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WHAT’S NEXT: Senate Budget Committee Democrats reached a framework agreement last night for a $3.5 trillion budget reconciliation bill they will attempt to move in the upper chamber without Republican support alongside a bipartisan infrastructure proposal.
President Joe Biden will attend Democrats’ weekly caucus lunch this afternoon to discuss the plan, which sets the table to advance the administration’s aggressive climate initiatives left out of the bipartisan agreement, such as providing renewable tax credits and imposing a clean electricity standard.
A topline spending number is just the first step: Democrats will need the support of all 50 Democrats on the overall spending figure before passing a reconciliation package, which has not been written yet.
Key swing voter Sen. Joe Manchin of West Virginia, speaking to reporters before an Energy Committee hearing he led this morning, sounded open to the $3.5 trillion price tag proposed by the Budget Committee. Liberal senators also seem appeased.
“We know we have a long road to go,” Senate Majority Leader Chuck Schumer said this morning. “If we pass this, this is the most profound change to help American families in generations.”
Projecting clean energy details: The budget blueprint will not provide specific clean energy details but directs individual committees to write legislation as part of a reconciliation package that fit within the spending limit.
The research group ClearView Energy Partners wrote in a note this morning that the $3.5 trillion limit is “more than adequate to leave room for triple-digit billions of dollars” for clean energy tax incentives over a decade, including financial assistance for financially struggling nuclear reactors, and long-term extensions of investment tax credits for solar power, production tax credits for wind, and electric vehicle rebates and subsidies.
I wrote last week about how Democrats are aiming to pass another big priority by designing a clean electricity standard as an investment program to comply with reconciliation rules requiring that items have a budgetary impact.
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REPUBLICANS SKITTISH ABOUT MANCHIN’S ENERGY PITCH: Manchin’s GOP counterpart John Barrasso of Wyoming and other Energy Committee Republicans do not appear to be on board with the West Virginia Republican’s sprawling energy infrastructure legislative proposal being considered today.
The committee is still considering the legislation in a hearing as I write this, but in the early hours Republicans criticized some of Manchin’s proposals, including theoretically bipartisan ideas such as giving FERC backstop siting authority over transmission lines deemed to be in the national interest.
“I’m concerned this bill paves the way for the Biden administration to take over America’s electric system,” said Barrasso, who suggested Manchin is going out of his way to try to help Biden achieve his goal of 100% zero-carbon power by 2035.
How Manchin’s pitch fits: Manchin is clearly positioning his energy pitch to be part of the bipartisan infrastructure bill, but some of his leftover priorities could be included in the eventual reconciliation package and serve as an asking price for his support.
His proposal mirrors some of the clean energy and climate provisions that are likely to be included in the broader bipartisan infrastructure bill (for which we are still awaiting details). It would fully fund more than a dozen clean energy demonstration projects originally authorized under the Energy Act of 2020 approved at the end of last year, including for energy storage, advanced nuclear reactors, carbon capture, direct air capture, and renewables.
It also creates a $5 billion program to combat methane emissions by employing oil workers to plug leaking “orphan” oil and gas wells whose owners are either unknown or insolvent, and establishes a 4-year credit program providing $1.2 billion annually in subsidies to help financially struggling nuclear plants stay alive.
EU MAKES ITS MOVE ON CARBON BORDER ADJUSTMENT: The European Union unveiled a long-anticipated plan this morning to tax imported goods based on their carbon content as part of a much larger legislative proposal for the 27 member bloc to fulfill its goal of cutting emissions 55% by 2030.
The move sets up potential conflict with the Biden administration, which has sought to slow-walk the proposal as it seeks to restore harmony with Europe in leading the world in addressing climate change.
The problem for Biden. His climate policies are mostly theoretical at this point without cooperation from Congress, and he has not proposed a domestic carbon price plan that most experts say the U.S. would need to impose its own tax on other countries’ exports.
The EU, by contrast, has had an emissions trading scheme since 2005, giving it ample reason to act now to prevent European companies from moving overseas to avoid paying the domestic fee.
The EU’s tax — called a carbon border adjustment — would apply initially to imports of steel, fertilizer, cement and unfinished aluminum and then be expanded to other products.
The U.S. is particularly concerned about the potential effect on American-produced steel, the New York Times reported.
Wiggle room for the US? Treasury Secretary Janet Yellen said yesterday during meetings with EU officials in Brussels that countries such as the U.S. that are regulating carbon dioxide emissions using methods other than carbon pricing should still get credit under the EU system, according to the Wall Street Journal.
