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How the Inflation Reduction Act set up the Biden administration to crack down on fossil fuels.
The Biden administration’s climate policy has entered an aggressive new phase. For the first time since the president took office, the star of the show isn’t Congress, the Department of Energy, or any other economic agency. It’s the good old Environmental Protection Agency.
The EPA is back.
Over the past few weeks, the EPA has unveiled an ambitious set of proposals that could remake the country’s transportation and power sectors. One proposal could cut toxic air pollution and greenhouse gases from cars, trucks, vans, and other vehicles by 2032. Another will restrict the amount of mercury and arsenic that coal-fired power plants can release.
But the most important new rule could come as soon as next week, when the agency is expected to propose slashing greenhouse gas pollution from new and existing power plants. That proposal — which will likely rank among the bluntest and most pugnacious climate protections ever issued by the EPA — will likely require coal and natural-gas plants to capture a large share of carbon emissions from their smoke stacks, preventing it from ever reaching the atmosphere.
If finalized and enforced, those rules should help accomplish Biden’s goal of generating 80% of the country’s electricity with zero-carbon sources by 2030, part of his broader vision of halving climate pollution by that year. The Intergovernmental Panel on Climate Change has said that every country must cut carbon pollution in half by 2030 in order for the world to hit the 1.5-degree goal.
The EPA’s reawakening heralds a broader shift in President Joe Biden’s climate policy. Since January 2021, much of his administration’s efforts have been focused on dangling new carrots in front of industry to entice decarbonization. Biden sometimes took a conciliatory approach to energy issues to win the support of Senator Joe Manchin, and the president has a major climate law — the Inflation Reduction Act — to show for it. Now, as his administration begins to implement that law, it has also picked up a big stick to crack down on unabated fossil fuels.
If you’ve hungered for a more punitive approach to the Biden administration’s climate policy, in other words, then you’re about to get it. But remember to thank the law that made it possible: the Inflation Reduction Act itself.
Although it has gone little acknowledged, the IRA is essential to Biden’s regulatory policy. Without the IRA’s generous subsidies, the EPA couldn’t adopt such aggressive rules to fight fossil fuels. In at least one case, the EPA actually needed the IRA to pass before it could issue its power-plant regulations, so that the climate law could underwrite the carbon-capture technology that the rules are expected to require.
This fact is essential to understanding the next 18 months of American climate policy — and it should prompt at least a modest reconsideration of the IRA.
Why is the IRA so important? It’s because of, well, the rules that rule how the federal government makes rules. Call them the meta-rules — the set of executive orders, court decisions, and informal precedent that constrain how agencies like the EPA can issue new regulations.
Since the 1970s, federal agencies like the EPA have had to consider a proposed rule’s costs and benefits before they can issue it. This is a technocratic and persnickety undertaking, conducted with Excel spreadsheets and groaning economic models, in which staff try to add up all of a rule’s costs to society and all of its benefits.
In the clean-car rules, these sums can rise into the tens of billions. To name a few categories: The cost of repairing EVs is $24 billion, while the benefits of reducing particulate pollution in the air are as high as $34 billion.
But this exercise is important, because it effectively determines how aggressive a proposed rule can be. If a rule’s costs exceed its benefits to society, then it’s too ambitious, at least under current law. Only proposals that make society richer in dollar terms are allowed to become law. (According to the EPA’s math, the clean-car rule’s benefits exceed its costs by more than $1 trillion.)
Here’s the key, though: These analyses only look at a rule’s direct costs, which means any status quo policies — and every existing federal program that makes it cheaper to follow the rule — are taken for granted. So the IRA’s hundreds of billions of dollars in tax credits function effectively as “free money” in these analyses, allowing the EPA to adopt much more aggressive rules than it otherwise would.
This has a modest effect on the EPA’s proposed rules for cars and trucks, but it’s expected to be transformative for the forthcoming power plant rules. One of the IRA’s most controversial tax credits, for instance, pays power plants and other factories $85 for each ton of carbon pollution that they capture from their smokestacks and pump into the ground. At best, that might seem like a way to pay oil and gas companies for a form of greenwashing; at worst, it might look like a subsidy for fossil-fuel extraction.
But when coupled with an EPA limit on the amount of carbon that power plants can release into the atmosphere, it becomes revolutionary. The new rule will reportedly require some form of carbon-capture technology on existing and new fossil-fuel-burning power plants. Thanks to the IRA, the EPA can essentially ignore the first $85 a ton of regulatory costs that the rule places on companies.
These new “aggressive regulations would not have been possible without the IRA,” Leah Stokes, a political-science professor at the University of California, Santa Barbara, told me.
