How the Climate Fight Was Almost Lost

One year ago, the Inflation Reduction Act became law, throwing the full financial might of the federal government behind the clean energy transition and forever changing the fight against climate change.

Recent polling finds that too few recognize the historical significance of the hundreds of billions of dollars the law invests to make clean energy cheaper for American households, businesses, and industries.

Even fewer people appreciate just how close we came to losing it all.

This is a personal account of the final days of the fight to pass the nation’s first comprehensive climate law, and of how the Inflation Reduction Act remarkably arose from the ashes of near-defeat.

The day the climate deal died

On July 14, 2022, just over a month before eventually becoming law, the budget bill that would eventually become known as the Inflation Reduction Act died. Again.

That evening, Senator Joe Manchin, the coal-state Democrat from West Virginia, called Senate Majority Leader Chuck Schumer to tell him he was done with the long-simmering inter-party negotiations striving to craft a budget bill that could unite all 50 Democratic senators and pass the evenly divided Senate. The stubborn hold-out had already dashed progressive dreams multiple times in the year and a half since the 117th Congress gaveled into session, including dealing the killing blow to the House-passed Build Back Better Act in December 2021.

The news was a shock. Less than two weeks earlier, over the Fourth of July weekend, I was told by Senate staffers party to the budget negotiations that a deal was imminent. They told me to prepare the REPEAT Project, a Princeton University team that I lead and that assesses the impacts of federal energy and climate policies as they are debated, to stand by to run the numbers on a new bill.

But in July 2022, inflation was running at nearly 9% and gasoline prices were over $5 per gallon in many parts of the U.S. Then we got one bad report on the rate of inflation after another, prompting Manchin to say he could no longer support any additional government spending that might further fuel inflation.

Manchin called Schumer on July 14 to say he could no longer continue negotiations, and that he would not support legislation that included any clean energy or climate spending — leaving only a slimmed-down bill focused on health care left in play.

"DEVASTATING... utterly SENSELESS!" I tweeted at the time, using REPEAT Project modeling to illustrate the massive climate gap we would have faced, had that been the end of the story.

Courtesy of the REPEAT Project at Princeton University's Zero Lab

And it really did seem like the end.

The tone I heard from Senate staffers that day was very different from the several prior ‘false demises’ of the budget negotiations we had all endured. They were despondent. “I feel like I just wasted the last six years of my life,” one staffer texted me on July 14. So did I.

The next day, Manchin issued an ultimatum: Either Democrats could quickly pass a “skinny” budget bill focused only on health care or they could wait a few weeks to see if inflation improved and try negotiating a larger package in August.

The problem: Basically no one thought inflation would meaningfully cool that quickly, and there was only a few weeks left to pass a law before the August recess, after which Congress would go into full campaign season and nothing would pass.

The game clock was winding down.

Then President Biden threw in the towel. He issued an official statement vowing to keep the climate fight up via executive action but urged the Senate to quickly pass a bill focused only on health care.

Schumer appeared poised to do just that, and a caucus meeting for Senate Democrats was set for the following Tuesday to discuss how to move forward. Since Congress only gets one shot at a budget reconciliation law per fiscal year, if they ended up passing a bill without any climate package, it was game over.

I had been working to advance federal climate policy since 2008. I lived through the demise of the last serious effort to pass a federal climate law in 2009 and 2010. I knew how rare these windows of opportunity to pass meaningful legislation are. And we’d just blown a once-in-a-decade chance. Would we have to wait until the 2030s for our next shot? Could we even survive another decade with the United States standing on the sidelines of the global climate fight?

Playing to the final buzzer

By July 16, I had apparently had enough time to go through the various stages of grief, arriving at bargaining (or perhaps denial). “It’s just not okay to end like this, with Manchin walking away from the deal and the rest of the caucus just quietly accepting that!” I wrote in a text to a key Senate staffer. “There’s got to be at least a dozen [Senate] members who are furious and could be unwilling to accept that in the end, right?”

“Working on it 😄,” the staffer replied.

