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CARBON PRICING BENEFITS: Two fresh analyses make the case that President Joe Biden would fall short of his emissions reduction targets without carbon pricing being included in the Democratic-only reconciliation spending package.
The research published yesterday by Resources for the Future and World Resources Institute, done separately, shows a carbon tax would enhance Democratic policies headlining the party’s climate push, namely the clean electricity payment program (CEPP) paying utilities to use more carbon-free power, combined with a package of new and expanded tax subsidies for clean energy technologies.
According to the Resources for the Future modeling, combined, those latter two policies without carbon pricing could reduce carbon emissions to roughly 39% below 2005 levels in 2030, falling short of Biden’s Paris Agreement target of at least 50% by the end of this decade.
But a modest economy-wide carbon tax starting at $15 per ton combined with the tax credits and a CEPP would reduce emissions 50%–52% by 2030 — meeting Biden’s target.
Notably, the analysis doesn’t look at the emissions reduction potential of all of the environmental provisions in the reconciliation bill (such as the methane fee on oil and gas).
Why it matters: The research bolstering the case for a carbon price shows the stakes of negotiations ahead between the House and Senate, as the policy has emerged as one of the major fault lines for Democrats in the two chambers.
As I reported this week, the Senate Finance Committee is seriously considering including carbon pricing in its reconciliation portion, splitting from House Democrats who see the policy as politically damaging.
Carbon pricing has long been presumed dead for Democrats, who have moved on to other policies that don’t raise the cost of energy, such as direct federal spending and tax credits.
But “with so much at stake, we can’t risk falling short,” the World Resources Institute says in its commentary supporting carbon pricing.
A carbon price would make meeting Biden’s emissions-reduction target “much more likely,” the group said, by reaching into all aspects of the economy to raise the price of fossil fuels.
A carbon tax is also a natural fit for the budget reconciliation process as a revenue-raiser, producing money for the government “that would reduce pressure to trim progressive investments and tax credits in the rest of the package.”
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WHO JOINED BIDEN’S CLIMATE FORUM: Chinese President Xi Jinping and Indian Prime Minister Narendra Modi, representing the top two emitters outside the U.S., did not participate today in Biden’s reconvening of the Major Economies Forum on Energy and Climate.
Both leaders took part in the first forum, held by the White House in spring 2021, but they were absent this morning, as the Washington Examiner’s Christian Datoc reports.
French President Emmanuel Macron, German Chancellor Angela Merkel, and other European leaders also did not participate, though the continent was represented by European Council President Charles Michel and European Commission President Ursula von der Leyen.
The remaining participants, per White House officials, included the presidents of Argentina, Bangladesh, Indonesia, South Korea, and Mexico, along with Prime Minister Boris Johnson of the United Kingdom and United Nations Secretary-General Antonio Guterres.
Biden, Secretary of State Antony Blinken, and climate envoy John Kerry spoke on behalf of the U.S.
White House officials later told Christian that though Xi, Merkel, and Modi did not participate in the president’s session, representatives from China, Germany, India, and Russia joined Kerry for a ministerial-level session following Biden’s departure.
What Biden said: He used his opening remarks to frame the climate debate as an “inflection point” for the global community, mirroring language he rolled out to frame the congressional debate over his Build Back Better spending package the day prior.
“There’s a real consensus, a real consensus that while the climate crisis poses an existential threat, there is a silver lining the climate crisis also presents real and incredible economic opportunities to create jobs, lift up the standard of living for people around the world,” he said. “We know there’s still a lot of work to do, and if anything, our job, in my view, is growing more urgent.”
Biden also confirmed the U.S. and European Union have launched a global pledge to cut methane pollution 30% by 2030. Johnson said the U.K. has joined that commitment.
ECONOMIC CASE FOR CLIMATE AGENDA: The White House is claiming its climate policy agenda would reduce emissions without increasing energy costs for consumers.
In a blog post yesterday, the White House Council of Economic Advisers argued Biden and Democrats’ push as part of infrastructure legislation for using federal government spending and tax credits to spur clean energy growth would shield U.S. consumers from price hikes.
“Direct subsidies to energy producers can limit the costs of clean energy to consumers and accelerate the transition to a carbon-neutral economy,” the economists write. “From a consumer cost perspective, this is preferable to alternative ways to reduce emissions, such as regulations that prohibit or limit carbon-based energy, which tend to be passed on to consumers in the form of higher prices of carbon-intensive energy.”
Other cost-cutting measures: The bipartisan infrastructure bill and larger, Democratic-only reconciliation package also aim to boost energy efficiency, enabling consumers to get more with less, which saves consumers money.
Carbon-free power sources, such as solar and wind energy, meanwhile, are often the lowest-cost options today, but their cost will come down further as Democrats provide more tax credits and additional R&D funding.
