Budget Reconciliation Is the Key to Stopping Climate Change
Budget Reconciliation Is the Key to Stopping Climate Change
Congress is on the verge of major legislation that would be strong enough to confront the climate crisis.
The United States is suffering acutely from the chaotic changes in climate that scientists now directly attribute to the burning of fossil fuels and other human activity. The drought, fires, extreme heat, and floods that have already killed hundreds this summer across the continent and around the world are a tragedy—and a warning of worsening instability yet to come.
Build Back Better
Read more of CAP’s work related to the Build Back Better agenda.
However, this week, the Senate initiated an extraordinary legislative response that would set the world on a different path. Enacting the full scope of President Joe Biden’s Build Back Better agenda would put the American economy to work leading a global transition to clean energy and stabilizing the climate.
A look at what’s coming next through the budget reconciliation process reveals a ray of hope that is easy to miss amid the fitful negotiations of recent months: At long last, Congress is on the verge of major legislation that would build a more equitable, just, and inclusive clean energy economy. This is our shot to stop climate change.
Building a clean energy future must start now
Until the global economy stops polluting the air and instead starts to draw down the emissions of years past, the world will continue to heat up, blundering past perilous tipping points that threaten irreversible and catastrophic consequences. Stemming the extent of warming at 1.5 degrees Celsius rather 2 degrees or worse will reduce the risk of crossing such tipping points or otherwise exceeding the adaptive capacity of human society. Every degree matters.
Tell the Senate: Invest in a 100% Clean Future
Stabilizing global warming at 1.5 degrees Celsius starts with cutting annual greenhouse gas emissions in the United States to half of peak levels by 2030. This isn’t about temporary offsets or incremental gains in efficiency—it’s about the rapid adoption of scalable solutions that will work throughout the world to eliminate global net emissions by 2050 and sustain net-negative emissions thereafter.
Building this better future will tackle climate change, deliver on environmental justice, and create good jobs. It will give us a shot to stop the planet from continuously warming. It will alleviate the concentrated burdens of fossil fuel pollution, which are concentrated in systemically disadvantaged, often majority Black and brown communities. It will empower American workers to compete in the global clean energy economy of the 21st century.
There is no time to lose in the work of building a clean energy future.
A moment of opportunity for climate legislation
The key to urgent climate action is a process called budget reconciliation, which enables the enactment of budget-related measures by simple majority vote. This week, the Senate voted to begin the process by passing a budget resolution that instructs committees to start drafting a comprehensive set of investments that would “put America on a path to meet President Biden’s climate change goals of 80% clean electricity and 50% economy-wide carbon emissions reductions by 2030.”
The resulting reconciliation bill would deliver major emissions reductions and change the trajectory of global warming through a new clean electricity payment program; incentives for clean energy and clean vehicles; investments in climate-smart agriculture and forestry; new consumer rebates for home electrification; and more.
As articulated by President Biden, the scope and scale of these investments mark an approach that is categorically different from past spending efforts. Neither the $90 billion in clean energy investments through the American Recovery and Reinvestment Act of 2009 nor the bipartisan infrastructure framework that passed the Senate this week are at the same level. It’s the fiscal year 2022 budget resolution that opens the door for the pivotal investments needed to build a clean energy future.
The solution starts with clean electricity
Roughly one-quarter of the annual greenhouse gas pollution in the United States still comes from the combustion of fossil fuels in power plants to generate electricity, but the sector is poised for a transformation to clean electricity if Congress makes the right investments now. Doubling the share of clean electricity—from roughly 40 percent today to at least 80 percent in 2030—would cut more than a full gigaton of annual carbon dioxide emissions. That can be accomplished this decade, and it’s more than half the emissions reductions required to meet Biden’s economywide 2030 goal. Two major policies lead the way:
If redesigned for maximum impact, 10 years of flexible, full-value tax credits for clean electricity with direct pay could achieve between 57 percent and 68 percent clean electricity.
- Clean electricity tax incentives. Tax credits for building new clean energy sources, such as wind turbines and solar panels, have helped drive the progress toward clean electricity to date, but they’ve been allowed to lapse in a pattern of on-again, off-again extensions. If redesigned for maximum impact, 10 years of flexible, full-value tax credits for clean electricity with direct pay could achieve between 57 percent and 68 percent clean electricity by the end of the extension. Clean electricity tax incentives are included in the budget reconciliation instructions to the Senate Committee on Finance and were a major part of the Clean Energy for America Act recently endorsed by the committee.
- Clean electricity payment program. A program of payments and penalties for utilities—mimicking the incentives of the clean electricity standards that have proven effective at the state level—will fill the gap that tax incentives for renewables developers do not. This will help spur end-to-end investments in generation, efficiency, transmission, storage, and distribution. This program represents the major part of the reconciliation instructions to the Senate Committee on Energy and Natural Resources.
By setting the power sector on the path to 100 percent clean electricity by 2035, the investments proposed for budget reconciliation would further strengthen the case for electrification in other sectors.
Switch from fossil fuels to electricity wherever possible
Roughly one-third of the annual greenhouse gas pollution in the United States comes from the combustion of fossil fuels in buildings—primarily furnaces and water heaters—or in the cars, trucks, and buses that we drive. Such emissions are usually discussed as parts of the broader buildings or transportation sectors, but they have an important aspect in common: They can readily be replaced by highly efficient electric heat pumps and electric vehicles, possibly including hydrogen produced by electricity in the case of trucks. Other important parts of the economy can also be shifted to run on electricity.
However, since consumers tend to keep their cars, furnaces, and water heaters for between one to two decades, the United States must begin now in order to complete the transition by midcentury. The right set of incentives would not only deliver substantial near-term emissions reductions, but they would also set replacement rates on the path to 100 percent electric in the 2030s.
