In the Democrats’ Budget Package, a Billion Tons of Carbon Cuts at Stake

Sen. Joe Manchin of West Virginia was explaining why he opposed his Democratic colleagues’ $3.5 trillion budget plan, but his words summed up the Congressional response on climate change for the past 30 years.

“What is the urgency?” asked Manchin in an appearance on CNN on Sunday.

With climate action advocates now in a race against both the forces of nature and the political calendar, some might say the answer is obvious.

The legislation that Manchin wants to stall contains the policies that most Democratic senators see as the best hope left to make the deep cuts in greenhouse gases necessary to curb devastating planetary warming.

With a key round of international climate talks scheduled for November in Glasgow—the first since the United States rejoined the Paris accord—Congressional action now would demonstrate the nation’s commitment to President Joe Biden’s ambitious pledge to cut U.S. greenhouse gas emissions 50 percent by 2030.

And with the Democrats’ slim majority in both the House and Senate in jeopardy in next year’s midterm elections, the budget package may mark the last opportunity to act.

“We have a responsibility now—while we don’t have fossil fuel-funded Republican control in the House or the Senate, and while we have President Biden in the White House—to get this done,” said Sen. Sheldon Whitehouse (D-R.I.) at a rally outside the Capitol on Monday. “If we miss this moment, it is not clear when we will have a second chance.”

The legislation cannot pass the Senate unless it has every Democratic vote, including those of Manchin and Sen. Kyrsten Sinema of Arizona, both of whom have balked at the bill’s $3.5 trillion cost.

Democratic lawmakers have been trying to include virtually everything in Biden’s domestic agenda that they believe has no chance of garnering Republican votes, from universal pre-kindergarten and tuition-free community college to an expansion of Medicare and legal status for some undocumented immigrants. The size of the package could be whittled down considerably without sacrificing any measures related to climate.

Manchin, however, opposes some of the climate provisions in particular, and as chairman of the Senate Energy Committee, he will have a large say in which make it to the Senate floor.

As House committees began this week to assemble their version of the legislation, details of the proposed climate policy emerged for the first time, along with their potential to help thwart the worst impacts of climate change. 

“We’re really confident that this package is on the right track,” said Trevor Higgins, senior director for the climate and energy program at the Center for American Progress. “As long as it can proceed with full funding and full support in both chambers, it has all of the raw materials we need to really change the picture on climate.”

The Center for American Progress is part of a coalition of 20 environmental and public health groups that produced a detailed analysis of how the legislation could help meet U.S. climate goals, based on a rundown put together by Senate Majority Leader Chuck Schumer’s staff. 

Biden’s climate pledge is for a 50 percent reduction in emissions from the baseline of 2005 U.S. greenhouse gas emissions, which was 6.68 billion metric tons. Applying the estimates of Senate staffers and environmentalists to that figure, the package of bills that Congress is now considering could add up to 1.3 billion metric tons in emissions reductions.

The analytical firm Rhodium Group, which uses sophisticated economic modeling to come up with its estimates of the impact of policy on greenhouse gas emissions, calculates that the six largest items in the Democrats’ climate package add up to about 1 billion metric tons. Rhodium concluded that the legislation would be historic. “This scale of abatement represents more reductions than any other single action that any part of the federal government has ever taken to tackle climate change,” Rhodium analysts said in a report released Wednesday.

Only a small portion—perhaps 5 percent—of the emissions reductions are expected to come from the bipartisan $1 trillion infrastructure plan that the Senate passed over the summer.

The $3.5 trillion budget bill, with an uncertain pathway to passage, is far more crucial on climate.  And Democrats are pursuing a potentially risky two-part strategy, with House Speaker Nancy Pelosi pledging to bring the infrastructure bill to a vote only if the Senate moves forward with the bigger spending package.

Here are some of the most important pieces of climate policy contained in the legislation as well as the challenges Democrats face in pushing them through. 

Clean Electricity Carrots and Sticks

Electric utilities that increase their share of clean electricity supply by 4 percent each year would receive federal grants, while those that fail to meet the target would have to pay fines under the Clean Electricity Performance Program approved this week by the House Energy and Commerce Committee. At $150 billion, it is the biggest climate outlay that Congress is considering—and has the potential to make the biggest dent in emissions, especially when coupled with a variety of clean energy tax incentives under consideration.

