The Washington Post

The prospect of a $3.5 trillion budget bill has set off a lobbying frenzy as lawmakers zero in on a measure that could reshape the nation’s energy system.

Lawmakers develop plan that could reshape nation’s energy system

- BY STEVEN MUFSON AND TONY ROMM Theodoric Meyer contribute­d to this report.

The prospect of a $3.5 trillion tax-and-spending bill has sparked a lobbying frenzy in Congress, as lawmakers zero in this week on a measure that could reshape the nation’s energy system.

The jockeying over what promises to be the largest-ever overhaul of the United States’ electricit­y grid and automotive fleet involves major industries, environmen­tal groups and President Biden, who argued for cutting carbon emissions while touring wildfire damage in the West on Monday.

Unlike the usual lobbying drive on high-profile bills, this campaign has been swift, reflecting the political urgency of Democrats’ efforts to advance longstalle­d policy priorities and vast swaths of Biden’s broader economic agenda. Using a budget process known as reconcilia­tion, they hope to pass the mammoth package with only Democratic votes as soon as this month, along with another nearly $1 trillion bipartisan infrastruc­ture bill.

Steve Elmendorf, a partner at Subject Matter, a firm that represents dozens of companies including oil giant BP, an electric bus start-up, rural electric co-ops and Ford Motor, said that the push reflects the reality of legislatin­g in Washington right now. “Congress has increasing­ly become a place where things get done in one big step in an omnibus or a covid bill.”

While Biden has argued that investing in cleaner electricit­y and electric cars is far cheaper than the devastatio­n climate change is causing, his top aides have been working behind the scenes to broker deals between key industries and congressio­nal leaders. Last week, White House national climate adviser Gina McCarthy and her deputy Ali Zaidi traveled to Colorado Springs to meet with scores of top utility executives at their trade group’s board meeting.

“He’s out there connecting the dots and making the case,” Zaidi said in an interview with The Washington Post. “But the reality is the dots are being connected, in communitie­s, right now. This is why the American people, more vigorously, are calling for these investment­s.”

The budget bill’s most ambitious climate spending plans still face major hurdles within the president’s own party, including from Sen. Joe Manchin III ( W.VA.), a pivotal vote from a state with a flagging coal industry. This month, Manchin said he would not support a $3.5 trillion spending bill, and he has privately signaled to his Democratic peers that he may support only half as much in spending and tax increases.

Opposition from Manchin, who chairs the Senate Energy and Natural Resources Committee, would set up a conflict with the Democrats’ more liberal wing and could force the party to make significan­t cuts to the package’s climate provisions.

The current proposal affects a far-reaching set of economic players, including utilities, automakers, unions, natural gas producers, renewable energy producers, and the makers of highvoltag­e transmissi­on lines linking the nation’s major cities with areas rich in wind and solar.

In recent days, Democrats have proposed many new policies and potential tax credits designed to spur clean energy production, reduce carbon usage and encourage Americans to buy more environmen­tally friendly cars and trucks. A centerpiec­e for the plan is a novel system that would pay power companies for reducing their emissions and penalize those that do not, to help achieve Biden’s goal of a carbon-free electricit­y sector by 2035.

Elmendorf said it was important for the Democratic Party to tackle climate change for political imperative­s, as well as policy reasons. “If you look at the issues that motivate the Democratic caucus and base, climate is at the top,” he said. “I think it’s one of [the] top issues — not just for progressiv­es.”

Though Congress used to balk at large deficits, leading lawmakers are increasing­ly open to big spending to address serious social problems.

“Last year alone, our country experience­d 22 major natural disasters costing Americans a record-shattering $95 billion in damages — figures that represent more than double the historical average, but which still don’t reflect the cost of lost jobs or the trauma of families losing their homes,” House Energy and Commerce Committee Chairman Frank Pallone Jr. (D-N. J.) said in a statement. “The climate crisis is here, and the cost of inaction is already staggering.”

The House Ways and Means Committee and the House Energy and Commerce Committee are considerin­g various clean energy measures.

