Weekly Analysis

Weekly Analysis

Democrats Brace For GHG Effect Of Cutting CEPP From Budget Plan

October 18, 2021

As Democrats appear poised to cut the Clean Energy Performance Standard (CEPP), a key feature of the Biden administration’s climate agenda, from their emerging budget deal, they are facing the prospect of falling well short of their greenhouse gas reduction targets, particularly for the power sector, according to several recent analyses.

As such, lawmakers are scrambling to either shore up the climate elements in the bill -- or come to grips with reduced legislative ambition on emissions -- just two weeks before President Joe Biden and his top deputies will head to Glasgow, Scotland, for this year’s closely watched international climate summit.

Multiple recent analyses suggest that a bill whose primary climate policy is a suite of expanded low-carbon tax credits could result in nearly 70 percent “clean” power generation by 2030.

For example, recent analysis from the group Energy Innovation found that expanded low-carbon tax credits alone could spur an increase in cleaner power share ranging from 61-69 percent in 2030.

Similarly, an Oct. 7 issue brief from Resources for the Future (RFF) concluded that the tax breaks would achieve 69 percent clean generation by 2030, while either a CEPP or a potential carbon tax would virtually ensure the power sector hits Biden’s target of 80 percent clean power in that year.

While that data bolsters the case for enacting such credits, it also underscores the need for some type of complementary policy to achieve the Biden administration’s 80 percent target.

Environmentalists fear a downsized climate bill, to the extent a reconciliation agreement surfaces at all, would undermine confidence in the ability of the U.S. to achieve Biden’s 2030 climate targets, and thus the ability of the president to press for tougher pledges from China and other major emitters.

White House international climate envoy John Kerry underscored the stakes of the Hill debate last week, arguing that if the Democratic-controlled Congress did not act on the issue, it “would be like President Trump pulling out of the Paris Agreement, again.”

Yet Biden himself downplayed the level of concern late Oct. 15, in response to a reporter’s query that paraphrased Kerry’s remarks but focused on a scenario of not enacting the reconciliation bill before Glasgow.

“I think it'd be good to have an agreement on the climate piece, but we're going to get the climate piece. And I think Senator Kerry has a little hyperbole there,” the president said.

Much of the latest consternation focuses on reports that the proposed CEPP is all but dead, amid continued opposition from Senate energy committee Chairman Joe Manchin (D-WV).

The CEPP is intended to mimic a clean electricity standard, offering incentives for utilities that meet annual clean power goals while imposing penalties on those that fall short.

As Inside EPA’s Climate Extra is reporting, some Democrats are touting the major GHG cuts projected from other elements of the reconciliation deal, in particular the expanded low-carbon tax breaks.

In addition to Biden’s power sector GHG target, environmental advocates are concerned that shrinking the climate portion of the reconciliation package would jeopardize Biden’s pledge under the Paris deal to halve economy-wide emissions by 2030.

“Certainly, losing CEPP and not replacing it with anything else significantly reduces our chances of achieving Biden’s 50 percent by 2030 goal,” Zeke Hausfather, director of climate and energy at the Breakthrough Institute, told E&E News.

Continued Negotiations

Some observers are not ruling out the possibility of an agreement with Manchin on a complementary climate policy, even if the CEPP moniker is dropped.

One source tracking the issue told Climate Extra that some kind of CEPP solution might still be found. The source said Manchin indicated during a recent meeting with domestic climate adviser Gina McCarthy and Energy Secretary Jennifer Granholm that he was opposed to current public CEPP proposals, but that is “different than saying he opposes the CEPP,” the source says.

The source also cited indications that potential changes to the CEPP related to carbon capture and storage may still be in play.

Similarly, a Democratic aide acknowledged to CNN that Manchin is “not there on the CEPP, period. We’ve been trying.” This source said Democrats continue efforts to restructure the program to assuage Manchin’s concerns while still reducing emissions.

“Whatever comes through will not be called the CEPP, but we're strongly hoping and thinking there will be ways to meet what he wants,” the aide said. “If there's a deal to be struck in the next few days, I don't think there's anything resembling CEPP in there.”

Manchin spokesman Sam Runyon told multiple outlets that the senator is concerned about using taxpayer money to pay utilities to “do things they're already doing. He continues to support efforts to combat climate change while protecting American energy independence and ensuring our energy reliability."

Policy Alternatives

The dynamic is intensifying focus on policy alternatives, with the Washington Post over the weekend reporting that lawmakers are mulling options such as a carbon tax or even a voluntary cap-and-trade program that could apply to industrial emitters, such as cement and steel manufacturers.

Others are suggesting that EPA climate and conventional air rules for power plants could help make up the emissions gap from the likely loss of the CEPP -- even as most experts consider legislation to be more durable against court challenges or future administrative reversal.

“I think the administration will take a serious look, if they are not already, at necessary regulations to address conventional air pollutants in the power sector -- including nitrogen oxides -- and regulation of greenhouse gases under the Clean Air Act,” RFF economist Dallas Burtraw tells Climate Extra.

Stanford University scholar Michael Wara also floated the scenario in which Biden conveys to Manchin that without a strong climate bill, the president would direct EPA to craft “aggressive” GHG rules for new gas- and coal-fired power plants, as well as “conservative and defensible” rules for existing plants. -- Lee Logan (llogan@iwpnews.com)

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