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CLEAN Future Act heads list of possible US congressional routes to energy transition

29 March 2021 Kevin Adler

Congressional action on moving the US towards a net-zero energy future is gaining momentum, as House of Representatives and Senate committees each held hearings this month on the Climate Leadership and Environmental Action for our Nation's (CLEAN) Future Act, while Republicans have offered their own energy plan that relies more heavily on producing fossil fuels but with minimized emissions.

These energy-related bills are moving forward even as President Joe Biden readies his announcement, expected on 31 March during a speech scheduled in Pittsburgh, on an infrastructure bill that could invest as much as $3 trillion in a range of measures that could include support for electric vehicle (EV) charging infrastructure, power system upgrades, mass transit, and other means to reduce GHG emissions. In previewing his upcoming speech, Biden said during a press conference on 25 March, "… there's so much we can do that … makes people healthier and creates good jobs."

Policy insiders are confident that funding will emerge this year with a strong orientation towards moving the US towards net-zero emissions. Taking a look at legislation in Congress right now, policy insiders say that views seem to be coalescing around a few core issues that could achieve bipartisan support: extension of tax credits for clean energy technologies; EV infrastructure; and technology to reduce methane and GHG emissions from oil and natural gas operations and manufacturing. (See related IHS Markit coverage here.)

Whether a more comprehensive slate of action could pass remains highly uncertain, given the slim majority that Democrats hold in the Senate, and Republicans' opposition to many elements of the Democrats' preferred plans.

The CLEAN Future Act (HR 1512), sponsored by House Democrats Frank Pallone, Paul Tonko, and Bobby Rush, would mandate economy-wide national GHG emissions reductions of 50% from 2005 levels by 2030 and net-zero emissions by 2050. The bill would create a Clean Electricity Standard that would require all retail electricity suppliers obtain 100% of their electricity from non-polluting sources by 2035, which matches a Biden campaign pledge. Also, the bill would authorize the Securities and Exchange Commission to require public companies to disclose information about climate-related risks, a requirement the SEC already has started to explore through rulemaking.

"The bill will set sweeping regulatory standards in the power, transportation, and industrial sectors in addition to over $500 billion in federal spending aimed at decarbonization of the power sector by 2035," said Cornerstone, a government affairs analysis group.

The CLEAN Future Act ties emissions reductions to creating jobs and generating economic growth — themes that Biden and Democrats stressed on the campaign trail and since gaining control of both chambers of Congress.

"Today's introduction of the CLEAN Future Act promises that we will not stand idly by as the rest of the world transitions to clean economies and our workers get left behind, and that we will not watch from the sidelines as the climate crisis wreaks havoc on Americans' health and homes. This legislation will create millions of homegrown jobs in a climate-resilient economy, ensuring our workers and businesses can compete in the 21st century transition to clean technology that's already happening," Pallone said when the legislation was introduced.

Republicans, however, say that a bill with such sweeping impact is a jobs killer. They countered on 14 March with a package of bills aimed at expanding US production and exports of oil and gas, as well as investments in carbon capture and storage (CCS) and hydrogen, in order to reduce or offset GHG emissions. Leading Republicans on the House Energy and Commerce Committee -- Cathy McMorris Rodgers, Fred Upton, and David McKinley -- called their "Securing Cleaner American Energy" package a solution for staying competitive with high-emissions countries such as China, while providing a path to reducing emissions.

"Rather than Green New Deal-style regulations and job-crushing actions like canceling the Keystone XL pipeline, we urge Democrats to join us in a bipartisan way to advance these real, workable solutions," they said in a joint statement. "Our plan is a much better agenda to protect the environment, jobs, and our national security than their unworkable pie-in-the-sky mandates that will halt economic opportunities for millions of Americans."

The 18 bills grouped in the Republicans' package include measures to reduce or eliminate gas flaring and venting; provide federal loans for CCS; accelerate reviews of nuclear and hydropower projects; streamline permitting for gas and LNG pipelines; and secure critical materials for energy production and storage technologies.

"Legislation being developed in the House sets a tone for what the Democrats and the Biden administration are seeking in terms of net-zero/climate policy. The real question is what will emerge in the Senate and given the thin majority, what legislation can bring over moderate Democrats, including those that represent fossil energy producing states," said Jack Belcher, principal, Cornerstone.