“It is totally a function of the IRA that they’re able to do this. They’re able to make arguments with 45Q, for example, that carbon capture and storage is a viable technology,” she added, referring to the carbon-capture subsidy by its section of the tax code.
Some climate experts expect that these rules will ultimately discourage new fossil-fuel plants from getting built, even if carbon-capture technology becomes cheaper, simply because it will be cheaper and easier to build solar, wind, or nuclear plants.
The IRA is important as well because the EPA is so limited in what kind of restrictions it can impose on power plants in the first place. Last year, the Supreme Court ruled that the agency could not fight climate change by creating a national market for carbon pollution under the Clean Air Act, but that it could issue technology-by-technology guidelines.
That fact should prompt a popular rethink of the IRA. Since the law passed last summer, a common line of criticism has focused on its magnanimity: that it mostly uses subsidies, and not new taxes or mandates, to decarbonize the economy. The IRA uses “carrots without sticks,” critics have written, subsidizing some of the technological investments that fossil-fuel companies were already planning on making.
This was never quite true. The IRA by itself included a few new taxes, including a fee on methane leaks from fossil-fuel infrastructure that was meant to go hand-in-hand with new EPA rules. (House Republicans have sought to repeal that tax in their new budget proposal.) But the IRA was also never meant to stand on its own, and many of its authors knew that by making clean energy cheap, it would make future climate regulations cheaper. In other words, Biden’s climate policy never entailed only a never-ending booze cruise of green subsidies, as some global commentators have alleged over the past eight months. Instead, it required adopting a politically sensitive sequence of policies: first, a reconciliation bill to subsidize the good; then, a regulatory revival to penalize the bad.
Of course, the sharply conservative Supreme Court must allow Biden to actually carry out the second half of that agenda. But if it does, then we’ll discover something new about donkey carts: The sweeter the carrots, the harder you can whack with the stick.
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On coal mines, Energy Star, and the EV tax credit
Current conditions: Storms continue to roll through North Texas today, where a home caught fire from a lightning strike earlier this week • Warm, dry days ahead may hinder hotshot crews’ attempts to contain the 1,500-acre Sawlog fire, burning about 40 miles west of Butte, Montana• Severe thunderstorms could move through Rome today on the first day of the papal conclave.
The International Energy Agency published its annual Global Methane Tracker report on Wednesday morning, finding that over 120 million tons of the potent greenhouse gas were emitted by oil, gas, and coal in 2024, close to the record high in 2019. In particular, the research found that coal mines were the second-largest energy sector methane emitter after oil, at 40 million tons — about equivalent to India’s annual carbon dioxide emissions. Abandoned coal mines alone emitted nearly 5 million tons of methane, more than abandoned oil and gas wells at 3 million tons.
“Coal, one of the biggest methane culprits, is still being ignored,” Sabina Assan, the methane analyst at the energy think tank Ember, said in a statement. “There are cost-effective technologies available today, so this is a low-hanging fruit of tackling methane.” Per the IEA report, about 70% of all annual methane emissions from the energy sector “could be avoided with existing technologies,” and “a significant share of abatement measures could pay for themselves within a year.” Around 35 million tons of total methane emissions from fossil fuels “could be avoided at no net cost, based on average energy prices in 2024,” the report goes on. Read the full findings here.
Opportunities to reduce methane emissions in the energy sector, 2024
IEA
The Environmental Protection Agency told staff this week that the division that oversees the Energy Star efficiency certification program for home appliances will be eliminated as part of the Trump administration’s ongoing cuts and reorganization, The Washington Post reports. The Energy Star program, which was created under President George H.W. Bush, has, in the past three decades, helped Americans save more than $500 billion in energy costs by directing them to more efficient appliances, as well as prevented an estimated 4 billion metric tons of greenhouse gas from entering the atmosphere since 1992, according to the government’s numbers. Almost 90% of Americans recognize its blue logo on sight, per The New York Times.
President Trump, however, has taken a personal interest in what he believes are poorly performing shower heads, dishwashers, and other appliances (although, as we’ve fact-checked here at Heatmap, many of his opinions on the issue are outdated or misplaced). In a letter on Tuesday, a large coalition of industry groups including the Air-Conditioning, Heating, and Refrigeration Institute, the Association of Home Appliance Manufacturers, and the U.S. Chamber of Commerce wrote to EPA Administrator Lee Zeldin in defense of Energy Star, arguing it is “an example of an effective non-regulatory program and partnership between the government and the private sector. Eliminating it will not serve the American people.”
