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Interest trumps ideology just about every time.
They may only control the House of Representatives for now, but Republicans in Washington are already arguing amongst themselves about what they’ll do if they take control of both congressional chambers and the White House in November’s elections. And one of the most intense debates concerns the Inflation Reduction Act, one of Joe Biden’s signature legislative accomplishments and the most important climate bill ever passed in the U.S. Should they repeal it? Repeal it, then drown it, then set it on fire? That’s what some would prefer to do. But the reality may be more delicate than that.
Earlier this month, Speaker of the House Mike Johnson gave a speech to a conservative group in which he vowed to “cut the wasteful Green New Deal spending in the Democrats’ so-called Inflation Reduction Act” if Republicans take control (for the uninitiated, “wasteful Green New Deal spending” essentially means “whatever environmental spending you don’t like”). But he also said in an interview that “You’ve got to use a scalpel and not a sledgehammer” when going after the IRA, “because there’s a few provisions in there that have helped overall.”
To many Republicans, that was nothing less than blasphemy. “A sledgehammer to the so-called Inflation Reduction Act is what is needed,” said Representative Chip Roy, Republican of Texas. “Something tells me that’s going to be an issue of contention next year between some of my colleagues and their districts where they might have interests who love the largesse of Washington, D.C.,” said Representative Byron Donalds of Florida. “Repeal the IRA now. Completely,” said Representative Bob Good of Virginia. All are members of the far-right Freedom Caucus. Representatives of conservative advocacy groups have also condemned the idea of not repealing the IRA in full.
And yet, Johnson’s remarks also came after 18 Republicans in his caucus whose districts have benefited from the IRA sent him a letter warning against repealing the law. “We hear from industry and our constituents who fear the energy tax regime will once again be turned on its head due to Republican repeal efforts,” they wrote. “Prematurely repealing energy tax credits, particularly those which were used to justify investments that already broke ground, would undermine private investments and stop development that is already ongoing.”
What we have here is a conflict between interests and ideology. The hard-right conservatives will say that the law violates almost everything they believe in since it addresses climate change (which they prefer not to do) with a big, expensive, government-driven effort (which they hate). But for many Republicans, the IRA is bringing jobs and economic development to their districts. And when ideology and interests collide, interests usually prevail.
Appropriators have long understood that a key way to protect your funding is to widen the number of people and places that benefit from it. The Pentagon has always been adept at distributing subcontracts for big weapons systems across as many congressional districts as possible; if 100 different members of Congress have constituents making widgets that go in a bomber, they’ll make sure its funding won’t get cut in the next budget.
That idea was built into the design of the IRA, along with the Infrastructure Investment and Jobs Act and the CHIPS and Science Act, the other Biden-era laws that contained serious climate spending. Some of the benefits are available to any American (like subsidies for the purchase of electric vehicles), but others are more geographically targeted. As it turns out, those benefits have flowed disproportionately to Republican-run states and conservative areas. Which means that there are a lot of Republicans in Congress who might not be on board with repealing the IRA, even if they voted against it in the first place — which all of them did.
As you may recall, the IRA got zero Republican votes in both the Senate and House when it passed in August 2022. In the two years since, some of those same Republicans who voted no have taken credit when IRA funds came to their states and districts, to both annoyance and mockery from their Democratic counterparts.
Hypocritical or not, the economic logic can be hard to deny. According to an analysis by Bloomberg News, $206 billion in clean technology manufacturing investments have been announced under President Biden, most of which involve EVs and batteries. Of that total, $42 billion will be spent in districts represented by Democrats, while $161 billion, nearly four times as much, will go to Republican districts. Overall, that spending can be found in 185 congressional districts. Other estimates put the amount of investment even higher.
Many of the politicians representing these districts are conservative Republicans who haven’t abandoned their ideology — at least not rhetorically. Some of them may be outright climate deniers, who will be happy to rail against wasteful government spending and the Green New Deal if you ask them to. But if it comes to a vote that would cut off subsidies to a factory that’s employing thousands of their constituents, they’re almost certainly going to say no.
