Oct 18, 2021 - Energy & Environment

Democrats' clean power outlook is very muddy

Illustration of a lightning bolt stuck in mud

Illustration: Annelise Capossela/Axios

Here are two big questions as a key Democratic proposal to slash emissions from power generation flounders: how much its demise would sap climate protections, and what might replace it.

Catch up fast: New financial carrots and sticks for utilities to deploy zero-carbon power — the Clean Electricity Performance Program (CEPP) — look unlikely to stay in Democrats' big social spending and climate bill.

Backers have been unable to get buy-in from Democratic Sen. Joe Manchin (D-W.Va.), the chairman of the Senate's energy committee and whose state is a big coal and natural gas producer.

Why it matters: The CEPP is an important part of the White House plan to achieve 100% zero-carbon power by 2035.

Climate-friendly power is needed for Biden's wider pledge under the Paris Agreement to cut economy-wide emissions by 50% by 2030.

More broadly, if the wider social and clean energy bill is stalled or gutted, it makes it harder for the U.S. to push other nations for aggressive steps at the upcoming UN climate summit.

What we're watching: A Democratic aide tells Axios that lawmakers’ offices are seeking other ways to help make up emissions cuts the CEPP would have provided.

  • The Washington Post reports of talks over a voluntary emissions trading program among metals, concrete and chemical industries that would provide federal funding for emissions cuts.
  • In recent weeks Senate Finance Committee Chairman Ron Wyden (D-Ore.) has discussed a carbon tax that would return revenues to the public. But carbon taxes face gigantic political hurdles.

The intrigue: One important thing is how much other parts of the Democrats' plan and bipartisan infrastructure legislation would speed the ongoing shift toward zero-carbon sources like wind and solar.

Several analysts have tried to game out the CEPP's impact. The upshot? It's really big! But so are the tax provisions in the Democrats' plans, and estimates of their relative effects vary.

By the numbers: Resources for the Future, a nonpartisan think tank, estimates that with no policy changes, power sector emissions in 2030 are 43% lower than 2005 levels.

  • The tax incentives in the Democrats' plan bump that to 72% while adding the CEPP increases the total to 81%. So the tax credits do more in their study, but there's some nuance here.
  • They didn't analyze the CEPP in isolation, but rather as policy layered onto tax incentives that drive lots of deployment. "We can’t really directly compare the two policies," RFF analyst Nicholas Roy said via email, noting it also depends on how the CEPP is implemented.

Meanwhile, the Rhodium Group recently published initial modeling of a few big-ticket items in the Democrats' legislation and the bipartisan infrastructure bill.

  • Their "mid" technology costs analysis shows the CEPP and tax provisions providing the vast bulk of the 715 million tons of power-sector CO2-equivalent emissions cuts in 2030 compared to current policy.
  • That's about twice the emissions cuts expected with the tax credits alone, Rhodium's John Larsen tells me.
  • Overall, the power sector CO2 cuts from those programs do the heaviest lifting in their wider analysis that we explored here.
  • It shows the various provisions modeled — which also include EV incentives and a fee on methane emissions — taking a huge bite out of emissions cuts needed to reach the White House pledge under Paris.

Energy Innovation, a clean energy research firm, is also out with modeling of the bills in Congress and shows the tax credits and CEPP combined providing the most emissions cuts, calling both vital.

  • They estimate that losing the CEPP could eliminate a third of the emissions reductions enabled by the two bills.
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