This carrot-and-stick approach to reducing fossil fuel emissions from the power grid is a modified version of the renewable electricity standards already in place in 30 states, and reflects lawmakers’ effort to overcome a number of political obstacles. A carbon tax might achieve the same goal more efficiently, and a cap-and-trade system might give utilities more flexibility, but Congressional leaders have made the calculation that either of those would be a harder sell.

Also, while most states implement their renewable electricity program by giving utilities “credits” for hitting their clean electricity targets—credits they can then sell to or buy from other utilities—Congressional leaders have designed a straight payment-or-penalty program that would have a direct impact on the federal budget; otherwise, the proposal would need 60 votes to pass in the Senate, as other types of bills do.

Manchin, however, has cast doubt on whether the measure can even get the 50 Democratic votes it needs to pass as part of a budget reconciliation package. “They’re wanting to pay companies to do what they’re already doing,” he told CNN. “Makes no sense to me at all for us to take billions of dollars and pay utilities for what they’re going to do as the market transitions.”

Indeed, the U.S. grid has gotten cleaner, with coal—which generated more than 50 percent of U.S. power less than a decade ago—down to 19 percent in 2020. But much of that change was driven by a switch to cheaper natural gas, and the government and other forecasters expect carbon emissions from electricity to remain level over the next decade without new policy.

To meet Biden’s goal under the Paris accord, analysts estimate the amount of carbon-free electricity on the electric grid would have to double from 40 percent today (half of it nuclear, half renewables) to 80 percent by 2030. In a letter to Congressional leaders this week, the coal industry group America’s Power warned that the Clean Electricity Performance Program would eliminate coal-fired power in the United States by 2030, if not sooner. Most proponents of a Clean Electricity Performance Program would not quarrel with that projection. 

Some utilities, like American Electric Power, which has coal plants in West Virginia, are telling Congress that the electric system can’t handle such a fast transition. 

“Not one utility has told us they can reach that goal if they’re using only wind, solar and hydro to provide baseload power,” said Rep. David McKinley (R-W.Va.), who with Rep. Kurt Schrader (D-Ore.) is co-sponsoring a bipartisan Clean Energy Future Through Innovation bill that would give utilities 20 more years—until 2050—to meet the target of reducing emissions 80 percent. That happens to be American Electric Power’s long-term carbon reduction goal. But it is not in line with the complete elimination of such emissions by 2050 that the Intergovernmental Panel on Climate Change says will be necessary to hold warming below 2 degrees Celsius. Still, because the idea comes from a fellow West Virginian, the McKinley-Schrader approach might be appealing to Manchin as his committee puts together its own version of the legislation.

Luring Electric Vehicle Buyers

Lawmakers are proposing to jump-start the market for electric vehicles in two ways: with $13.5 billion in additional federal funding to build an electric vehicle charging network and tax credits as high as $12,500 per vehicle for consumers who buy electric cars.

There already is a $7,500 federal tax credit for EV purchases, but it phases out when a  manufacturer sells over 200,000 qualifying vehicles, meaning current purchasers of Tesla and GM electric vehicles receive no federal incentives. The new legislation would lift that cap and offer a sweetener of up to $5,000 for cars and batteries made in the United States with union employees.

The made-in-America provision, sponsored by Rep. Richard Neal (D-Mass.), chairman of the House Ways and Means Committee, would exclude vehicles from non-union employers, including Tesla, the company that by far sells the most electric vehicles in the United States.  Toyota sent a letter of protest to the committee this week, arguing that the provision ​​”makes the objective of accelerating the deployment of electrified vehicles secondary by discriminating against American auto workers based on their choice not to unionize.”

But unions are an important part of the coalition that Biden and the Democrats have forged in support of the “Build Back Better” package, which they have promoted as an engine of American union jobs creation, as well as a bid to cut carbon emissions.

Rhodium Group estimates that the charging infrastructure investments and long-term EV tax credit enhancements will drive EV deployment as high as 61 percent of total U.S. vehicle sales by 2030, blasting past Biden’s goal of 50 percent.