House Speaker Mike Johnson suggested that the electric vehicle tax credit may be on its last legs, according to an interview he gave Bloomberg on Tuesday. “I think there is a better chance we kill it than save it,” Johnson said. “But we’ll see how it comes out.” He estimated that House Republicans would reveal their plan for the tax credits later this week. Still, as Bloomberg notes, a potential hangup may be that “many EV factories have been built or are under construction in GOP districts.”
As we’ve covered at Heatmap, President Trump flirted with ending the $7,500 tax credit for EVs throughout his campaign, a move that would mark “a significant setback to the American auto industry’s attempts to make the transition to electric vehicles,” my colleague Robinson Meyer writes. That holds true for all EV makers, including Tesla, the world’s most valuable auto company. However, its CEO, Elon Musk — who holds an influential position within the government — has said he supports the end of the tax credit “because Tesla has more experience building EVs than any other company, [and] it would suffer least from the subsidy’s disappearance.”
Constellation Energy Corp. held its quarterly earnings call on Tuesday, announcing that its operating revenue rose more than 10% in the first three months of the year compared to 2024, beating expectations. Shares climbed 12% after the call, with Chief Executive Officer Joe Dominguez confirming that Constellation’s pending purchase of natural gas and geothermal energy firm Calpine is on track to be completed by the end of the year, and that the nuclear power utility is “working hard to meet the power needs of customers nationwide, including powering the new AI products that Americans increasingly are using in their daily lives and that businesses and government are using to provide better products and services.”
But as my colleague Matthew Zeitlin reported, Dominguez also threw some “lukewarm water on the most aggressive load growth projections,” telling investors that “it’s not hard to conclude that the headlines are inflated.” As Matthew points out, Dominguez also has some reason to downplay expectations, including that “there needs to be massive investment in new power plants,” which could affect the value of Constellation’s existing generation fleet.
The Rockefeller Foundation aims to phase out 60 coal-fired power plants by 2030 by using revenue from carbon credits to cover the costs of closures, the Financial Times reports. The team working on the initiative has identified 1,000 plants in developing countries that would be eligible for the program under its methodology.
Rob and Jesse go deep on the electricity machine.
Last week, more than 50 million people across mainland Spain and Portugal suffered a blackout that lasted more than 10 hours and shuttered stores, halted trains, and dealt more than $1 billion in economic damage. At least eight deaths have been attributed to the power outage.
Almost immediately, some commentators blamed the blackout on the large share of renewables on the Iberian peninsula’s power grid. Are they right? How does the number of big, heavy, spinning objects on the grid affect grid operators’ ability to keep the lights on?
On this week’s episode of Shift Key, Jesse and Rob dive into what may have caused the Iberian blackout — as well as how grid operators manage supply and demand, voltage and frequency, and renewables and thermal resources, and operate the continent-spanning machine that is the power grid. Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap, and Jesse Jenkins, a professor of energy systems engineering at Princeton University.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from our conversation:
Robinson Meyer: So a number of people started saying, oh, this was actually caused because there wasn’t enough inertia on the grid — that Spain kind of flew too close to the sun, let’s say, and had too many instantaneous resources that are metered by inverters and not by these large mechanical generators attached to its grid. Some issue happened and it wasn’t able to maintain the frequency of its grid as needed. How likely do you think that is?
Jesse Jenkins: So I don’t think it’s plausible as the precipitating event, the initial thing that started to drive the grid towards collapse. I would say it did contribute once the Iberian grid disconnected from France.
So let me break that down: When Spain and Portugal are connected to the rest of the continental European grid, there’s an enormous amount of inertia in that system because it doesn’t actually matter what’s going on just in Spain. They’re connected to this continen- scale grid, and so as the frequency drops there, it drops a little bit in France, and it drops a little bit in Latvia and all the generators across Europe are contributing to that balance. So there was a surplus of inertia across Europe at the time.
Once the system in Iberia disconnected from France, though, now it’s operating on its own as an actual island, and there it has very little inertia because the system operator only scheduled a couple thousand megawatts of conventional thermal units of gas power plants and nuclear. And so it had a very high penetration on the peninsula of non-inertia-based resources like solar and wind. And so whatever is happening up to that point, once the grid disconnected, it certainly lacked enough inertia to recover at that point from the kind of cascading events. But it doesn’t seem like a lack of inertia contributed to the initial precipitating event.
Something — we don’t know what yet — caused two generators to simultaneously disconnect. And we know that we’ve observed oscillation in the frequency, meaning something happened to disturb the frequency in Spain before all this happened. And we don’t know exactly what that disturbance was.
