U.S. climate-change fight threatened as Manchin rejects Biden's bill

by Reuters
Monday, 20 December 2021 22:42 GMT

FILE PHOTO: U.S. President Joe Biden delivers remarks promoting his "Build Back Better Agenda" at the Capitol Child Development Center in Hartford, Connecticut, U.S., October 15, 2021. REUTERS/Leah Millis

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From electric vehicle tax credits to incentives for carbon capture, here is a look at five top climate measures in the bill and their prospects if the wider legislation dies

By Timothy Gardner and Valerie Volcovici

WASHINGTON, Dec 20 (Reuters) - U.S. Senator Joe Manchin's rejection of President Joe Biden's $1.75 trillion social spending bill threatens to scuttle hundreds of billions of dollars in funding for measures to fight global warming and meet the administration's climate goals.

Biden wanted his sweeping Build Back Better bill to put the United States on track to at least halve its greenhouse gas emissions this decade from 2005 levels and decarbonize the power grid by 2035. These goals will be harder to reach if Biden's fellow Democrat Manchin helps Senate Republicans kill the bill.

Here are five top climate measures in the bill, and a discussion of their prospects if the wider legislation dies:

CLEAN ENERGY TAX CREDITS

The bill has more than $300 billion in tax credits for producers and buyers of low carbon energy, including wind and solar power and existing nuclear plants. It would extend tax credits for renewable power and launch new credits for reactors.

Prospects are dim that such provisions could become law if they were included in a "climate-only" bill given Manchin's opposition, said Christy Goldfuss, senior vice president for energy and environment policy at the Center for American Progress, a left-leaning think tank.

But smaller incentives for renewables could get adopted if they are lumped with breaks for nuclear power and hydrogen, technologies that could bring jobs to regions where coal plants are closing.

Goldfuss said another route back to the negotiating table could be narrowing and pairing low carbon tax credits with other popular elements like prescription drug and child support provisions.

TAX INCENTIVES FOR CARBON CAPTURE

The bill contains billions of dollars to extend so-called 45Q tax credits for power and industrial plants to capture carbon emissions and store them underground or use it for other purposes.

Senator Tina Smith, a Democrat who has sponsored 45Q legislation, said she would keep fighting for her measure as the incentives could benefit ethanol plants in her state of Minnesota and across the Midwest.

"This is one place where we have been able to see some bipartisan agreement," Smith told Reuters.

Manchin supports carbon capture, and wants to make the subsidies easier to secure. He supports removing a provision in the House-passed version of Build Back Better that would have required plants to capture at least 75% of their carbon emissions to qualify for 45Q.

METHANE FEE

The bill contains fees on oil and gas facilities that emit methane, a powerful greenhouse gas. Such fees would raise revenues while fighting climate change. After Manchin opposed an initial methane fee, Democrats softened it to phase in fees on drillers starting at $900 per tonne of emissions instead of $1,500.

Democratic Representative Pramila Jayapal, a progressive, suggested in a press call that Biden could advance methane fees through executive action. Yet lawmakers say climate legislation is best since courts or future presidents can reverse executive actions.

ELECTRIFICATION OF INFRASTRUCTURE

The bill has about $13 billion for electrification of buildings and energy efficiency to cut greenhouse gas emissions.

Several cities, including most recently New York, have embraced proposals for new buildings to use electricity for heating and cooking instead of gas-burning appliances. But it is a tough sell for lawmakers from states where budgets depend on production of fossil fuels.

ELECTRIC VEHICLE TAX CREDITS

Biden's legislation also has incentives for buyers of electric vehicles including a boost in tax credits to $12,500 for union-made vehicles from $7,500, and a 30% credit for commercial electric vehicles.

ClearView Energy Partners, a nonpartisan research group, said in a note to clients that EV credits are an incentive that could be included in a package of "tax extenders" late next year, when Congress typically votes on legislation on short-term extensions of tax breaks.

That tactic could require achieving 60 votes in the evenly divided Senate. But it could be more likely to pass if the union-made stipulation was dropped, and as electric vehicle manufacturing extends into Texas and other typically Republican-led states, ClearView said.

(Reporting by Timothy Gardner, Valerie Volcovici and Nichola Groom; Editing by David Gregorio)

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