- Electric vehicle tax incentives. A comprehensive set of consumer incentives for electric vehicles, manufacturing investment, and charging infrastructure could drive light-duty battery electric vehicle sales from 2 percent today to between 40 percent and 58 percent of all light-duty vehicles in 2031, depending on battery prices—and even before getting to regulatory actions—according to the Rhodium Group. Clean vehicle tax incentives are included in the budget reconciliation instructions to the Senate Finance Committee and were a major part of the recently endorsed by the committee.
- Heat pump rebates. Heat pumps are essentially air conditioners that can run in reverse to deliver or remove heat, making them a very efficient replacement for home furnaces and water heaters when it comes time to replace home appliances. Rebates for these and other electric appliances would make it easy for everyone—especially low- and middle- income households—to make the switch. Electrifying these appliances would lower monthly bills, cut down on indoor air pollution, and ready home electrical equipment for rooftop solar and electric vehicle charging. Consumer rebates to weatherize and electrify homes are a major component of the reconciliation instructions to the Senate Energy Committee, and reflect legislation recently introduced by Sen. Martin Heinrich (D-NM).
Strong incentives now for buildings and vehicles will set in motion the longer-term transitions that need to be completed by mid-century, leaving a much narrower set of emissions from other sectors still needing to be addressed.
The full reconciliations instructions have a comprehensive scope
The rest of the economy contributes about two-fifths of annual greenhouse gas emissions, the great majority of which come from fossil fuel extractive industries, petrochemical and plastics production, agriculture, landfills, aviation, metals production, and cement production.
Major investments proposed as part of the build back better agenda include:
- Methane. More than 280 million metric tons of carbon dioxide equivalents vented, flared, or leaked from the oil and gas industry in 2019, according to the EPA inventory, mostly in the form of methane. Setting a fee on oil and gas producers would cause them to clamp down on this pollution, with immediate and significant emissions benefits. Such a fee is included in the instructions to the Senate Committee on Environment and Public Works and similar legislation has been proposed by Sen. Sheldon Whitehouse (D-RI).
- Agriculture. Roughly 600 million metric tons of carbon dioxide equivalents—mostly methane and nitrous oxide—were emitted from fertilizer application and production, livestock management, and other agricultural practices in 2019. Significant emissions reductions are possible from better agricultural practices such as planting cover crops and preserving grasslands, with one recent study from the Nature Conservancy and others finding opportunities for between 180 million and 500 million metric tons in near-term savings for the sector. Doubling funding for conservation programs at the U.S. Department of Agriculture, which could be accomplished under the reconciliation instructions for the Senate Committee on Agriculture, would have huge potential benefits.
- Conservation. Roughly 800 million metric tons of carbon dioxide equivalents are drawn out of the atmosphere by trees in the United States every year. Investing more in conservation and stewardship of forests and other natural lands—including the right reforestation and afforestation practices—is a straightforward way to grow this natural carbon sink. The Biden administration has committed to conserving 30 percent of U.S. lands and ocean by 2030 to do just that. Funding under the reconciliation instructions to the Agriculture Committee and other committees would kick-start this process and could sequester over 150 million tons above baseline in 2030.
The list continues, with investments planned in emerging clean energy technologies; clean fuels and sustainable aviation fuel; direct air capture of carbon dioxide; capture of emissions from non-combustion industrial processes; support for rural electric co-ops to retire stranded coal power plants; federal procurement of clean vehicles and green materials; climate research; and more.
From clean electricity through emerging technologies, each of these programs is important, and, together, they add up to a dramatic change in the trajectory of U.S. greenhouse gas emissions. Further details and integrated analysis are needed to substantiate a precise estimate, but it is clear that, coupled with a return to the proper implementation of the Clean Air Act and other bedrock environmental laws, this package of investments would put the United States firmly on the path to cutting emissions to half below peak levels by 2030.
Climate, justice, and jobs
Investments in clean energy and climate mitigation will deliver major victories, but they’re only one part of a broader commitment to environmental justice and good, high-quality jobs for the communities that need them.
The budget resolution provides instructions that will deliver investments in historically Black colleges and universities and minority-serving institutions; climate and health equity; tribal nations and more. The Senate Committee on Banking receives instructions for $332 billion, including for affordable housing, public housing, community land trusts, other revitalization programs, and transit improvements. The Senate Committee on Environment and Public Works receives instructions for $67 billion, including for environmental justice investments in clean water access and affordability, healthy ports, electric school buses, and a clean energy technology accelerator that will fund low-income solar and other pollution-free technologies. The Senate Committee on Energy and Natural Resources receives instructions with funding for consumer rebates to weatherize and electrify homes in disadvantaged communities.
The creation of a Civilian Climate Corps would deploy clean energy where it is needed, help address the legacy of pollution in overburdened and frontline communities, and give people the opportunity to help build their future, with funding across multiple committees in the budget instructions indicating an expansive scope of work.
The reconciliation bill will also contain provisions that will create good-paying, high-quality union jobs. In addition to the job-creating investments themselves, there are provisions for labor enforcement and penalties modeled on the PRO Act and shifts in the tax code to be more pro-worker. The Clean Energy for America Act includes job quality and domestic content standards. Investments in domestic manufacturing of clean energy and electric vehicle supply chains will support America’s global competitiveness. These would be major victories.
The significance of the budget resolution cannot be overstated. It has created the opportunity for Congress to enact by simple majority vote the most consequential investments in climate, justice, and jobs ever seen. Those of us looking for good work, for clean air, and for a stable climate have no time to lose. It’s time to cut out the pollution that drives the climate crisis, create millions of good jobs, and build a just and equitable economy for all.
Trevor Higgins is the senior director of Domestic Climate and Energy Policy at the Center for American Progress.
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