And if you’re an advocate of climate action, that’s fine. They can bloviate all they want. That’s why the IRA was designed the way it was: to make progress on climate, and ensure that that law was durable. White House economist Heather Boushey recently said that one of the administration’s climate goals is to “create more path dependency,” so climate progress will be harder to undo. That doesn’t mean that there aren’t vulnerable provisions of the law, but they’re likely to be the ones that don’t have advocates on both sides of the aisle; a manufacturing tax credit may be safer than the one on purchases of heat pumps.
We’ve come to expect that the passage of a major law doesn’t end the fight over it; Republicans tried for years to repeal the Affordable Care Act, and some are still talking about doing so 14 years after it passed. But they never succeeded because it would have hurt too many people. That history might repeat itself.
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What happened this week in climate and energy policy, beyond the federal election results.
1. It’s the election, stupid – We don’t need to retread who won the presidential election this week (or what it means for the Inflation Reduction Act). But there were also big local control votes worth watching closely.
2. Michigan lawsuit watch – Michigan has a serious lawsuit brewing over its law taking some control of renewable energy siting decisions away from municipalities.
A conversation with Frank Wolak of the Fuel Cell and Hydrogen Energy Association.
We’re joined today by Frank Wolak, CEO of perhaps the most crucial D.C. trade group for all things hydrogen: the Fuel Cell and Hydrogen Energy Association. The morning after Election Day we chatted about whether Trump 2.0 will be as receptive as members of Congress have been to hydrogen and the IRA’s tax credit for producing the fuel. Let’s look inside his crystal ball, shall we?
Simply put, will president-elect Donald Trump keep the IRA’s 45V tax credit in place?
So a couple things there. First, the production tax credit still has to be finalized and what they do about the tax credits, if anything, is a function of whether the Biden administration issues final guidance.
If they issue final guidance, then what that guidance says will determine what kind of reaction the Trump administration may have, whether to adjust it or tweak it.
The second thing: I think the tax credits fit into a question of the IRA broadly and hydrogen specifically. The Trump administration is going to be looking at the entirety of the IRA. There’s the question of what pushback hydrogen has in this administration and if it’s viewed as valuable or important or secondary, tertiary to other things. And I think we’ve yet to see that in the form of any platform.
So Trump’s view on hydrogen is a mystery then – how will that uncertainty impact hydrogen projects in development today?
The uncertainty that has been experienced by this industry predates the election outcome. The long wait for guidance has definitely slowed down the amount of investment. They’ve put many things on hold. This is not a secret.
What I’ll say is, the ability to regroup and fulfill the expectations that this industry had two or three years ago is hugely dependent on the outcome of the tax credit.
What do you think we’ll see companies do in this information vacuum? Will we see them double down on supporting the credit or potentially get out of hydrogen since it’s an emerging, nascent technology?
The doubling down on the tax credit depends on what the guidance looks like.
If the guidance looks flexible, the question is: how do you take that flexibility and make sure the Trump administration continues it and sees it as valuable or vital?
If the tax credit becomes rigid and stays rigid in the Biden administration, you’ll have a two step process – to unwind the rigidity and then also encourage the Trump administration to see the merits. If the guidance stays as stated, the work is harder.
The degree to which industry continues to make investments and says, “hey, we’re all in,” is a function of how these tax credits emerged. Are they going to really keep fighting and to keep the momentum going, or are the [credits] so limited that companies go, “look this is going to be very very hard to overcome in the U.S. so we’re going to take our investment elsewhere.”
You think we might see companies dip out of the hydrogen space over the credit’s outcome?
Mature long term players who are multinationals … are remaining extremely positive. They may adjust the sequence of their investments but they’re in this because they’re in hydrogen and want to be in this market as much as possible.
But those who saw this as an opportunity to come in and take advantage of tax credits are having those reactions of, “Should I invest? Do I look [at it] positively?” And that’s probably natural.
On the looming climate summit, clean energy stocks, and Hurricane Rafael
Current conditions: A winter storm could bring up to 4 feet of snow to parts of Colorado and New Mexico • At least 89 people are still missing from extreme flooding in Spain • The Mountain Fire in Southern California has consumed 14,000 acres and is zero percent contained.