The White House economists say the cost of not aggressively responding to climate change would be steep, as extreme weather events worsened by warming contribute damages to the economy, while heat and pollution exposure reduces worker productivity, especially among lower-income groups.
ABOUT THAT WEIRD COMPLAINT ON GASOLINE PRICES: Biden is complaining about high gasoline prices again, and I am a bit confused by the source of his ire.
“We’re also going after the bad actors and pandemic profiteers on our economy. There’s lots of evidence that gas prices should be going down, but they haven’t,” Biden said yesterday at the White House during remarks about the economy. “We’re taking a close look at that.”
There’s little evidence there is something nefarious behind high gasoline prices. While gasoline prices usually fall after the peak of driving demand during Labor Day, they have risen this week to $3.19 per gallon on average, matching a seven-year high. But much of the rise is due to impacts from Hurricanes Ida and Nicholas on oil and refinery production in the Gulf area, according to AAA.
Gasoline prices track global oil prices, which have increased again in recent weeks after falling in August to their lowest level in months because of the economic fallout from the delta variant.
But even if oil prices kept falling, pump prices typically lag changes in crude anyway.
PAGING JOE MANCHIN: A national clean electricity payment program pitched by Democratic leaders as part of reconciliation would amplify the benefits of a key clean energy manufacturing provision favored by Sen. Joe Manchin, according to new research.
Manchin’s proposal, which he released as legislation with Sen. Debbie Stabenow of Michigan, would build on the 48C tax credit by providing subsidies for companies to build or retrofit manufacturing and industrial facilities to make clean energy technologies.
Half of the $8 billion of funding would be targeted for use in places where coal mines have closed or coal plants have retired, a priority for Manchin, who represents West Virginia, a big coal- and natural gas-producing state.
The proposal fell out of the bipartisan infrastructure bill but is expected to be included in some form in the final Democratic-only reconciliation package.
A study by Data for Progress, a liberal group, finds that Manchin and Stabenow’s proposal would directly and indirectly create nearly 140,000 jobs nationwide over the next several years, and would add over $27 billion to GDP.
But it shows the economic impact would be greater if paired with Democrats’ centerpiece plan to pay utilities to generate more clean electricity, a concept that Manchin said this week “makes no sense.”
A tool to persuade Manchin? Manchin’s manufacturing credits could create 15% to 30% more jobs if paired with the clean electricity payment program, Data for Progress said.
That’s because boosting domestic output of clean technologies through the 48C tax credits, while at the same time increasing demand for those technologies through incentives to utilities, expands the overall macroeconomic effects.
EXXON’S CARBON CAPTURE HUB PITCH GAINS TRACTION: Ten energy and petrochemical companies are backing a proposal by ExxonMobil to create a so-called carbon capture hub in Houston.
Under the plan, Houston’s plentiful industrial facilities, such as gas-fired power plants, refineries, and chemical manufacturing operations, would install equipment to capture carbon emissions.
Now, other companies, including Calpine, Chevron, Dow, Marathon Petroleum, Phillips 66, and Valero, have agreed to “begin discussing plans” that could lead to capturing and storing up to 50 million metric tons of carbon per year by 2030 and about 100 million metric tons by 2040.
When it announced the concept in May, Exxon estimated the project could require at least $100 billion in public and private funding.
To help it get off the ground, Exxon called on Congress to beef up federal tax incentives for carbon capture and storage through the 45Q tax credit, which is included in House Democrats’ reconciliation package.
“The 11 companies will continue to advocate for policies that enable the long-term commercial viability of new, expanded and existing CCS investments in Texas,” they said in a statement.
The Rundown
Washington Post 9 questions about the Civilian Climate Corps, answered
Washington Post As climate pledges fall short, UN predicts globe could warm by worrying 2.7 degrees Celsius
Wall Street Journal Energy price crunch pushes investors in Europe to bet on inflation
Bloomberg Green push leaves UK energy supply at the mercy of weather
New York Times Lucid Motors beats Tesla in range, going 520 miles on a charge, EPA says
Calendar
TUESDAY | SEP. 21
10 a.m. 366 Dirksen. The Senate Energy and Natural Resources Committee will hold a hearing to consider the nominations of Laura Daniel-Davis to be an assistant secretary of the Interior for Land and Minerals Management, Camille Touton to be commissioner of reclamation, and Sara Bronin to be chairman of the Advisory Council on Historic Preservation.
WEDNESDAY | SEP. 22
9:30 a.m. 406 Dirksen. The Senate Environment and Public Works Committee will hold a hearing to consider several nominees, including Jeffrey Prieto to be General Counsel of the Environmental Protection Agency and members of the Chemical Safety and Hazard Investigation Board.