And just like that, while many gave up and others fumed, staff from just a handful of Senate offices and a rag-tag group of allied individuals and advocacy groups got back to what we’d been doing since the start: doggedly working the problem to find some way to passage.

Even then, I had very little faith our efforts would succeed. I just knew that the game clock had a few seconds left on it, time enough to run a couple more Hail Mary plays, and I wanted to be able to look my kids in the eye some day and say, “We failed, but we truly tried everything we could.”

So we got back to work.

Bringing Manchin back to the negotiating table

So how did we get Manchin back to the negotiating table?

From my limited perspective, three things worked.

First, the concern that climate spending would stoke inflation was bogus. The budget deal under negotiation was doubly paid for, raising twice as much new revenue as it spent. What’s more, the spending plan was estimated to be in the ballpark to $30 to $50 billion per year spread over a decade, or less than 1% of our roughly six trillion dollar federal budget.

The climate spending was peanuts, and any honest macroeconomist would say that the budget deal would have a mild, fiscally contractionary effect at best or no effect on inflation at worst. Plus, the proposals specifically took aim at two key drivers of inflation: health care costs and energy costs.

Either Manchin was honest in his inflation fears but misappreciating the issues, or he was trying to give himself cover to scuttle the bill.

Our so-called “Never Give Up Caucus” took him at face value. To address his inflation concerns, allies succeeded in getting inflation-hawk-in-chief Larry Summers, the conservative leaning Penn-Wharton Budget Model team, and the deficit hawkish head of the Committee for a Responsible Federal Budget to tell Manchin (and the press) that the deal would cut the deficit and not raise prices.

Second, the many vested interests that stood to gain from the clean energy package were mobilized and pushed Manchin hard not to leave them high and dry.

This was always a key part of the political strategy of the clean energy package: rather than focus on pricing carbon emissions and making fossil energy more expensive (as Congress had attempted in 2009), the budget bill would instead provide a wide-ranging set of direct subsidies — tax credits, grants, loan programs — to make climate-friendly technologies cheaper and help build up manufacturing of clean energy components in the U.S. Concentrated beneficiaries create organized power to back the bill. That was the theory, and it was time to put it to the test.

The pressure campaign to get Manchin back to the table was “across the board,” according to National Wildlife Federation CEO Collin O’Mara, who was one of the most dogged and effective organizers during those pivotal final days.

Executives from renewable energy companies reminded Manchin that billions of dollars of investment were at stake.

The United Mine Workers of America pushed Manchin not to walk away from his promise to create a permanent trust fund for miners suffering from black lung disease, which the budget bill would do.

In my personal estimation, the most effective voices were probably from those sectors Manchin had styled himself as personally championing as chairman of the Senate Energy Committee: carbon capture, nuclear power, hydrogen, and advanced manufacturing.

A senior executive with a utility operating in Appalachia reportedly told Manchin: “We know coal plants are ultimately going to close. What is going to replace them? What are the jobs? What are we transitioning to? In this case, we are going to explore hydrogen, new nuclear and get manufacturing in the state.”

Manchin received incoming pressure to pass a bill from the Carbon Capture Coalition, oil companies like BP with big plans to invest in hydrogen, and Nucor, the nation’s largest steel maker, which planned new investments in West Virginia in part to supply growing demand for steel for burgeoning renewable energy industries.

Utilities like Constellation and Duke reminded Manchin that this law was our best shot at preserving the nation’s existing nuclear fleet, which provides about a fifth of our electricity without contributing to air pollution or climate change.

Bill Gates, who has invested in nuclear and energy storage startups, called Manchin personally. And executives at a Gates-backed battery company with plans for a West Virginia manufacturing hub explained to Manchin’s staff how the bill’s incentives would accelerate their growth trajectory.

Third, a few key senators that Manchin personally trusted or respected, including John Hickenlooper of Colorado, Chris Coons of Delaware, Tina Smith of Minnesota, Mark Warner of Virginia, and Ron Wyden of Oregon, reportedly pressed him with direct personal appeals.

