If key climate policy is jettisoned, can the US still meet its climate targets?

The Clean Electricity Performance Program is likely a goner. We parse the data to gauge where the country stands without it.

U.S. Senator Joe Manchin (D-W.Va.) (Anna Moneymaker/Getty Images)
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Last week, Sen. Joe Manchin (D-West Virginia) finally stopped playing games and said that he will not vote for a budget reconciliation bill that contains the Clean Electricity Performance Program (CEPP).

You can read my interview with Sen. Tina Smith (D-Minnesota) for more on the CEPP and this article to understand why it is so centrally important to serious climate policy. I won’t get into all those arguments again. Suffice it to say, it’s a good policy and losing it is a bummer.

Insofar as Manchin has offered any reason for killing the CEPP, it is an alleged concern over using taxpayer dollars to pay private companies to do things they’re already doing.”

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But that is just incorrect.

Utilities are not already doing” what the CEPP requires, which is increasing their share of clean energy 4 percentage points year-over-year, every year. Only a tiny handful of the nation’s thousands of utilities are on that trajectory.

The sector as a whole is slowly decarbonizing, but the whole point of the policy is to accelerate the process to meet U.S. carbon targets.

Manchin knows that. It’s precisely what he’s trying to prevent. He told CNN flat out: I’m not going to sit back and let anyone accelerate whatever the market’s changes are doing.”

Why not? Well, he wants to keep fossil fuel power plants open, which is incompatible with Biden’s publicly stated goal of 50 to 52 percent carbon reductions from 2005 levels by 2030.

Manchin is standing up for local fossil fuel interests (including his own) against the president, 49 of his colleagues in the Democratic caucus, a majority of legislators in the House, a majority of voters, and even a majority of West Virginia voters.

At this point, it’s unclear what will and won’t survive into the final Build Back Better Act (or whether there will be a final bill at all). Reports indicate that staffers are scrambling to find ways to make up for the lost emissions reductions through other policies.

The question is, how big of a hole are they trying to fill? How big a hit is it to lose the CEPP?

A few analyses released in the past week are helpful in getting our heads around this.

Energy Innovation says the loss of CEPP could cost the bill up to 35% of its emissions reductions

The first is from research firm Energy Innovation, which uses its own Energy Policy Simulator modeling platform to determine how much emissions would be reduced by the policies in the House Democrats’ version of the Build Back Better Act and the bipartisan infrastructure bill that was passed by the Senate over the summer.

Obviously, predicting circumstances a decade hence is a fraught undertaking. Energy Innovation ran four scenarios: a business-as-usual scenario, with only existing policies, and low, moderate and high emissions-reduction scenarios based on different assumptions about the price of energy and the efficacy of various provisions in the bills.

Energy Innovation didn’t model all the policies in the bills, just the ones that are relatively easy to quantify. Some emissions reductions have gone uncounted, so the estimates the firm produced are almost certainly a lower bound.

Here are the topline results.

(Energy Innovation)

In the high scenario, clean energy reaches an 85 percent share of U.S. electricity by 2030; in the moderate scenario, it’s 80 percent; in the low scenario, it’s about 70 percent.

As you can see in the moderate scenario below, by far the biggest tranche of emissions reductions (about half) would come from the combination of the CEPP and clean-energy tax credits.

(Energy Innovation)

The good news is that passing both bills could, with supporting state and regulatory policy,” at the high end of the high emissions-reduction scenario, just barely get the U.S. to its 2030 target. That’s if everything now included makes it to the final versions of the bills.

The question now is this: What do those numbers look like without the CEPP?

Luckily, Energy Innovation ran a couple of variations of its moderate scenario with no CEPP (a high one, which assumes tax credits are maximally effective, and a low one with lower takeup of tax credits).

(Energy Innovation)

Long story short, emissions are likely to be 250 to 700 [million metric tons] higher per year in 2030” than they would be with the CEPP in place, which could eliminate more than a third of the total emissions reductions under the Infrastructure Bills.”

As the scenarios show, a great deal depends on factors that can’t be precisely predicted: the price of fossil fuels, the cost curves of clean technologies, and the efficacy and impact of the clean-energy tax credits and other Build Back Better policies. The loss of the CEPP could reduce the emissions impact of the bill anywhere from 20 to 35 percent.

Resources for the Future agrees — but says a carbon fee could make up for it

Energy Innovation’s findings jibe with the second analysis, which is from Resources for the Future. RFF modeled three policies in various combinations:

  • The clean-energy tax credits (which it calls CEAA” for the Clean Energy for America Act, a bill from Oregon Democratic Sen. Ron Wyden that is largely included in the text of Build Back Better)
  • The Clean Electricity Performance Program (CEPP)
  • A carbon tax (er, fee) — the central” carbon fee starts at $15/​metric ton and increases gradually to $30/​metric ton by 2028, followed by a $10 annual increase through the end of the modeling period (2045)”

The CEAA tax credits alone, without the CEPP, get the electricity sector to a 69 percent clean energy share by 2030. That is roughly in line with Energy Innovation’s high-end estimation of the tax credits’ impact.

The CEAA plus the CEPP together get the sector to 78 percent clean energy — a bump of 9 percentage points.

