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Want to build a subway or a power line to green energy? Get ready to pay and wait. Freeway blown up? It’s fixed already.
The partial Second Avenue subway line in New York City was, at the time of its completion in 2017, the most expensive piece of subway ever built in the world, at $2.5 billion per mile — or more than the Grand Coulee Dam, adjusted for inflation. Not coincidentally, it also took an entire decade to finish. The next phase of the same line might cost even more: estimated at $6.4 billion, which is highly likely to increase, by a lot, once construction actually gets going.
Compare that stupendous waste of money and time to the I-95 overpass in Philadelphia that was damaged by a gasoline tanker truck that caught fire underneath. In less than two weeks, a temporary fix reopening half the lanes was in place, and it’s expected that the rest of the repair will be completed ahead of schedule.
Now, it’s a lot easier to fix a busted highway overpass than dig a subway (though I should note a few of the tunnels were already dug back in the 1970s). But it’s still the case that the Second Avenue subway construction was roughly an order of magnitude slower and more expensive than what peer nations like Spain can manage for similar work, while the I-95 repair is more in line with international standards.
It reflects the fact there are plenty of trained engineers in this country who really can design projects quickly when asked, along with plenty of skilled construction workers who can work quickly if conditions are right. All it takes is sheer political panic about inconvenienced suburbanites.
Only that kind of thinking can break through the strangling kudzu of bureaucracy and lawsuits that makes it nearly impossible to build anything in this country.
For instance, this type of panicked efficiency doesn’t apply to new roads. The new interstate 69 has been under construction for many years, and has seen the same kind of delays and skyrocketing cost overruns as in the New York City subway system. It’s only when existing roads get blown up, thus threatening the driving access for existing suburbanites, that the government kicks into gear.
It also doesn’t apply to inner city road repairs, particularly when those repairs might include a loss of driving lanes or parking. In Philadelphia, a proposal to resurface dangerous Washington Avenue, while cutting the number of lanes from five to three or four, was tied up in community meetings and outreach for nearly 10 years, only for the local city council member to abruptly veto the entire redesign at the last minute and return to five lanes.
Delays and attendant cost overruns are also seen with California’s epically mismanaged high-speed rail system, now ten years behind schedule and substantially over budget despite the length of the project being cut by about two-thirds.
Long-distance electricity transmission lines might be worst of all. As Josh Saul, Cailley LaPara and Jennifer A Dlouhy report at Bloomberg, it takes a bare minimum of 10 years for a new line to make it through the gauntlet of regulatory approval from the Department of Energy and Federal Energy Regulatory Agency, as well as state authorities. One line from New Mexico to Las Vegas took 17 years to get final approval.
This is a disaster for America’s climate goals. We need to put a lot more renewable energy on the electric grid, and we need to be able to transmit that energy over longer distances to account for renewable variability between regions. If it takes nearly two decades to simply start constructing new long-distance transmission, we’re not going to make it.
There are many reasons why America has this problem, but a central key one is the growth of judicial power — and liberals are partly to blame. As Paul Erlich explains in his book Public Citizens, in the 1970s a new movement of liberal legal activists led by Ralph Nader, motivated by the Vietnam War and the numerous environmental disasters caused by federal government projects like dams and highways, mounted an activist campaign to force the government to undertake legal reviews before building things, make it easier for people to sue the government, and so on.
Their reasons for doing this were understandable at the time. But the overall result was calamitous, playing directly into the neoliberal turn under Presidents Reagan and Clinton. Nader and his allies made it dramatically more difficult for the federal government to do anything, especially build infrastructure, and conversely dramatically easier for any interested party to gum up the process of government with lawsuits. After Nader’s initial successes, the conservative movement seized on his legal tactics themselves — and with much greater success given how the very nature of the court system biases it towards rich elites who can afford to hire the most well-connected law firms, or stuff luxurious gifts into the pockets of Supreme Court justices.