Methane Fees and Other ‘Polluters Pay’ Ideas

Congressional Democrats are moving toward imposing a fee on methane emissions from oil and gas operations, as a way to prod the industry to eliminate leaks of the super-potent greenhouse gas. Currently the oil and gas industry flares and vents enough methane gas per year to fuel 10 million homes, approximately $2 billion worth of lost natural gas, according to a number of recent studies.

Legislation led by Whitehouse in the Senate would tax methane emissions at $1,800 per ton in 2023, increasing 5 percent above inflation annually. The fees would be assessed for individual companies based on their share of production and the emissions intensity in the oil and gas basins where they operate. The measure could raise $10 billion to $20 billion annually, according to an analysis by the environmental coalition that is pushing for the legislation.

However, the petroleum industry is aggressively lobbying against the proposal, saying it is burdensome and unnecessary—the American Petroleum Institute says that participants in a new voluntary flare management program cut flare volumes in half from 2019 to 2020. And methane emissions relative to production in five of the largest basins decreased nearly 70 percent from 2011 to 2019, according to API. Advocates of a methane fee point out that because oil and gas production was increasing so strongly until recently, total methane emissions were not falling and are believed to be 60 percent higher than government estimates indicate.

While the methane fee idea is endorsed by Biden, some Democrats on the budget and finance committees are considering additional levies on the oil and gas industry, in part to pay for the large cost of the overall budget package. Bloomberg reported last week that some lawmakers are pushing for a carbon tax, either based on the carbon content of fuel or levied on major industrial emitters like producers of steel, cement and chemicals. Whitehouse and Sen. Chris Van Hollen (D-Md.), both of whom are on the Senate Budget Committee, have pushed for establishment of a “superfund” for climate damage, a $500 billion fund to be created with one flat levy on the top 25 oil companies, as determined by their historic contribution to greenhouse gases.

While fees and taxes would seek to address ongoing emissions, Whitehouse and Van Hollen said their idea is to create a pool of funds to address the climate damage already done.

Smaller Measures That Add Up

Schumer’s committee and climate advocates have identified at least a dozen smaller measures Congress is considering that each comprise less than 2 percent of the needed greenhouse gas cuts to get to Biden’s 2030 target. But taken together, they form a significant building block of an emissions reduction policy. The largest of these are Department of Agriculture and Department of Interior programs to provide incentives for soil conservation practices in farming and stewardship of forests to increase natural carbon sinks. The House version of the legislation would have an additional climate benefit: It would reverse the policy adopted under the Trump administration to open the Arctic National Wildlife Refuge to oil drilling.

Investment in coastal resilience also is expected to have an impact in reducing emissions, because it will pay for the rebuilding of natural marshes and wetlands that absorb carbon and act as a barrier against rising seas. Congress would provide incentives for using clean fuels and converting buildings to clean power, and support for rural electric cooperatives to transition to cleaner energy sources.

Sen. Ron Wyden (D-Ore.), chairman of the Senate Finance Committee, has spearheaded a proposal to repeal fossil fuel industry subsidies, a move supported by Biden that will save the taxpayers $259 billion over the next 10 years, according to the Joint Committee on Taxation. It also could generate nearly 1 percent of the greenhouse gas cuts needed to reach Biden’s goal, according to environmental advocacy groups—about 5 million metric tons.

The House version of the legislation does not include repeal of the fossil fuel subsidies, an omission that has angered some environmentalists. But Higgins noted that the House chose  another approach that achieves some of the same goals of reducing the industry’s tax advantages. The House would restore a long-lapsed levy on the oil and gas industry to pay for the Superfund toxic waste cleanup program.

It is not clear how many of these climate measures will make it through the narrowly divided Senate, where Manchin or any other Democratic Senator can block the effort. For now, however, Schumer has not signaled a willingness to negotiate away any portions of the package. At this week’s climate rally in front of the Capitol, he stressed that the window of opportunity on climate may not come again.

“We must act, and act big and bold,” Schumer said. “The bottom line for all of us is that we can’t let this moment pass by.”

An earlier version of this article failed to specify that the Rhodium Group analyzed only the largest items in the Democrats’ climate package.