Biden forced to reset climate policy strategy after Manchin rules out BBB

The Biden administration will be forced to rethink its climate policy strategy by potentially attempting some priorities as standalone legislation while pursuing others as executive actions, analysts said Dec. 20, after Senator Joe Manchin ended Democrats' hopes for passing the $1.7 trillion Build Back Better package in its current form.

Manchin, the West Virginia Democrat who has been at the center of negotiations for months, said Dec. 19 that he could not support the massive social spending and $325 billion in clean enery credits over 10 years.

The bill contained the first tax credit proposal for sustainable aviation fuel as part of the administration's target of cutting US aviation emissions by 20% by spurring the production of 3 billion gal/year of the fuel by 2030.

Without the additional push from the legislation, the US could continue to see "slow and steady" decarbonization and growth in electric vehicles and renewables in the next few years, said Dan Klein, head of future energy pathways for S&P Global Platts Analytics. "But we're not going to see accelerated growth" that is probably needed to meet aggressive climate targets, he said.

In comparison, Klein said, Europe is subsidizing hydrogen production, getting SAF off the ground and targeting specific sectors, such as trying to reduce natural gas use for heating.

Narrower focus

ClearView Energy Partners said Democrats could still propose a new version in the coming year but would likely have to narrow the energy and climate focus to get Manchin's vote.

"We would not yet bet against long-term green power tax credit extensions in some form, albeit for shorter durations and/or with less generous provisions," said Kevin Book, ClearView's managing director.

Scott Segal, a partner with Bracewell's Policy Resolution Group, also saw potential for Manchin's announcement to force further compromise.

"Sometimes you have to have an action-forcing event before you can reach a policy compromise," he said.

In his view, some energy-related provisions were likely to remain. He pointed to the Democratic caucus' strong interest in addressing climate change-related clean energy policy, and the existence of some significant areas of policy agreement.

Ben Cahill, senior fellow at the Center for Strategic and International Studies, said that unbundling some of the energy and climate priorities from the massive bill could make it easier to find support on selected issues.

"I imagine that centrists on both sides of the aisle could support clean energy tax credits meant to last for a decade," he said. "These incentives could help ensure American competitiveness in critical, strategically important industries."

Executive actions

Cahill said the same was not true for the bill's proposed methane fee and higher royalty rates for federal oil and gas leases, which have drawn opposition from senators in energy-producing states.

While it is questionable whether a fee on methane emissions including proposed in the reconciliation would survive in future iterations, the US Environmental Protection Agency is already pursuing tougher methane regulations requiring US oil and gas producers to conduct increased emissions monitoring on new wells and to bring nearly 700,000 older wells into compliance.

As for other EPA regulations affecting power sector GHG emissions, Segal noted that "we're in a period of some uncertainty" about the scope of EPA's legal authorities under the Clean Air Act, with the Supreme Court having agreed to hear a case challenging its reach.

Still, ClearView suggested the White House could respond to the legislative impasse by "leaning into President Biden's other policy 'tools' to accelerate a green transition," including tougher emissions regulations stemming from a higher estimated social cost of greenhouse gases.

White House Press Secretary Jen Psaki said Dec. 20 that President Joe Biden has not hesitated to use executive authorities when needed, but "the benefit of legislation is obviously it makes it permanent, so there's a lot of value in that."

Finding a path forward

In announcing his opposition to the bill, Manchin said its climate proposals "risk the reliability of our electric grid and increase our dependence on foreign supply chains." He also argued the "energy transition my colleagues seek is already well underway in the United States of America."

Height analyst Benjamin Salisbury wrote that the probability of the House-passed reconciliation bill becoming law was "now effectively zero," but agreed "there may be opportunities to scale down or break up the bill which will shake out over the coming weeks."

Democrat congressional leaders were still asserting their intentions to push ahead in some fashion, and clean energy and environmental groups pledged their support.

Gregory Wetstone, president and CEO of the American Council on Renewable Energy, said the largely non-controversial nature of the clean energy provisions that rely on incentives rather than mandates "positions us to find a way forward."

"I don't think this effort is going to just fade," he said. "I think what we're going to see is renewed energy to find a path."