Another reason is the American fetish for community input. On the face of it, it’s not clear why holding a meeting where random people can show up and talk represents “the community” instead of a small and highly unrepresentative group of retired busybodies, cranks, and, not uncommonly, paid sockpuppets for some vested interest. In any case, even if we grant the value of community meetings, they are often cynically abused — in the Philadelphia story above, every single meeting and every survey found a large majority in favor of cutting down the number lanes. They were just held over and over to buy time while elites maneuvered behind closed doors to get what they wanted.
A third reason is the American addiction to consultants and contractors. During the neoliberal turn, it became axiomatic to assume that the private sector could do absolutely everything better and cheaper than government. Just fire most of the state employees, it was thought, replace them with private firms, and everything will be great. This created stupendous corruption, as tick-like companies ballooned enormously on government contracts without the former expert oversight. And the resulting cost bloat made it harder to build, as 10 projects’ worth of money disappeared into the gullet of one project’s contractors.
With all these barriers to government action, only the incredible political dominance of suburban commuters can break through them. Instead of 10 years of meetings, Pennsylvania Governor Josh Shapiro immediately declared a state of emergency. Workers began demolishing the wrecked bridge on the same day it collapsed. Police escorted deliveries of asphalt and other construction material. When rain threatened to slow down the scheduled reopening, the state dragooned a NASCAR track drying machine from Pocono Raceway, blasting the road surface with air at jet engine velocity so it could be dry enough to paint on the same day it was paved.
This type of inventive, dynamic agility is all but unimaginable in any other American governance context. It reflects the political importance of suburban voters, particularly in swing states like Pennsylvania, and perhaps more to the point, the hegemonic assumption that suburban commuter interests are basically the entire point of government. When they are threatened, ordinarily sluggish and timid politicians spring into action, trampling over precedent as necessary, and digging into every possible corner for available resources.
It might take a decade to build three subway stops, or two decades to build a moderately long transmission line. But whenever a critical freeway overpass goes down, all levels of government will spring into action.
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The House budget bill may have kept the 45Q tax credit, but nixing transferability makes it decidedly less useful.
Very few of the Inflation Reduction Act’s tax credits made it through the House’s recently passed budget bill unscathed. One of the apparently lucky ones, however, was the 45Q credit for carbon capture projects. This provides up to $180 per metric ton for direct air capture and $85 for carbon captured from industrial or power facilities, depending on how the CO2 is subsequently sequestered or put to use in products such as low-carbon aviation fuels or building materials. The latest version of the bill doesn’t change that at all.
But while the preservation of 45Q is undoubtedly good news for the increasing number of projects in this space, carbon capture didn’t escape fully intact. One of the main ways the IRA supercharged tax credits was by making them transferable, turning them into an important financing tool for small or early-stage projects that might not make enough money to owe much — or even anything — in taxes. Being able to sell tax credits on the open market has often been the only way for smaller developers to take advantage of the credits. Now, the House bill will eliminate transferability for all projects that begin construction two years after the bill becomes law.
That’s going to make the economics of an already financially unsteady industry even more difficult. “Especially given the early stage of the direct air capture industry, transferability is really key,” Giana Amador, the executive director of an industry group called the Carbon Removal Alliance, told me. “Without transferability, most DAC companies won’t be able to fully capitalize upon 45Q — which, of course, threatens the viability of these projects.”
We’re not talking about just a few projects, either. We’re talking about the vast majority, Jessie Stolark, the executive director of another industry group, the Carbon Capture Coalition, told me. “The initial reaction is that this is really bad, and would actually cut off at the knees the utility of the 45Q tax credit,” Stolark said. Out of over 270 carbon capture projects announced as of today, Stolark estimates that fewer than 10 will be able to begin construction in the two years before transferability ends.
The alternative to easily transferable tax credits is a type of partnership between a project developer and a tax equity investor such as a bank. In this arrangement, investors give project developers cash in exchange for an equity stake in their project and their tax credit benefits. Deals like this are common in the renewable energy industry, but because they’re legally complicated and expensive, they’re not really viable for companies that aren’t bringing in a lot of revenue.
