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Policy: Biden's One-Shot Climate Deal

Copyright © 2021 Energy Intelligence Group

The US Senate is deep in negotiations that may be US President Joe Biden’s best shot at implementing his aggressive climate agenda. Writing Biden’s ambitious spending targets, a clean energy standard and other climate objectives into US law is seen as critical for restoring confidence in US climate leadership, including by giving Biden deliverables ahead of UN climate talks in November (EC Apr.9'21). The climate push, folded into Democrats’ $3.5 trillion spending package, rests on the tricky budget reconciliation process to get through the narrowly Democrat-controlled Congress (unlike a separate, bipartisan infrastructure bill). Below, Energy Intelligence looks at what measures are likely to get traction, and what the biggest risks for oil and gas are. • Expect a clean electricity policy aimed at 2030 targets, accelerating decarbonization of the power sector. Democrats are eyeing a target of 80% clean electricity by 2030, and there are several legislative proposals out there. However, Democratic leadership has begun to coalesce around the idea of a clean electricity payment program, spearheaded by Sen. Tina Smith (OD Aug.16'21). The program would pay utilities to make incremental increases in carbon-free generation, and ensure that costs aren’t passed on to consumers. Companies failing to add a specific amount of clean generation would have to pay a fee. A payment program might be better able to withstand scrutiny under the reconciliation process than the federal-level clean energy standard originally pitched by Biden to cut emissions (EC Aug.6'21). That more regulatory-oriented approach typically requires utilities to add low-carbon resources, while charging a fee to those that don’t add enough. A condition of including legislative items via reconciliation is a direct budget link. The government incentive payments themselves have a good chance of being viewed that way, but there are still questions about implementing a standard for determining compliance, a former Senate official said. Utilities with natural gas plants that use carbon capture likely qualify under a payment program, according to Conrad Schneider at the Clean Air Task Force. A focus on 80% clean generation also leaves the door open for the remaining 20% to include uncontrolled gas and coal generation. Sen. Joe Manchin of West Virginia, who heads the Senate panel tasked with filling in the details on the power sector policy, has already raised his concerns about forcing fossil fuels off line. • Tax breaks for the oil and gas industry are still under threat, even if a fracking ban is off the table.

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