The News
The Biden administration took what is likely to be one of its last actions on climate, detailing a new clean energy tax credit designed to survive scrutiny by Republicans and President-elect Donald Trump.
The credit follows a basic formula that has applied to wind and solar projects for more than a decade, and extends it to a wider range of low-carbon energy sources, including geothermal, nuclear, advanced batteries, and some kinds of biofuels. It could pay out more than $250 billion over the next decade, and cause emissions from the US power sector to fall up to 73% below 2022 levels by 2035, which would make it arguably the single most impactful element of Biden’s climate agenda. Independent analyses have also shown the tax credit will reduce household electricity costs by up to 10%.
Traditional wind and solar tax credits always drew fire from Congressional Republicans, who viewed them as a case study of the government unfairly “picking winners” among energy technologies. Making the credit “technology neutral,” and accessible to energy sources with broader Republican support, should help it survive the next administration.
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Tim’s view
No amount of careful design can fully protect any of Biden’s climate policies from rollback under Trump and his allies in Congress who remain ideologically dead-set against anything resembling a “green new deal.” The next four years will be a major test of how far they are willing to take their opposition to climate action even when doing so undermines job creation and economic growth in core Republican districts. Some policies will inevitably meet the dustbin. But ultimately, Biden’s most important legacy on climate is about more than any one tax credit or regulation. It’s about meaningfully linking climate to the economy, and proving that the energy transition can revitalize US industry, an approach that Trump can’t repeal.
When Biden took office, the centrality of his bet on climate was literally visible inside the White House, said Costa Samaras, director of Carnegie Mellon University’s Scott Institute for Energy Innovation and a former senior Biden climate official. “There are only so many desks,” he said, and more of them than ever before were set aside for staffers in new positions tasked with banging out the details of a climate-based industrial strategy. “There’s only so much energy and time and political capital one can devote to a topic, and climate was one the administration leaned in heavily on, and won.”
Prior to Biden, US climate policy was almost exclusively built on mandating emissions reductions from vehicles and power plants. This stick-based approach was never able to, well, stick; Biden bet that carrots would be more popular and durable. That gamble paid off. In the two years after the Inflation Reduction Act passed, businesses and consumers invested nearly half a trillion dollars in energy transition-related goods and industrial facilities, an increase of 71% over the two years preceding the law. Suddenly, acting on climate was about promoting economic activity, rather than curtailing it. Over the next few years, job creation in the country’s new slate of factories churning out batteries, solar panels, carbon capture technology, and other hardware will only increase as post-IRA investment plans mature — economic activity that Trump will likely take credit for, which will be increasingly difficult to unwind, and that will further prove Biden’s thesis.
“The thing that was really revolutionary is the idea of truly marrying economic growth with low carbon, and the only way you can do that is to make the low carbon thing cheaper than the dirty thing,” said Christina DeConcini, director of government affairs at the World Resources Institute.
The Biden strategy was not only more conducive to bipartisan support in Congress, but also avoided needlessly antagonizing the fossil fuel industry, which actually saw record production and profits in the last four years and will be major beneficiaries of tax credits supporting carbon capture and hydrogen production. Biden showed, in other words, how to begin building the offramp from fossil fuels without choking off supply while it’s still needed.
This economic philosophy hasn’t percolated yet into Republicans’ rhetoric; on Tuesday, Trump promised “to have a policy where no windmills are being built,” and House of Representatives Speaker Mike Johnson (R-La.) promised last week to “pass legislation to eliminate the Green New Deal.” Tax credits for electric vehicles, alongside Environmental Protection Agency regulations on vehicle and power plant emissions, will likely get the axe, as will Biden initiatives supporting environmental justice for marginalized communities. Legislation to streamline the building of energy infrastructure — a crucial obstacle Biden never managed to solve — will probably be written to favor fossil fuels. Further taxpayer support to commercialize nascent low carbon technologies may not be forthcoming. So the energy transition will probably slow down. But Biden left it with a good shot at not grinding to a halt.
“The lasting legacy of the Biden administration is that clean energy will be inevitable in the United States,” Samaras said. “The administration teed up a great opportunity for this country to lead the world. Let’s not mess this up.”
Room for Disagreement
If linking clean energy and the economy was a strategy to give climate action a degree of political insurance, Biden may have fallen short on making sure the electorate understood what he was cooking up. Fewer than a quarter of Americans felt the IRA benefitted them, according to recent polls, and fewer than 3% of taxpayers in 2023 took advantage of credits for household solar and energy efficiency upgrades. The administration’s climate strategy was too heavily focused on wealthy households and industrialists, political scientists Daniel Aldana Cohen and Thea Riofrancos argued in The New York Times this week; the next step for a future climate-concerned president (and, until they arrive, for state and local leaders) is to find new ways to make the energy transition work in service of lower energy bills and costs of living.
The View From Europe
Even if Trump takes some regulatory pressure off high-carbon US industries, they will still be under pressure from overseas trading partners. Starting this year US natural gas exporters will need to meet methane emissions standards to have access to the European market.