Because carbon capture is a much younger, and thus riskier technology than renewables, “tax equity markets typically require returns of 30% or greater from carbon capture and direct air capture project developers,” Stolark told me. That’s a much higher rate than tax equity partners typically require for wind or solar projects. “That out of the gate significantly diminishes the tax credit's value.” Taken together with inflation and high interest rates, all this means that “far fewer projects will proceed to construction,” Stolark said.
One DAC company I spoke with, Bay Area-based Noya, said that now that transferability is out, it has been exploring the possibility of forming tax equity partnerships. “We’ve definitely talked to banks that might be interested in getting involved in these kinds of things sooner than they would have otherwise gotten involved, due to the strategic nature of being partnered with companies that are growing fast,” Josh Santos, Noya’s CEO, told me.
It would certainly be a surprise to see banks — which are generally quite risk averse — lining up behind these kinds of new and unproven technologies, especially given that carbon capture doesn’t have much of a natural market. While CO2 can be used for some limited industrial purposes — beverage carbonation, sustainable fuels, low-carbon concrete — the only market for true carbon dioxide removal is the voluntary market, in which companies, governments, or individuals offset their own emissions by paying companies to remove carbon from the atmosphere. So if carbon capture is going to become a thriving, lucrative industry, it’s likely going to be heavily dependent on future government incentives, mandates, or purchasing commitments. And that doesn’t seem likely to happen in the U.S. anytime soon.
Noya, which is attempting to deploy its electrically-powered, modular direct air capture units beginning in 2027, is still planning on building domestically, though. As Santos told me, he’s eyeing California and Texas as promising sites for the company’s first projects. And while he said that the repeal of transferability will certainly “make things more complicated,” it is not enough of a setback for the company to look abroad.
“45Q is a big part of why we are focused on the U.S. mainly as our deployment site,” Santos explained. “We’ve looked at places like Iceland and the Middle East and Africa for potential deployment locations, and the tradeoff of losing 45Q in exchange for a cheaper something has to be significant enough for that to make sense,” he told me — something like more cost efficient electricity, permitting or installation costs. Preserving 45Q, he told me, means Noya’s long-term project economics are still “great for what we’re trying to build.”
But if companies can’t weather the short-term headwinds, they’ll never be able to reach the level of scale and profitability that would allow them to leverage the benefits of the 45Q credits directly. For many DAC companies such as Climeworks, which built the industry’s largest facility in Iceland, Amador and Stolark said that the domestic policy environment is causing hesitation around expanding in the U.S.
“We are very much at risk of losing our US leadership position in the industry,” Stolark told me. Meanwhile, she said that Canada, China, and the EU are developing policies that are making them increasingly attractive places to build.
As Amador put it, “I think no matter what these projects will be built, it’s just a question of whether the United States is the most favorable place for them to be deployed.”
House Republicans have bet that nothing bad will happen to America’s economic position or energy supply. The evidence suggests that’s a big risk.
When President Barack Obama signed the Budget Control Act in August of 2011, he did not do so happily. The bill averted the debt ceiling crisis that had threatened to derail his presidency, but it did so at a high cost: It forced Congress either to agree to big near-term deficit cuts, or to accept strict spending limits over the years to come.
It was, as Bloomberg commentator Conor Sen put it this week, the wrong bill for the wrong moment. It suppressed federal spending as America climbed out of the Great Recession, making the early 2010s economic recovery longer than it would have been otherwise. When Trump came into office, he ended the automatic spending limits — and helped to usher in the best labor market that America has seen since the 1990s.
On Thursday, the Republican majority in the House of Representatives passed their megabill — which is dubbed, for now, the “One Big, Beautiful Bill Act” — through the reconciliation process. They did so happily. But much like Obama’s sequestration, this bill is the wrong one for the wrong moment. It would add $3.3 trillion to the federal deficit over the next 10 years. The bill’s next stop is the Senate, where it could change significantly. But if this bill is enacted, it will jack up America’s energy and environmental risks — for relatively little benefit.
It has become somewhat passé for advocates to talk about climate change, as The New York Times observed this week. “We’re no longer talking about the environment,” Chad Farrell, the founder of Encore Renewable Energy, told the paper. “We’re talking dollars and cents.”
