as it struggles for a bipartisan deal in the Senate over one of the nation’s most politically polarized issues.

Thirty states already have a clean electricity standard, including red states like Iowa, Missouri, Montana and Texas. And as recently as a decade ago, proposals for a national renewable energy standard were able to garner Republican support in Congress when other approaches could not.

But so far, no Republicans in today’s evenly-divided Senate have voiced support for Biden’s clean electricity standard idea. And the Democrat whose vote has become pivotal because of his tendency to side with the GOP on climate change, Sen. Joe Manchin of West Virginia, has indicated he is not inclined to support any infrastructure measure that is not bipartisan.

 A slew of recent studies by the National Academies of Science and others have concluded that some policy framework that gives clean energy a leg up in the marketplace—a carbon tax, a cap-and-trade system, or a clean electricity standard—needs to be in place to double carbon-free electricity in the U.S. power sector from its current 40 percent share to 80 percent by 2030. Federal dollars alone are not likely to drive the kind of transformational change in the U.S. energy system that is needed to meet Biden’s commitment to cut greenhouse gas pollution economy-wide in half by 2030. 

“The basic problem is there’s a completely unlevel playing field right now,” said Michael Greenstone, director of the Energy Policy Institute at the University of Chicago, who served as chief economist for President Barack Obama’s Council of Economic Advisers. “There’s no penalty for increasing the odds of disruptive climate change, and a clean electricity standard would help to level the playing field. Without it, fossil fuels will continue to be advantaged, and advantaged in a way that increases our risk from climate change.”

But designing a clean electricity standard has proved politically challenging. Natural gas is a key sticking point, since it is doubtful a standard can win the needed support from Republicans or moderate Democrats unless natural gas gets some credit for being less carbon-intensive than coal, a prospect abhorrent to some environmentalists. And crafting a clean electricity standard that can be included in a budget reconciliation bill that can pass the Senate with a simple majority could add complexity and will make it a shorter-term fix.

“We need a long-term policy framework that investors and the industry believes will be there for several decades,” said Sasha Mackler, director of the energy project at the Bipartisan Policy Center, which recently issued recommendations from an expert working group it convened on clean electricity standards. “If you do it through a purely partisan approach—it may be the only way forward, but you’re not going to get the same enduring policy.”

‘We Tried That 10 Years Ago’

Given the hurdles Biden is facing in Congress, most observers believe that he settled on a clean electricity standard as a more politically viable approach than a carbon tax or cap-and-trade, a system in which the government places a cap on carbon emissions that decreases over time, while giving polluters the flexibility to undershoot their targets by buying “credits” from other companies that overperformed.

The White House has steadfastly declined to push for a carbon tax or fee, even after industry groups like the American Petroleum Institute and the U.S. Chamber of Commerce indicated their support for carbon pricing earlier this year. As for cap-and-trade, environmental justice advocates worry that it encourages polluter “hot spots” that hurt poor and minority communities. And for too many climate advocates, it is reminiscent of Obama’s failed legislative effort for such a system, when the massive and complex bill that emerged from the House was smeared as “cap-and-tax,” in a campaign funded by the Koch brothers and other anti-climate action advocacy groups. 

“The cap and trade conversation—you know, we tried that 10 years ago,” said Mackler. “There isn’t a lot of enthusiasm to go back to that now.”

But clean electricity standards, often called “renewable portfolio standards,” have a long and mostly successful history in the states, dating back to the first mandate in Iowa in 1983. States have for the most part met their clean energy goals, and half the growth in U.S. renewable energy since 2000 has been a result of state clean energy standards, according to tracking by the Lawrence Berkeley National Laboratory. 

Hawaii, which in 2015, became the first state to mandate a transition to 100 percent renewable energy (by 2045), has seen dramatic growth: from 8 percent to 67 percent on the island of Kauai in the last decade, and from 10 to 30 percent on Oahu, Hawaii Island and Maui. 

But 20 states have no renewable energy mandates and others have only modest requirements that they met long ago. Although the cost of wind and solar energy has plummeted dramatically in the past decade, and now is significantly cheaper than building new coal plants, it is still, on average, cheaper to build new natural gas plants, according to an analysis by Greenstone and his colleagues at the University of Chicago. Utilities have gravitated mainly toward the cheapest option—natural gas—to replace money-losing coal plants. As a result, natural gas now is the biggest source of power in the United States, fueling 40 percent of electricity generation. Just 20 percent comes from renewable energy sources.

