Weekly Analysis

Weekly Analysis

Budget Deal Deadline Highlights Pressure From Glasgow Climate Meeting

October 4, 2021

Democratic leaders’ decision to postpone action until the end of October on both bipartisan infrastructure legislation and the politically linked budget “reconciliation” package is boosting pressure on the White House and lawmakers to reach a deal on major climate policies ahead of next month’s international climate talks.

For months, Biden administration officials have said enactment of significant federal actions to cut greenhouse gas emissions would solidify the administration’s GHG target under the Paris climate agreement and strengthen the position of U.S. negotiators heading into the Nov. 1-12 meeting in Glasgow, Scotland.

There, Biden officials hope to secure more ambitious GHG pledges from big emitters like China, India and Russia in order to achieve the Paris Agreement’s long-term global warming goals, include striving to limit warming to 1.5 degrees Celsius above pre-industrial times.

While the infrastructure bill has several energy-related aspects to get “super excited about,” Energy Secretary Jennifer Granholm told a Sept. 30 event that the bill by itself “is simply just not going to get us where we need to go. If we want a fighting chance to get our emissions under control, we absolutely need the rest of President Biden's build back better agenda, too.”

She added that Biden officials want to head into the Glasgow summit “with the credibility necessary to build on the Paris Agreement to exhort other countries to reduce their greenhouse gas emissions. So, we need the rest of the president's build back better agenda if we want to lead this $23 trillion global clean energy market that I keep talking about.”

House Democrats last week delayed a planned Sept. 30 vote on the $1.2 trillion infrastructure deal when the party could not reach agreement on a framework for a climate-heavy reconciliation measure. Instead, Congress enacted a 30-day funding bill for federal transportation programs, with such funding expiring Oct. 31.

That sets a new deadline for Democrats to reach a deal on sweeping “build back better” reconciliation legislation, according to Senate Majority Leader Chuck Schumer (D-NY). Whether by design or coincidence, that deadline comes on the eve of the United Nations climate meeting in Glasgow.

“As you may know by now, the House and Senate quickly passed a 30-day extension of the expiring Highway infrastructure program on Friday and Saturday,” Schumer says in an Oct. 4 letter to his Senate colleagues. “The Bipartisan Infrastructure bill is also a 5-year reauthorization of the Highway Trust Fund, which means that our new legislative goal must be to enact that bill and the Build Back Better Act before the new expiration date at the end of October,” Schumer adds.

Democratic leaders have linked passage of the reconciliation bill with the bipartisan infrastructure bill approved by the Senate in early August. The budget bill, which Democrats originally envisioned spending up to $3.5 trillion over a decade, is expected to be approved using Senate budget reconciliation procedures that will not require any Republican votes.

Hill Negotiations

Last week’s agreement to delay action on the infrastructure measure was seen as a win for progressive Democrats who back aggressive GHG cuts through the reconciliation package, amid pushback from Sen. Joe Manchin (D-WV) and other moderates over the overall cost of the reconciliation legislation and its perceived attack on fossil fuels.

A central point of contention has been the House Democrats’ proposed $150 billion clean electricity performance program (CEPP), which some groups say is akin to a clean electricity standard. This program would pay utilities to increase the availability of “clean” energy by 4 percent each year or face a penalty for falling short of those goals.

Key moderates have said they would not accept a reconciliation bill costing $3.5 trillion, and Manchin has pressed for the bill to be scaled back to $1.5 trillion. Democratic leaders have been seeking a compromise figure, which some reports suggesting might come in at roughly $2 trillion.

Negotiations over the top-line price tag has raised concerns among CEPP proponents that the program could be pared back, including by shortening the timeline of the proposed incentives. Yet Rep. Pramila Jayapal (D-WA), who chairs the Congressional Progressive Caucus, is pressing to keep the CEPP off the chopping block.

“I think that the clean electricity standards really do need to be in there for a 10-year period, because it takes time to cut carbon emissions. And we need to have that certainty in order for the market to move in that direction. So, that, I think, is one that really does need to be there for 10 years,” Jayapal told CNN on Oct. 3.

Amid expectations that the bill’s spending would be significantly cut, various lobbying groups and lawmakers lined up to preserve their interests in the “build back better” legislation.

For instance, the House Labor Caucus sent a Sept. 30 letter to Speaker Nancy Pelosi (D-CA) arguing that tax credits for electric vehicles (EVs) endorsed by the Ways & Means Committee should “remain as-is” in any final deal.

That would mean retaining a $4,500 incentive for domestic EVs built with union labor, which under the House plan would supplement a $7,500 consumer tax credit that applies to all EVs, including imports or those manufactured by non-union shops.

Further upping the ante for lawmakers negotiating a reconciliation agreement, an industry coalition of 18 companies that supports carbon, capture and sequestration (CCS) technologies sent a letter to Pelosi and Schumer urging the bill to include more generous CCS incentives, despite calls to pare back the bill’s price tag.

Their asks include an increase in the incentive for all industrial sectors and the power sector, to at least $85 per metric ton for saline storage and carbon utilization, and $50 per ton for geologic storage in oil and gas fields.

The letter also seeks elimination of annual facility-level capture requirements for covered projects that the companies claim would “stymie broader decarbonization of steel, chemicals, cement, refining, ethanol, fertilizer and other industrial facilities.”

Further, the companies urged Pelosi and Schumer to block proposed Senate language that would reduce the amount of the CCS tax incentives for projects that receive “federal state, or local grants, financing tax breaks and other benefits.” This limitation “directly undermines the intent of the bipartisan infrastructure bill and contradicts past precedent of Congress successfully pairing federal financial assistance with tax credits to deploy emerging technologies, such as with utility scale solar projects,” the letter argues.

Biden administration officials have reportedly agreed to include the expanded CCS credits along the lines of companies’ request -- in an apparent attempt to help reach a deal with Manchin and other CCS backers.

Biden’s Agenda

At the same time, senior administration officials are urging lawmakers to go big on climate policy initiatives, arguing they are central to the president’s economic agenda as well as a successful outcome at the upcoming Glasgow talks.

“Our proposed Energy Efficiency and Clean Electricity Standard -- being advanced in Congress as the Clean Electricity Performance Program -- is a top priority for President Biden's Build Back Better Agenda,” White House domestic climate chief Gina McCarthy said in a Sept. 29 tweet, garnering praise from environmentalists.

McCarthy’s message walked back prior statements suggesting that the CEPP might be a casualty -- albeit a reluctant one -- in talks on the reconciliation measure, with McCarthy touting the ability of climate regulations to supplement Hill legislation.

“It doesn’t mean I don’t want the clean energy payment plan, and it doesn’t mean we’re going to give it up without lots of kicking and screaming,” McCarthy had said during a Sept. 29 event. “It does mean that I don’t think we need to have every penny in [the reconciliation bill] to make tremendous progress.”

But with Congress now facing its new Oct. 31 deadline to reach a reconciliation deal, that doesn’t leave much time for maneuvering ahead of what could be a make-or-break moment for Biden’s climate agenda in Glasgow. -- Rick Weber (rweber@iwpnews.com)

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