Maybe that’s because saying that something “is bad for the climate” only makes it a more appealing target for national Republicans at the moment, who are still reveling in the frisson of their post-Trump victory. But one day the environment will matter again to Americans — and this bill would, in fact, hurt the environment. It will mark a new chapter in American politics: Once, this country had a comprehensive climate law on the books. Then Trump and Republicans junked it.
The Republican megabill will make climate change worse. Within a year or two, the U.S. will be pumping out half a gigaton more carbon pollution per year than it would in a world where the IRA remains on the books, according to energy modelers at Princeton University. Within a decade, it will raise American carbon pollution by a gigaton each year. That is a significant increase. For comparison, the United States is responsible for about 5.2 gigatons of greenhouse gas pollution each year. No matter what happens, American emissions are likely to fall somewhat between now and 2035 — but, still, we are talking about adding at least an extra year’s worth of emissions over the next decade. (Full disclosure: I co-host a podcast, Shift Key, with Jesse Jenkins, the lead author of that Princeton study.)
What does America get for this increase in air pollution? After all, it’s possible to imagine situations where such a surge could bring economic benefits. In this case, though, we don’t get very much at all. Repealing the tax credits will slash $1 trillion from GDP over the next decade, according to the nonpartisan group Energy Innovation. Texas will be particularly hard hit — it could lose up to $100 billion in energy investment. Across the country, household energy costs will rise 2% to 7% by 2035, on top of any normal market-driven volatility, according to the energy research firm the Rhodium Group. The country will become more reliant on foreign oil imports, yet domestic oil production will budge up by less than 1%.
In other words, in exchange for more pollution, Americans will get less economic growth but higher energy costs. The country’s capital stock will be smaller than it would be otherwise, and Americans will work longer hours, according to the Tax Foundation.
But this numbers-driven approach actually understates the risk of repealing the IRA’s tax credits. The House megabill raises two big risks to the economy, as I see it — risks that are moresignificant than the result of any one energy or economic model.
The first is that this bill — its policy changes and its fiscal impact — will represent a double hit to the capacity of America’s energy system. The Inflation Reduction Act’s energy tax credits were designed to lower pollution and reduce energy costs by bringing more zero-carbon electricity supply onto the U.S. power grid. The law didn’t discriminate about what kind of energy it encouraged — it could be solar, geothermal, or nuclear — as long as it met certain emissions thresholds.
This turned out to be an accidentally well-timed intervention in the U.S. energy supply. The advent of artificial intelligence and a spurt of factory building has meant that, in the past few years, U.S. electricity demand has begun to rise for the first time since the 1990s. At the same time, the country’s ability to build new natural gas plants has come under increasing strain. The IRA’s energy tax credits have helped make this situation slightly less harrowing by providing more incentives to boost electricity supply.
Republicans are now trying to remove these tax bonuses in order to finance tax cuts for high-earning households. But removing the IRA alone won’t pay for the tax credits, so they will also have to borrow trillions of dollars. This is already straining bond markets, driving up interest rates for Americans. Indeed, a U.S. Treasury auction earlier this week saw weak demand for $16 billion in bonds, driving stocks and the dollar down while spiking treasury yields.
Higher interest rates will make it more expensive to build any kind of new power plant. At a moment of maximum stress on the grid, the U.S. is going to pull away tax bonuses for new electricity supply and make it more expensive to do any kind of investment in the power system. This will hit wind, solar, and batteries hard; because renewables don’t have to pay for fuel, their cost variability is largely driven by financing. But higher interest rates will also make it harder to build new natural gas plants. Trump’s trade barriers and tariff chaos will further drive up the cost of new energy investment.
Republicans aren’t totally oblivious to this hazard. The House Natural Resource Committee’s permitting reform proposal could reduce some costs of new energy development and encourage greater power capacity — assuming, that is, that the proposal survives the Senate’s byzantine reconciliation rules. But even then, significant risk exists for runaway energy cost chaos. Over the next three years, America’s liquified natural gas export capacity is set to more than double. Trump officials have assumed that America will simply be able to drill for more natural gas to offset a rise in exports, but what if higher interest rates and tariff charges forbid a rise in capacity? A power price shock is not off the table.