Tax credits

Provisions of the CLEAN Future Act make it clear that Democrats are reaching out to Republicans, not just seeking to win points from their supporters, said one lobbyist who asked not to be identified. The lobbyist contrasted the bill with the Green New Deal, which has attracted attention for its ambitious goals, but is not considered politically feasible. "The CLEAN Future Act is a serious bill. This is coming from the Democratic leadership, not from people outside that framework," said the lobbyist.

From the lobbyist's perspective, having broad goals -- rather than the specific strategy to reach them -- is the key to getting legislation passed. "I think it's important that the mechanism of choice to get in the game is 'a clean energy standard.' The details still may not be workable [legislatively], but at least it gets all the stakeholders in the game," he said.

Tax credits seem to be one area where there appears to be bipartisan agreement. The CLEAN Future Act covers the same turf on tax credits as bipartisan legislation introduced in December 2020, the Clean Energy Future through Innovation Act of 2020 (HR 9054), co-sponsored by McKinley and Representative Kurt Schrader, Democrat-Oregon. That bill would provide federal funding to accelerate development and commercialization of CCS, hydrogen, advanced nuclear, and renewables, with a goal of reducing power sector CO2 emissions by 80% by 2050. This bill has not yet been reintroduced in the current congressional session, though McKinley has offered elements of it through separate bills either with other Republicans or Democrats.

Although HR 9054 expired at end of the last Congress, the broad range of stakeholders who supported it -- including the US Chamber of Commerce, United Mine Workers, Duke Energy, Southern Co., American Council for an Energy Efficient Economy, the National Wildlife Federation, and the Bipartisan Policy Center -- indicates that it could be revived.

New bills introduced this year push for some of the same measures. For example, McKinley and Democrat Terri Sewell, Alabama, introduced in March the "Storing CO2 and Lowering Emissions Act," which would fund infrastructure to transport CO2 from where it is captured to where it can be sequestered underground. They also introduced the "Carbon Capture Modernization Act," which they said "would make it easier for businesses to retrofit coal facilities around the world with carbon capture technologies." That bill has a companion measure in the Senate.

The American Petroleum Institute (API) also mentioned funding for advanced technologies as one of five priorities in its Climate Action Framework, which it announced on 25 March. "We know you can't get [to net zero] without new innovation and technology solutions," said Mike Sommers, API's president and CEO, in a session with reporters about the framework. "API and its member companies will continue to make significant investments to make our future cleaner … and we know that government is going to have to play a major role."

In his remarks, Sommers said Congress should extend tax credits to support CCS projects, and he noted that it needs to appropriate funds for CCS and hydrogen power that were authorized under the Energy Act of 2020.

Another tax credit bill emerged on 25 March, as Democrats in the Senate, Delaware's Tom Carper, Rhode Island's Sheldon Whitehouse, and New Mexico's Martin Heinrich, introduced the Save America's Clean Energy Jobs Act. The act would allow for temporary refundability of Internal Revenue Service Section 45, 45Q, and 48 investment and production tax credits, which are available for solar, wind, fuel cells, and CCS. "This will enable clean energy companies to bypass frozen tax equity markets and access these tax credits directly, which in turn will help get stalled projects off the ground and people back to work," the senators said in announcing the proposal.

The American Clean Power Association (ACP) called the bill "an essential down payment to fix the constrained tax equity markets and ensure companies both large and small can continue to embrace clean energy solutions and create jobs."

Added CEO Heather Zichal: "The availability of a 100% direct pay option is crucial for clean energy deployment. Tax equity scarcity is a long-term challenge."

On the EV infrastructure front, tax credits also are the name of the game right now. The "Securing America's Clean Fuels Infrastructure Act," introduced on 25 March in the Senate, would extend the federal tax credit for installation of EV chargers to 31 December 2029 and raise the cap for businesses to $200,000 from the current $30,000; the credit is due to expire at the end of 2021.

No carbon tax

While tax credits seem very much on the table, a carbon tax is a glaring omission from the CLEAN Future Act.

"We know there's always a political price to be paid when taxes are involved," the lobbyist said. "So, it's important that this bill takes the most politically challenging piece off the table."

Indicative of the lukewarm interest in a carbon tax, Senator John Barrasso, Republican-Wyoming, ranking member of the Senate Committee on Energy and Natural Resources, pronounced himself squarely against it last week. "Proposals that impose a cost on carbon will hurt American families. This will lead to higher electricity bills and gas prices for American consumers," he said in a press statement on 25 March.