The CEAA, CEPP and the central carbon fee together get the U.S. to 91 percent clean energy.

(RFF)

RFF’s model, like Energy Innovation’s, shows that the tax credits are doing the bulk of the work. From a baseline (no policy) scenario, the tax credits take the clean-energy share in 2030 from 46 to 69 percent (+23 percentage points); with the CEPP, it goes from 69 to 78 percent (+9 percentage points).

Notably, in RFF’s modeling, the tax credits plus a central carbon fee get the number to 79 percent — in other words, a carbon fee pretty neatly substitutes for the CEPP, emissions-wise.

Nonetheless, despite some recent chatter, Manchin has already put the kibosh on the prospect of a carbon fee as well.

Rhodium Group says the U.S. climate target is still within reach

Can the U.S. get on track to its 2030 target without the CEPP? For some insight on that, we turn to the other recently released analysis from the research firm Rhodium Group.

It sets out to determine whether the U.S. can hit its target (again, reductions of 50 to 52 percent from 2005 levels by 2030) with what it calls a joint action scenario,” which includes actions by all key actors in the U.S. federal system, including legislation under construction in Congress, regulations and other actions that can be taken by the Biden administration and key departments, as well as actions by climate-leading states and corporations.”

Importantly, though it is capacious, the joint action scenario is deliberately conservative about policy out of Congress, given Manchin’s well-known Manchinness: We include tax credit extensions, clean energy grant programs, and spending on agricultural programs, but do not include a carbon or methane fee or the CEPP [my emphasis].”

The good news is that the CEPP-less joint action scenario gets the U.S. to its goal, or at least close to it.

(Rhodium Group)

Even without the CEPP, it is the electricity sector that provides most of the reductions, as shown below.

(Rhodium Group)

One reason there are so many reductions in the electricity sector — and this brings us to what I suppose is the bad news — is that the joint action scenario includes a lot of policies, including standards on new and existing power plants from the Environmental Protection Agency. Getting to the U.S. target requires all levels of government and the private sector to act with immediate ambition.

This is the action required by Congress:

(Rhodium Group)

This is the action required by the executive branch:

And this is what’s required of subnational groups,” including states, cities and companies:

If all of that comes together, then the U.S. can hit its 2030 climate target without the CEPP.

Rhodium stresses that the joint action scenario is not the only path to that goal — the final section of its analysis suggests a range of other policies that could also help — but any path to the goal involves coordinated action taken on numerous fronts at once…and a lot of luck.

Where does this leave us?

For years now, it’s been one of the climate world’s great rituals: After every new setback, delay or disappointment, there’s a rush of articles and models showing, We can still do it! It’s not impossible yet!”

I suppose this is another one of those posts. Even without the CEPP, the two infrastructure bills passed together would reduce emissions considerably. The loss of the CEPP would eliminate a big chunk out of those emission reductions — more than a third, if things go poorly — but there’s a chance some of that can be made up with other policies.

This is assuming the Build Back Better bill doesn’t get worse. Manchin may not be done screwing it up yet. The top priority now should be protecting the full range of clean-energy tax credits and ensuring that 1) they extend at least 10 years and 2) they are fully refundable.

And other policies must be protected as well. Here, according to Energy Innovation, are the next most effective policies after the CEPP plus tax credits.

The second strongest provision is the fee on oil and gas methane emissions, which contributes about 12 percent of total reductions, or 165 [million metric tons] in 2030. Incentives for electric vehicles and charging equipment are next, at 115 MMT in 2030, or 9 percent of total reductions.

I tend to doubt that congressional staffers will be able to find anything new that’s big enough to compensate for the loss of the CEPP, but Biden can also gain back some of those reductions through aggressive use of the EPA and other agencies. We’ll see if he has the moxie to do that.

The U.S. doesn’t need to worry that hitting its target is unaffordable. All three analyses show that decarbonizing the electricity sector will reduce consumer energy costs, and that’s not even including the enormous benefits of reduced air pollution, which themselves would easily pay for the transition.

(Rhodium Group)

Nonetheless, rapid decarbonization is a huge, wrenching socioeconomic transformation. Hitting our target would be a heroic feat. The fastest the U.S. has ever reduced emissions, outside of a recession, is by 4.1 percent in a single year, 2012. To get to 50 percent reductions by 2030, Rhodium says, requires a 5.2 [to] 5.6 percent year-on-year cut in emissions every year.” We have to go faster than we’ve ever gone, every year from now through 2030.

And that’s only the first, and arguably easiest, step. The first 50 percent of reductions will be easier than the last 50 percent, which we need to eliminate by 2050. That will require new policies, technologies and industries.

In the grand scheme of things, the loss of the CEPP is not the end of the world, as irritating and indefensible as it is. As long as Manchin doesn’t do any more damage, as long as staffers scrabble together a few compensatory policies, as long as Biden uses executive agencies aggressively, as long as states, cities and businesses continue acting ambitiously…well, as long as all of that happens, we still have a shot.

***

This article was originally published at Volts.

David Roberts is editor-at-large at Canary Media. He writes about clean energy and politics at his newsletter, Volts. Previously, he covered the same subjects at Vox and Grist.