The world is still reeling from the results of this week’s U.S. presidential election, and everyone is trying to get some idea of what a second Trump term means for policy – both at home and abroad. Perhaps most immediately, Trump’s election is “set to cast a pall over the UN COP29 summit next week,” said the Financial Times. Already many world leaders and business executives have said they will not attend the climate talks in Azerbaijan, where countries will aim to set a new goal for climate finance. “The U.S., as the world’s richest country and key shareholder in international financial institutions, is viewed as crucial to that goal,” the FT added.
Trump has called climate change a hoax, vowed to once again remove the U.S. from the Paris Agreement, and promised to stop U.S. climate finance contributions. He has also promised to “drill, baby, drill.” Yesterday President Biden put new environmental limitations on an oil-and-gas lease sale in Alaska’s Arctic National Wildlife Refuge. The lease sale was originally required by law in 2017 by Trump himself, and Biden is trying to “narrow” the lease sale without breaking that law, according to The Washington Post. “The election results have made the threat to America's Arctic clear,” Kristen Miller, executive director of Alaska Wilderness League, toldReuters. “The fight to save the Arctic Refuge is back, and we are ready for the next four years.”
Another early effect of the decisive election result is that clean energy stocks are down. The iShares Global Clean Energy exchange traded fund, whose biggest holdings are the solar panel company First Solar and the Spanish utility and renewables developer Iberdola, is down about 6%. The iShares U.S. Energy ETF, meanwhile, whose largest holdings are Exxon and Chevron, is up over 3%. Some specific publicly traded clean energy stocks have sunk, especially residential solar companies like Sunrun, which is down about 30% compared to Tuesday. “That renewables companies are falling more than fossil energy companies are rising, however, indicates that the market is not expecting a Trump White House to do much to improve oil and gas profitability or production, which has actually increased in the Biden years thanks to the spikes in energy prices following the Russian invasion of Ukraine and continued exploitation of America’s oil and gas resources through hydraulic fracturing,” wrote Heatmap’s Matthew Zeitlin.
Hurricane Rafael swept through Cuba yesterday as a Category 3 storm, knocking out the power grid and leaving 10 million people without electricity. Widespread flooding is reported. The island was still recovering from last month’s Hurricane Oscar, which left at least six people dead. The electrical grid – run by oil-fired power plants – has collapsed several times over the last few weeks. Meanwhile, the U.S. Bureau of Safety and Environmental Enforcement said yesterday that about 17% of crude oil production and 7% of natural gas output in the Gulf of Mexico was shut down because of Rafael.
It is “virtually certain” that 2024 will be the warmest year on record, according to the European Copernicus Climate Change Service. In October, the global average surface air temperature was about 60 degrees Fahrenheit, or nearly 3 degrees Fahrenheit warmer than pre-industrial averages for that month. This year is also on track to be the first entire calendar year in which temperatures are more than 1.5 degrees Celsius above pre-industrial levels. “This marks a new milestone in global temperature records and should serve as a catalyst to raise ambition for the upcoming climate change conference,” said Copernicus deputy director Dr. Samantha Burgess.
C3S
The world is falling short of its goal to double the rate of energy efficiency improvements by 2030, the International Energy Agency said in its new Energy Efficiency 2024 report. Global primary energy intensity – which the IEA explained is a measure of efficiency – will improve by 1% this year, the same as last year. It needs to be increasing by 4% by the end of the decade to meet a goal set at last year’s COP. “Boosting energy efficiency is about getting more from everyday technologies and industrial processes for the same amount of energy input, and means more jobs, healthier cities and a range of other benefits,” the IEA said. “Improving the efficiency of buildings and vehicles, as well as in other areas, is central to clean energy transitions, since it simultaneously improves energy security, lowers energy bills for consumers and reduces greenhouse gas emissions.” The group called for more government action as well as investment in energy efficient technologies.
Deforestation in Brazil’s Amazon fell by 30.6% in the 12 months leading up to July, compared to a year earlier. It is now at the lowest levels since 2015.