A complex Clean Energy Performanc­e Plan would require utilities to raise the share of low-carbon power by four percentage points each year from 2023 through 2030. If they failed to reach the four-point target, they would have to pay a penalty for falling short.

But Manchin said Sunday on CNN that he opposed the penalties, and some utility executives agree.

The centrist Democrat’s approach has left some of his liberal colleagues seething. In an interview this month, Rep. Katie Porter (D- Calif.) blasted Manchin as “somebody who takes a lot of corporate money, takes money from Big Oil” and called on him to focus on “what does our economy need.”

Senate Finance Committee Chairman Ron Wyden (D- Ore.), who has put forward several clean energy tax policies, said in an interview that he has been “working very closely” with Manchin in the push to bring a bill to the floor as soon as this month. He added that the senator from West Virginia has had “a number of constructi­ve suggestion­s,” but he declined to identify them.

The White House has also been trying to bridge the difference­s between factions. At the Edison Electric Institute quarterly meeting this month, Mccarthy spoke to about 100 people, including approximat­ely 40 board members. She and Zaidi followed up with one-on-one conversati­ons, where they took notes about what the administra­tion could do to cement the utilities’ support.

“You’ve got to give Gina and Ali Zaidi a lot of credit. They were doing significan­t outreach to the industry and other industries too,” said American Electric Power chief executive Nicholas Akins. “You put all this together and it really is a fundamenta­l restructur­ing of our industry.”

Raising money to fund the plan is equally complicate­d.

One idea is a fee forcing natural gas producers to pay for leaks of methane, a potent greenhouse gas, that exceed a very low threshold. Although many climate policy experts prefer a broader carbon tax, a methane fee wouldn’t boost the price of gasoline, removing a point of friction.

It’s “one of the most important things we can be doing, especially in terms of the near-term picture, when it comes to climate,” Zaidi said.

But the American Petroleum Institute — which has endorsed the idea of taxing carbon in exchange for loosening federal regulation on the oil and gas industry — calls the methane fee “punitive.” Frank Macchiarol­a, API’S senior vice president of policy and regulation, said in a statement that it “would be duplicativ­e on top of federal regulation­s.”

Democrats also hope to raise revenue through a carbon border adjustment fee, which would collect tens of billions from foreign companies whose exports to the United States are carbon-intensive. During the 2020 campaign Biden endorsed the proposal, which would affect China and other producers. But it would probably result in higher consumer prices for imports.

The package is also likely to include popular items such as a tax credit for purchasing electric vehicles. Restoring and expanding the $7,500 tax credit for buying EVS, for example, would help meet the administra­tion’s goal of phasing out sales of gas-powered cars and trucks by 2035.

The Ways and Means Committee markup would eliminate the credit for sedans costing more than $56,000 and for very wealthy Americans. Lawmakers are also considerin­g providing an additional $5,000 for U.s.-made and union-made cars.

One potential problem, however, is that about half of Americans do not owe any taxes. A refundable tax credit could help, said Progressiv­e Policy Institute strategic adviser Paul Bledsoe, but many consumers would find that complicate­d. He noted that Lyft, the ride-hailing company, has been lobbying for generous tax credits because it does not own its vehicles and its drivers have fewer means for purchasing new cars.

The legislatio­n also extends investment and production tax credits for solar and wind power, which were supposed to be phased out years ago.

Democrats throughout Congress emphasized in recent days that they cannot afford to squander what they regard as a generation­al opportunit­y to respond to climate change. “This is the moment to finally take action on climate,” said Sen. Tina Smith (Minn.). “All you have to do is look at the news.”

 ?? BRIDGET BENNET/REUTERS ?? Solar panels at the Desert Stateline project near Nipton, Calif. The new legislatio­n extends investment and production tax credits for solar and wind power, which were supposed to be phased out years ago.
BRIDGET BENNET/REUTERS Solar panels at the Desert Stateline project near Nipton, Calif. The new legislatio­n extends investment and production tax credits for solar and wind power, which were supposed to be phased out years ago.

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