I imagine their pitches either made the political case — did Manchin really want to send his party into the midterms having utterly failed on their domestic policy agenda? — or a personal one, emphasizing the opportunity to secure his legacy and the admiration of his grandchildren.

I don’t think we should discount the importance of these personal appeals. At the end of the day, senators are humans too. They crave the respect of their colleagues (at least those they admire). And everyone wants to be the hero of their own story, not the villain.

Which of these (or other parallel efforts I don't know about) pushed Manchin back to the table? Who knows what went through his mind in the end. But somehow, against virtually all expectations, it worked.

A phoenix rising from the ashes

We didn’t know it until later, but by as early as Tuesday, July 19, Manchin and Schumer, with just a couple key aids each, began meeting in secret somewhere in the Senate offices and got back to work.

No one else had any idea this was happening.

Like others working to save the bill, I spent the next week continuing to talk to press, allies, congressional staff, etc., marshaling talking points and data, mobilizing various interests to pressure Manchin, and doing everything we could to convince the stubborn senator to make a deal that would get a climate package into law. Little did we know, he was already back at it.

In fact, a little over a week later, on Wednesday, July 27, Manchin issued a statement that shocked everyone: He and Leader Schumer had reached a deal after all and were unveiling a full-fledged bill to be called “The Inflation Reduction Act.”

“The Inflation Reduction Act of 2022 addresses our nation’s energy and climate crisis by adopting commonsense solutions through strategic and historic investments that allow us to decarbonize while ensuring American energy is affordable, reliable, clean and secure,” Manchin wrote.

The full text of the bill dropped later that evening, and we were blown away to see how much of the original climate package from the ill-fated Build Back Better Act was retained by this new legislation.

The deal contained roughly $370 billion in estimated climate and clean energy spending, an historic package. All the key tax incentives were still in the proposal, including credits for clean electricity, electric vehicles, and heat pumps. Major grant programs were funded at similar levels. Even a new fee on methane pollution from the oil and gas sector had survived. In fact, a tax credit for U.S. clean energy manufacturing had even been expanded, apparently at Manchin’s request, to support production of batteries and their components and the mining and processing of critical minerals.

Rather than lose it all, we were poised to win nearly everything we’d hoped for.

“Holy shit. Stunned, but in a good way,” wrote Senator Tina Smith, a tireless advocate for the climate package, on Twitter. “$370B for climate and energy … BFD.”

It took us a couple weeks to run the numbers, but once we did, REPEAT Project estimated on August 4 that the Inflation Reduction Act, or IRA (pronounce it like your friendly Uncle Ira!), would cut emissions by about one billion metric tons per year in 2030 and retained about 80% of the cumulative emissions reductions of the larger Build Back Better package.

Courtesy of the REPEAT Project at Princeton University's Zero Lab

IRA could get the United States to about 42% below our peak historical emissions by 2030, we estimated at the time. (REPEAT Project’s latest updated analysis published last month revises 2030 emissions under IRA to 37-41% below peak.) That was still short of the target of 50% below peak levels that President Biden had committed the country to on the world stage, but the proposed legislation was a true game changer that gave us a fighting chance to hit that goal.

After the Manchin-Schumer deal dropped, we were off to the races.

Manchin shifted from the package’s chief obstacle to its chief spokesperson, stumping for the bill on Fox and haranguing senators on the floor alongside Schumer to get IRA passed during an exhausting, overnight “vote-a-rama.” After a 16-hour process where Republicans proposed amendment after amendment to be shot down one by one by a united Democratic caucus — plus a little last minute drama wherein Kyrsten Sinema nearly killed the bill to save private equity firms billions in taxes — the Inflation Reduction Act passed the Senate at 3:17 PM on August 7, 51-50, with Vice President Harris casting the deciding vote.

The House passed IRA in turn on August 14, and President Biden signed it into law two days later. The rest, as they say, is history.

We’re still writing that history, but it’ll be forever changed by passage of the landmark law. And we almost lost it all.