So that’s risk No. 1. The second risk is arguably of greater strategic import. As part of their megabill, House Republicans have stripped virtually every demand-side subsidy for electric vehicles from the bill, including a $7,500 tax credit for personal EV purchases. At the same time, Senate Republicans and the Trump administration have gutted state and federal rules meant to encourage electric vehicle sales.
Republicans have kept, for now, some of the supply-side subsidies for manufacturing EVs and batteries. But without the paired demand-side incentives, American EV sales will fall. (The Princeton energy team projects an up to 40% decline in EV sales nationwide.) This will reduce the economic rationale for much of the current buildout in electric vehicle manufacturing and capacity happening across the country — it could potentially put every new EV and battery factory meant to come online after this year out of the money.
This will weaken the country’s economic competitiveness. Batteries are a strategic energy technology, and they will undergird many of the most important general and military technologies of the next several decades. (If you can make an EV, you can make an autonomous drone.) The Trump administration has realized that the United States and its allies need a durable mineral supply chain that can at least parallel China’s. But they seem unwilling to help any of the industries that will actually usethose minerals.
Does this mean that Republicans will kill America’s electric vehicle industry? Not necessarily. But they will dent its growth, strength, and expansion. They will make it weaker and more vulnerable to external interference. And they will increase the risks that the United States simply gives up on ever understanding battery technology and doubles down on internal combustion vehicles — a technology that, like coal-powered naval ships, is destined to lose.
It is, in other words, risky. But that is par for the course for this bill. It is risky to make the power grid so exposed to natural gas price volatility. It is risky to jack up the federal deficit during peacetime for so little gain. It is risky to cede so much demand for U.S.-sourced critical minerals. It is risky to raise interest rates in an era of higher trade barriers, uncertain supply shocks, and geopolitical instability.
This is what worries me most about the Republican megabill: It takes America’s flawed but fixable energy policy and replaces it with, well, a longshot parlay bet that nothing particularly bad will happen anytime soon. Will the Senate take such a bet? Now we find out.
Editor’s note: This story has been updated to correct the units in the sixth paragraph from megatons to gigatons.
And more of the week’s top conflicts around renewable energy
1. Worcester County, Massachusetts – The town of Oakham is piping mad about battery energy storage.
2. Worcester County, Maryland – A different drama is going down in a different Worcester County on Maryland’s eastern shore, where fishing communities are rejecting financial compensation from U.S. Wind tied to MarWin, its offshore project.
3. Lackawanna County, Pennsylvania – A Pivot Energy solar project is moving ahead with getting its conditional use permit in the small town of Ransom, but is dealing with considerable consternation from residents next door.
4. Cumberland County, North Carolina – It’s hard out here for a 5-megawatt solar project, apparently.
5. Barren County, Kentucky – Remember the Geenex solar project getting in the fight with a National Park? The county now formally has a restrictive ordinance on solar… that will allow projects to move through permitting.
6. Stark County, Ohio – Stark Solar is no more, thanks to the Ohio Public Siting Board.
7. Cheboygan County, Michigan – A large EDP Renewables solar project called the Northern Waters Solar Park is entering the community relations phase and – stop me if you’ve heard this before – it’s getting grumbles from locals.
8. Adams County, Illinois – A Summit Ridge Energy solar project located near the proposal in the town of Ursa we’ve been covering is moving forward without needing to pay the city taxes, due to the project being just outside city limits.
9. Cottonwood County, Minnesota – National Grid Renewables has paused work on the Plum Creek wind farm despite having received key permits to build, a sign that economic headwinds may be more powerful than your average NIMBY these days.
10. Oklahoma County, Oklahoma – Turns out you can’t kill wind in Oklahoma that easily.
11. Washoe County, Nevada – Trump’s Bureau of Land Management has opened another solar project in the desert up for public comment.
12. Shasta County, California – The California Energy Commission this week held a public hearing on the ConnectGen Fountain Wind project, which we previously told you already has gotten a negative reaction from the panel’s staff.