There could have been a lot of different things. It could have been a sudden surge of wind or solar generation. That’s possible. It could have been something going wrong with the control system that manages the automatic response to changes in frequency — they were measuring the wrong thing, and they started to speed up or slow down, or something went wrong. That happened in the past, in the case of a generator in Florida that turned on and tried to synchronize with the grid and got its controls wrong, and that causes caused oscillations of the frequency that propagated all through the Eastern Interconnection — as far away as North Dakota, which is like 2,000 miles away, you know? So these things happen. Sometimes thermal generators screw up.
Music for Shift Key is by Adam Kromelow.
Then again, there are reasons why he’d want to focus on existing generation.
Just how big is the data center boom, really? How much is electricity demand going to expand over the coming decades? Business plans, government policy, and alarming environmental forecasts are all based on the idea that we’re on an unrelenting ride upwards in terms of electricity use, especially from data centers used to power artificial intelligence.
It’s one reason why the new Trump administration declared in the first days of its return to power that the country was in an “energy emergency,” and hasbeen used as a justification for its attempted revival of the coal industry.
But one mildly dissenting voice came from a perhaps-unexpected corner: the power industry.
Constellation Energy’s Chief Executive Officer Joseph Dominguez spent a portion of the company’s quarterly earnings call Tuesday throwing lukewarm water on the most aggressive load growth projections, even as the company looks to profit from increased demand for the power that its over 30,000-megawatt, largely nuclear fleet serves.
Dominguez told his audience of investors and analysts that utilities and their power customers have been telling Constellation that “the same data center need is being considered in multiple jurisdictions across the United States at the same time, just like fishing. If you’re a fisherman, you put a bunch of lines in the water to try to catch fish, and the data center developers are doing exactly the same thing.”
This means that different electricity markets or utility territories could report the same future data center demand, when ultimately the developer will pick just one site.
Tallying the demand growth projections from a few large power markets — namely MISO, which largely serves the Midwest; PJM, which largely serves the East Coast; and ERCOT, the Texas energy market — which together “account for less than half” of U.S. power demand, Dominguez said, Constellation finds that they project “notably higher” demand growth than many third-party consultants and analysts foresee for the country as a whole.
“It’s hard not to conclude that the headlines are inflated,” Dominguez said. He further claimed that Constellation had “done the math,” and that “if Nvidia were able to double its output and every single chip went to ERCOT, it still wouldn’t be enough chips to support some of the load forecasts.”
He argued that utilities tend to overstate load growth — an observation backed up by research from the Rocky Mountain Institute. “We get it,” he said. “Utilities have to plan to ensure that the system is reliable.” That frequently means erring on the side of having more generation and transmission to serve future demand as opposed to being caught short.
Dominguez is hardly the first voice to call into question load growth forecasts. Energy industry consultant Jonathan Koomey told Heatmap more than a year ago that “everyone needs to calm the heck down” about AI-driven load growth. Data center developers, chipmakers, and AI companies would likely find efficiencies to get more computing power out of less electric power, he predicted, similar to how the original data center buildout avoided catastrophic predictions of imminent power shortages and spiking electricity prices in the early 2000s.
Since then, demand growth projections have done nothing but rise. But even just a few weeks ago, Peter Freed, Meta’s former director of energy strategy, told Heatmap’s Shift Key podcast, “It is simultaneously true that I think this is going to be a really large demand driver and that we have bubble-like characteristics in terms of the amount of stuff that people are trying to get done.”
Now, to be clear, Dominguez has a reason to talk down expectations of future demand growth — and with it the expectation that there needs to be massive investment in new power plants. Constellation owns and operates a fleet of nuclear power plants, and is bringing on a gas-heavy fleet with its planned acquisition of Calpine.
Dominguez also said that new natural gas and renewables were likely to prove expensive to build.
“The cost of new entry, whether that be for combined cycle machines or solar with storage, has gone up substantially, as has the time to build and site these assets,” Dominguez said. “Now, at the end of the day, in a tightening market, we compete with the cost of new entry.”
This is halfway consistent with what other big players in the energy industry have been saying. John Ketchum, the chief executive of NextEra, which has a large renewables development business,has been telling anyone who will listen that the way to meet urgent load growth is with renewables and batteries, as they can be built cheaper and faster than natural gas, let alone nuclear.
Dominguez’s take, however, is that it’s all quite expensive and lengthy considering the likely level of need.
“When I listen to some of the comments on these calls, I just have to tell you, folks, I think the load is being overstated. We need to pump the brakes here.”