Last year, wind and solar had their best year ever in the United States, surpassing natural gas in additions to the grid, with wind capacity up 85 percent, utility-scale solar more than doubling, a total 32 gigawatts added. But renewable capacity would have to be added at three times that rate—about 100 gigawatts annually, every year for the next decade—to put the U.S. on track to meet Biden’s campaign goal of 100 percent clean electricity by 2035.

“It’s a monumental undertaking—a moon shot kind of thing to try to get these utilities there,” said Doug Vine, director of energy analysis at the Center for Climate and Energy Solutions think tank. “Some are further along than others. But it’s a lot of ambition.”

Many advocates of climate action have coalesced behind the idea that a national clean electricity standard is the best way to drive that kind of unprecedented growth. 

“It’s building off of a framework that people are comfortable with,” said Mackler. “These state-level standards have worked well. We know how to design and implement them. And they’re broadly popular.”

Polling conducted earlier this year by Data for Progress, the progressive policy research group, found that 62 percent of voters support the idea of a clean electricity standard aimed at that 100 percent clean energy goal.

But just because an idea is popular doesn’t mean it can make it through Congress.

The Natural Gas Quandary

One of the most fractious debates over the clean electricity standard has been about how it should treat natural gas, which may be a key to garnering needed political support not only from Republicans but from moderate Democrats.

The comprehensive climate legislation introduced by House Democrats, led by Energy and Commerce Committee Chairman Rep. Frank Pallone Jr. (D-NJ), includes a clean electricity standard that would give natural gas “partial credit” for being a clean energy source, since it produces half the carbon emissions of coal at the power plant.

But to meet Biden’s 100 percent goal, natural gas will need to be phased out, or fitted with carbon capture and storage technology that is not yet commercially viable. And because natural gas is primarily methane, a greenhouse gas far more potent than carbon dioxide, studies indicate that its warming impact is far greater than government estimates, because of the inevitable leaks from drilling sites, processing facilities, tanks and pipelines. Some in the environmental community have been urging that natural gas be left out of the definition of “clean” in any national electricity standard. 

“We think it’s a mistake to provide incentives in the near term that could lead to more natural gas generation, which will become stranded assets in the future,” said Steve Clemmer, director of energy research for the Union of Concerned Scientists.

Some 700 environmental and racial justice groups have signed a letter, urging Congressional leaders not to give partial credit to natural gas.

But modeling by the think tank Resources for the Future, as well as a new working paper by political economists at Harvard, suggest that there could be a climate downside to a renewables-only clean electricity standard. The researchers found that coal, the most carbon-intensive source of electricity, would get driven out of the electricity system more quickly under a clean electricity standard that gave partial credit to natural gas. That’s because coal regains some competitiveness in a system that makes no distinction between the desirability of coal and natural gas generation.

Perhaps more relevant in Congress than the economics are the politics: Without some sort of support for the incumbent energy industries that are a big part of the economy in many states, it is unlikely that a clean electricity standard will get the needed votes. Paul Bledsoe, strategic adviser to the Progressive Policy Institute, who worked on climate in President Bill Clinton’s White House, said he believes that although most attention has been focused on Manchin, there are many other moderate Democrats who feel the same way. A clean electricity  standard  without credit for natural gas, he said, “won’t get 50 votes in the Senate.” 

And to pass the Senate with 50 votes, a clean electricity standard needs more than a wide group of constituencies. As a reconciliation bill, it has to have an impact on the federal budget, otherwise, it would need 60 votes, as other types of bills do.

So the standard, which is essentially a new regulatory program, would have to be transformed into a program that spends federal dollars and generates federal revenue.

Uncertain Costs

Last week, the White House indicated that it was prepared to pass its infrastructure plan through budget reconciliation, after negotiations with Republicans led by West Virginia Sen. Shelley Moore Capito were unsuccessful, in part because the talks failed to produce results that met Biden’s climate goals. A separate group of 10 Senate moderates, including Manchin and four other Democrats and five Republicans, came up with a larger bipartisan infrastructure spending proposal late last week, but sources indicated that that proposal, too, failed to include a clean electricity standard.

