Breaking Down Energy and Climate Provisions in the Reconciliation Bill
The U.S. Chamber has been consistent in our view that durable climate policy requires Congressional action, and we’ve thrown our support behind efforts that gained strong bipartisan support, including the Energy Act of 2020, the AIM Act that phases out HFC production and use, and the significant clean energy provisions of the Bipartisan Infrastructure Law. We also believe that a bipartisan “grand bargain” is within reach to both accelerate the clean energy transition and to strengthen our energy security. Unfortunately, the latest version of the Reconciliation Bill contains tax increases and price controls that stifle American investment and innovation and prevent us from supporting the bill. While we work to remove these harmful provisions, it is worth noting that there are parts of the bill that will advance progress on climate and energy security, so let’s take a closer look at those.
Climate progress and energy security are not mutually exclusive, even though they are sometimes treated as such. We can increase American energy production while still lowering emissions. In fact, boosting domestic oil and gas production will help reduce global reliance on foreign sources that have a more significant environmental footprint. While certainly not complete in its scope, the Reconciliation Bill at least acknowledges these benefits by directing the resumption of legally required offshore oil and natural gas leasing and by attempting to ensure continued leasing for both oil and natural gas and for offshore wind. Hopefully, the Biden Administration will be more inclined to follow this new law than they have the existing laws governing lease sales.
The legislation’s commitment to advancing Carbon Capture, Utilization, and Storage (CCUS) technology development through the expansion of the 45Q tax credit will prove to be a major boon for energy security and addressing climate change. Industrial processes we rely on every day like cement, steel, and chemical manufacturing often produce carbon dioxide as a necessary byproduct. CCUS provides one of the only pathways to decarbonizing the industrial sector, with potential applications for electricity generation and hydrogen production.
There are also other provisions which will accelerate the clean energy transition and reduce greenhouse gas emissions, many of which have previously received bipartisan support. These include new incentives for sustainable transportation fuels, nuclear generation, and hydrogen production, a commitment to critical minerals production and processing, and a comprehensive focus on resilience that will help communities combat the effects of climate change. In addition, renewable generation is further bolstered through the long-term extension of tax credits for wind and solar generation, in addition to support for the expansion of storage technologies necessary to compensate for the intermittent availability of wind and solar.
The biggest obstacle to widespread adoption of electric vehicles is the lack of critical mineral supply chains. The Reconciliation Bill changes the tax credit structure to open up credits (with income and cost restrictions) for EVs—even for manufacturers who previously hit limits. It does so in a way that is intended to boost North American production of critical minerals by requiring higher percentages of North American components, a goal we support. However, this new type of credit system will require the Administration to change its posture toward domestic mining. For example, two important mining projects which could have helped meet critical minerals demand were rejected by the Department of Interior. If Congress is to now tie the ability for consumers to obtain EV tax credits to the origin of the battery components, the Administration must be prepared to revisit these decisions and to encourage more domestic mining and processing. Otherwise, the tax credits will only exist on paper.
The uncertain piece of the deal struck by Senator Manchin is permitting. Improving and accelerating the permitting process is necessary to meet ambitious climate goals and build the clean energy economy for tomorrow. As part of this agreement, Congress is to move a permitting bill next month. Initial information shared this week is positive, especially since many commonsense NEPA reforms enacted during the Trump Administration are in the process of being reversed by President Biden. Perhaps this agreement will set the stage for a durable, bipartisan package of permitting improvements that will allow infrastructure projects to be built more quickly without compromising environmental review or public input.
So, while we are disappointed that climate and energy progress could come in the form of legislation that we cannot support, we urge Congress to advance policies to both strengthen our energy security and accelerate the clean energy transition.