API supports a price on carbon or an emissions cap-and-trade program as the types of market-based mechanisms that would allow industry to decide how to reduce emissions most efficiently, a point Sommers reiterated in discussing the group's new climate framework. API also provided a comment from the Laborers' International Union of North America that it supports a federal price on carbon "that reinvests revenue into needed infrastructure projects that will reduce future emissions, bolster resilience in the face of extreme weather events, and improve the economic well-being of communities."

But Barrasso was having no part of that argument. "Spiking Americans' energy costs while our economy recovers from a global pandemic is a disastrous idea. That might be good for international energy companies, but it's a cost the American people can't afford," he said.

Congressional action must be both ambitious but also bipartisanship, added Rich Powell, executive director of ClearPath Action. "Clean energy policy must be rooted in political and technical realism, like the Energy Act of 2020, which authorized moonshot technology breakthroughs for the clean energy transition," he said. "Instead of partisan bills, we should focus on implementing and funding that bipartisan success story along with creating market incentives for more clean energy deployment."

Texas power outages

With grid reliability problems exposed in Texas in February when record cold led to widespread power outages for at least five days and more than 110 deaths, Democrats are saying that the CLEAN Future Act can solve that problem as well.

Opening a hearing on 24 March about the Texas power grid, Pallone blamed the outages on fossil fuel generation. "First is a failure to properly winterize power generation facilities, natural gas production facilities, and other related energy infrastructure," Pallone said. "It's also clear that natural gas facilities failed to perform as expected during extreme cold conditions. During the 2014 polar vortex, natural gas represented over 55% of the total outages, and in a similar cold snap in 2018, natural gas generation represented at least 70% of the unplanned outages. In this recent storm, natural gas outages represented more than half the total generation forced offline in ERCOT's territory."

During the hearing, Pallone referenced a bill to spend $7 billion over 10 years, the 21st Century Power Grid Program, sponsored by Representative John Sarbanes, Democrat-Maryland. But Karen Wayland, GridWise Alliance CEO, who was one of the witnesses at the hearing, said that funding should be more than tripled from the proposed $700 million/year to $2.6 billion/year.

Fellow witness Yvonne McIntyre, director of federal electricity and utility policy for the Natural Resources Defense Council, said: "Expanding our nation's transmission system may be the single-most important action we can take to improve resiliency and affordably decarbonize the nation's electric supply. Long-distance transmission moves clean energy from where it is available to where it is needed and enables balancing of the variability of wind and solar power on a national scale. The National Academies recently recommended an increase of 60% in the high voltage transmission system by 2030 as part of the least-cost path to reduce emissions."

Republicans appear to be onboard for some level of spending on grid reliability and security, too. Representative Randy Weber, a Republican from Texas, said he will reintroduce a bill he sponsored in 2020 with Democrat Ami Bera of California to spend $829 million on research on grid vulnerability, both from physical and cyber risks.

CLEAN Future Act

It's not clear that a bill as broad as the CLEAN Future Act, and with its ambitious targets for zero-carbon energy production, can gather sufficient support, especially in the Senate. But if the bill is viewed as the biggest feasible framework, its main components show where Democrats intend to lead the discussion this year:

  • Power: In addition to the clean electricity standard for 2035, the bill would direct funds to distributed energy resources, grid infrastructure, and microgrids.
  • Buildings: The bill would establish national energy savings targets for buildings and direct billions of dollars to improve the energy efficiency of new and existing buildings. By 2030, new buildings would have to be "zero-emissions-ready," able to operate on electricity only.
  • Transportation: Funding for EV purchases and infrastructure expansion. Also, goals to decarbonize and electrify ports around the country, seen as an environmental justice as well as climate issue.
  • Government purchasing: Creation of a "Buy Clean Program" that sets performance targets to steadily reduce emissions from construction materials and products used in projects that receive federal funding.
  • State programs: States would have to propose plans to reach net zero by 2050 for federal approval.
  • Creation of a Clean Economy Federal Advisory Committee to review how each federal agency is setting policies to implement national climate goals.
  • Creation of an Office of Energy and Economic Transition in the Executive Office of the President, responsible for managing stakeholder input on the local level about how workers and communities are affected.
  • Environmental justice: Throughout the act, environmental justice investments are proposed, such as site cleanups and strengthening oil, gas, and coal regulations in historically affected communities.

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