A group of former staffers for Washington Gov. Jay Inslee, one of the nation’s climate policy leaders, have taken the lead on coming up with possible designs for a clean electricity standard with the budgetary impact needed to pass muster as a reconciliation bill. Their group, Evergreen Action, working with the research group Data for Progress, laid out six different alternatives in a report released in February. One of the authors, former Data for Progress analyst Narayan Subramanian, is now a legal advisor to Energy Secretary Jennifer Granholm, who repeatedly has stressed the Biden administration’s willingness to pass a clean electricity standard through budget reconciliation. 

Under most state clean electricity standards, utilities earn “credits” for hitting targets increasing their percentage of clean energy. In order to lower costs for utilities and give them some flexibility, many states allow utilities that overshoot their targets to sell those credits to utilities that have a harder time doing so, in effect, creating a market much like the emissions market in a cap-and-trade system. At least some utilities have voiced support for a national standard because it would help them meet the cost of maintaining nuclear energy and transitioning to renewables. 

In order to pass a clean electricity standard through budget reconciliation, a similar process would be included in the federal budget.  But instead of “credits,” with the price determined by the marketplace, utilities that hit their targets would get payments from the federal government. Utilities that did not hit their targets would pay penalties instead. 

No one has produced a public analysis estimating how much money such a program would cost or how much revenue it would generate. The price of renewable energy credits in state markets today range widely depending on location, from $10 per megawatt-hour to $450 per megawatt-hour, according to the Lawrence Berkeley Lab. To meet a goal of 80 percent carbon-free electricity by 2030, the amount of clean energy on the U.S. grid would have to increase from 1.6 billion megawatt-hours annually today to at least 3.2 billion megawatt-hours. If vehicles and buildings are electrified, as Biden’s plan also anticipates, demand for clean electricity would increase much more. 

 If Congress moves forward with a reconciliation  approach, it would, like other budget bills, be scored by the Congressional Budget Office.

“The bottom line is that there is going to be a marginal cost of transforming the power sector over the coming decade—the way we’re contemplating it is as an investment opportunity in good job creation,” said Sam Ricketts, co-founder of Evergreen Action.

But if the standard is included in a budget reconciliation bill, under Congressional rules it would not be permanent, but would only address spending over the next 10 years. And if it passed with only Democratic votes, it could be overturned if Republicans regained control of Congress. 

Finally, at least some fellow climate advocates worry about the potential costs of a clean electricity standard that are part of the federal budget, instead of being levied directly from industry as a carbon tax. Sen. Sheldon Whitehouse (D-R.I.), one of the Senate’s most outspoken climate advocates, tweeted  that “We need a big climate bill—& fast—to stay in nature’s 1.5 degrees C safe zone.” Whitehouse, who has long endorsed a carbon tax as the way of driving an energy transition, voiced concern that some advocates were becoming fixated on a clean electricity standard. 

“‘CES only crowd needs to prove that gets us under 1.5, & justify cost per avoided ton,” he wrote in the Twitter post, referring to the clean electricity standard. “CES is important part but not enough on its own, IMO. We need to throw everything we can at the problem.”

McCarthy, too, sought to downplay the idea that the clean electricity standard is a linchpin of the Biden climate plan. “I don’t want people to think that our future and our success depends on any one piece, but it does depend—as the president’s indicated—on a sound investment in a clean energy strategy,” she told POLITICO. “He continues to support everything that he’s put on the table. I just don’t want people to think that a loss of any one thing, or a reduction in the cost, is going to be the end of the discussion.”

Although no advocate of a clean electricity standard portrays it as a magic bullet—virtually every analysis stresses the importance of the government pursuing other climate policies and investments at the same time—it tackles a crucial problem for clean energy in the United States. Greenstone said Biden’s team will fall short of their goals unless they can put a policy in place that gives renewable energy the advantage over natural gas, which, because of fracking, is likely to be abundant and cheap for the foreseeable future.

“It kind of comes back to the question, ‘Is this bountiful supply of natural gas a bridge to the green future? Or is it just a really, really long blue bridge?'” he said. “And without a clean electricity standard, the odds that it’s a really, really long blue bridge are much higher.”