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Budget reconciliation offers Democrats pathway to act on climate change

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Budget reconciliation offers Democrats pathway to act on climate change

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A seven-foot-tall fence protects the U.S. Capitol in Washington, D.C., as lawmakers prepare for President-elect Joe Biden's Jan. 20 inauguration.
Source: Chip Somodevilla/Getty Images News via Getty Images

Democrats in the U.S. Congress are said to be considering a budget reconciliation measure that could include provisions to address climate change and boost support for clean energy.

But policy experts and lawmakers are divided on how much climate action could be accomplished through reconciliation. A reconciliation bill — which instructs certain committees to change spending, revenues or deficits by specific amounts — only requires a simple majority in the Senate rather than the 60 votes typically needed to end debate on legislation in the upper chamber.

Some say the process could fulfill much of President-elect Joe Biden's $2 trillion climate plan, while others expect more modest steps given Democrats' narrow majorities in both chambers of Congress. Biden also supports a technology-neutral clean electricity standard, which some say could be included in a bill.

"All options are on the table as we consider the best way to address the crises at hand and lead our nation forward," House Budget Committee Chairman John Yarmuth, D-Ky., said in a Jan. 14 emailed statement. "That includes potentially using reconciliation to advance critical priorities for American families."

The 117th Congress is unlikely to advance more progressive climate measures, such as a carbon tax, despite opportunities presented through reconciliation, sources said. But a reconciliation bill could contain tax credits and other incentives for electric vehicles and renewable energy technologies, funding streams to help modernize the grid and policies aimed at improving energy efficiency.

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A potential climate opportunity

With the Senate split 50-50 between the Democratic and Republican caucuses and Vice President-elect Kamala Harris able to cast a tie-breaking vote for Democrats, budget reconciliation offers an attractive option for passing key Democratic priorities, including climate measures.

Most of Biden's $2 trillion energy and climate plan can be enacted through budget reconciliation, said Sam Ricketts, a senior fellow at the left-leaning Center for American Progress.

"Number one, it's an investment agenda and reconciliation is fundamentally about spending and taxing," Ricketts said in an interview.

Ricketts, a former adviser to climate-minded Washington Gov. Jay Inslee, said he is currently working on a paper that details how to structure a national clean energy standard, or CES, that can be passed through budget reconciliation.

"Fundamentally, reconciliation just means policies have to be germane to taxation or revenue outlays and the budget, and there's a number of CES policies that can be constructed to fit those parameters," Ricketts said.

One option would be to base a national CES on existing state programs that depend on markets and the trading of clean energy credits to accomplish their goals, while an alternative would incentivize utilities to continuously lessen their carbon intensity.

Ricketts noted that while Biden's climate plan sets a 100%-carbon-free-by-2035 goal for the U.S. power sector, budget reconciliation measures must fall within a 10-year window.

"We argue that 80% power emissions reductions on the power sector by 2030 is a really key thing," Ricketts said.

Michael Bloomquist, a partner with Venable LLP, noted that the 51-vote threshold is still a "major concern," but expects Congress will still be able to advance significant climate and energy legislation.

"Republicans losing majority-control of the Senate in the world of energy and environment just shifted the tectonic plates of what Congress can do in this area," Bloomquist said. "The administration was always going to be able to do a fair amount of stuff unilaterally ... now you'll have Congress able to pass significant legislation in the energy and environmental field to address climate change that in a divided government was unlikely to happen."

More measured view

Other policy experts and lawmakers anticipate more modest climate and energy provisions in a potential reconciliation bill. Though Democrats control both chambers of Congress, sources say bipartisan support will still be needed for a reconciliation bill to succeed, with moderate Democrats, including Sen. Joe Manchin, D-W.Va., unlikely to support more aggressive climate measures.

"There are a number of conservative Democratic senators and folks that are in states like West Virginia that are going to be keenly aware of an impact that any policies can have on their constituents," said Andrew Bockis, a partner with Saul Ewing Arnstein & Lehr LLP. "I think we'll see a pragmatic attempt to find ways to maybe have green tax provisions to create additional incentives for clean technology, additional research and development opportunities to really have an all-in approach toward lowering carbon emissions."

U.S. Rep. Kathy Castor, D-Fla., who chairs the House Select Committee on the Climate Crisis, said during a Jan. 13 webinar that a combined infrastructure and transportation bill would be the "way we go" to invest in clean energy rather than through reconciliation.

"There's some talk of this budget reconciliation maneuver," Castor said. "We'll see what that is."

To the extent Democrats use reconciliation to address climate change, tax incentives could be a key focus, several sources said.

Erin Hatch, a spokesperson for the House Ways and Means Committee, said it was "still early to know what might move as part of the reconciliation process."

The Growing Renewable Energy and Efficiency Now Act, or GREEN Act, was an example of a climate-related measure that could go into a reconciliation bill, Hatch said. The GREEN Act, which would extend and expand key tax incentives for renewable energy and electric vehicles, passed the House in 2020 as part of a broader infrastructure bill called the Moving Forward Act.

Additionally, Congress could pass a reconciliation bill for the fiscal year of 2021 and another for 2022, offering more opportunities for potential climate provisions, said Elizabeth Gore, senior vice president for political affairs with the Environmental Defense Fund.

"There are a whole series of tax proposals that can influence transportation electrification, potentially grid modernization, the power sector decarbonization," Gore said. "The tax policy is a very powerful tool and can be used to make big differences in lots of different areas."