Carbon pricing proponents, however, say the EU’s opening move imposing trade barriers should prod the Biden administration and Congress to level the playing field and push for a domestic carbon price.
“The U.S. faces a choice: we can act now to embrace this globally effective approach that enhances the competitiveness of American industries and compels other countries to do their part. Or we can sit idle and have other major economies seize the leadership role in establishing the new global rules around climate and trade,” said Greg Bertelsen, CEO of the Climate Leadership Council, a GOP-led group backed by large oil and gas companies that supports a carbon tax.
ENERGY DEPARTMENT’S LONG-DURATION STORAGE SHOT: Energy Secretary Jennifer Granholm announced today her agency’s new goal to reduce the cost of grid-scale, long duration energy storage by 90% within the decade in order to solve renewable energy’s most persistent problem: using it when the sun isn’t shining or the wind isn’t blowing.
Cost is one of the biggest impediments to greater use of grid-scale energy storage, which could hold excess solar and wind energy for more than 10 hours at a time, saving it for when it’s needed. That goes far beyond the capacity of current lithium ion batteries, the primary source of new energy storage technology deployed on the grid in the U.S., providing shorter duration storage.
DOE will “direct experts at its national labs to focus on improving” long-duration storage technologies, such as pumped storage at hydro facilities and new battery chemistries, while it seeks funding from Congress for early demonstration projects, according to the New York Times. The agency is taking steps to implement a law passed last year led by Republican Sen. Susan Collins of Maine and Democrat Sen. Tina Smith of Minnesota that requires DOE to undertake three energy storage system demonstration projects.
Backers of the effort compare its potential impact to the Energy Department’s SunShot Initiative that decreased cost of solar power by 75%.
US OIL DEMAND FALLS: U.S. oil demand fell to 19.3 million barrels per day last week from 21.5 million barrels p/d thanks to big declines in gasoline and diesel consumption, the Energy Information Administration said today in its Weekly Petroleum Status report.
EIA also reported a large crude oil inventory draw of 7.9 million barrels from the previous week. U.S. commercial crude stockpiles are now back at pre-pandemic levels, reflecting an easing of a massive glut built up over the last year-and-a-half.
OPEC+ NEARING DEAL ON OIL SUPPLY: OPEC and its allies are closing in on resolving a standoff with the United Arab Emirates over oil production policy, according to reports this morning, in what would send more crude into a tight market and could stem soaring prices that have alarmed the Biden administration.
In a compromise, Saudi Arabia would agree to let the UAE increase the amount of crude it can pump as part of a larger agreement with oil producing nations of OPEC+.
UAE wants to more aggressively boost its output ahead of what it projects to be reduced demand for oil in the coming years, while Saudi Arabia had pushed to return production more slowly to the market as it banks on crude demand being stable into the future.
An agreement would be welcomed by the Biden administration, which sees stable oil market conditions as critical to the U.S. economic recovery from the pandemic, and has pushed for a resolution.
COAL MINING FREEFALL: U.S. coal production fell to its lowest level since 1965 last year, as the pandemic further slowed demand for the dirtiest fossil fuel, the EIA said in a note this morning.
Coal mining totaled 535 million short tons in 2020, a 24% decrease from the year before, the result of coal being used less in domestic electricity consumption with cheaper natural gas prices, along with lower demand internationally.
West Virginia, Manchin’s home state, was hit particularly hard, with coal production declining 28% last year, a larger fall than Wyoming, which mines more coal than any other state but saw a 21% fall in 2020.
The Rundown
Wall Street Journal OPEC spat spotlights Saudi Arabia’s struggle to kick oil dependency
Wall Street Journal China set to launch the world’s largest emissions-trading program
Reuters EU set to call time on combustion engine within two decades
Politico Biden wanted a climate alliance with Europe. He’s getting a fight.
Los Angeles Times How an Oregon wildfire almost derailed California’s power grid
Calendar
WEDNESDAY | JULY 14
11:30 a.m. 2123 Rayburn. The House Energy and Commerce Committee’s environment and climate change subcommittee will hold an oversight hearing on the Nuclear Regulatory Commission.
THURSDAY | JULY 15
2:30 p.m. The House Select Committee on the Climate Crisis will hold a remote hearing titled “Advancing Environmental Justice Through Climate Action.”
