Jul 29, 2022 - Energy & Environment

The big new climate bill's most important provisions

Illustration of a finger pointed upwards, balancing a pen

Illustration: Annelise Capossela/Axios

The climate and energy provisions in the Senate's revenue and spending deal cover everything from incentives to buy electric vehicles to spurring the development of next-generation climate technologies, such as direct air capture.

The big picture: The draft bill would bring U.S. carbon dioxide and methane emissions down and dramatically scale up the development and deployment of new technologies.

Here are the biggest changes, if the bill passes.

Clean energy tax credits: Several climate policy experts told Axios Thursday that these provisions taken together would make the biggest difference in cutting emissions.

  • These include a decade of tax credits that would apply broadly to zero carbon technologies including existing nuclear power plants and advanced nuclear technologies, clean hydrogen, carbon capture and storage as well as wind and solar power. The bill would also provide incentives for deploying direct air capture technologies.
  • The Biden administration has already been funding demonstration projects for everything from clean hydrogen to long duration energy storage. The proposed bill would provide a path for some of these projects to be deployed.
  • Incentives would also be directed to battery manufacturing and the domestic mining of critical minerals.
  • Consumers could qualify for tax credits or rebates for making their homes more energy efficient by adding heat pumps and electric stoves, among other steps.

Electric vehicle incentives: These provisions would speed the wider adoption of clean technologies and help reduce transportation emissions, which are the largest contributor to U.S. annual emissions.

  • Specifically, the bill provides up to a $7,500 clean vehicle tax credit for EVs that are built in North America, with added incentives for having battery components largely manufactured or assembled in North America. The credit could be applied as a rebate at the point of sale.
  • The bill would also provide $4,000 in tax incentives for the purchase of used clean vehicles.
  • The EV incentives would be subjected to annual gross income limitations, to direct the benefits to mass market customers, rather than wealthy buyers.

Methane fee: Another provision that would have a big impact, according to policy analysts and scientists, is a methane fee program that would make it increasingly costly for the energy industry to emit this powerful greenhouse gas.

  • The fee would begin at $900 per metric ton of emissions above federal limits in 2024 and increase to $1,500 per metric ton in 2026 and thereafter.

What's not in the bill: The deal leaves out some elements of previous climate proposals, such as incentives to build new electric transmission lines to support the broader deployment of renewables.

  • But congressional action was never going to get the U.S. all the way to its emissions reduction target under the Paris agreement, notes Nathan Hultman, director of the University of Maryland's Center for Global Sustainability.
  • He said the draft bill would go about as far as necessary to help meet the U.S. target, and it is now up to federal agencies, state lawmakers, cities and private industry to do the rest. Other analysts agree.

The intrigue: The mere reveal of this bill changed the international discourse on climate policy, since the U.S. was perceived as lagging further behind and unable to follow through on its pledges made at the U.N. Climate Summit in Glasgow last year.

  • "Without this legislation, there was no question that the international credibility of the US would be significantly undermined," David Waskow of the World Resources Institute told Axios via email.

What we're watching: The bill's emergence takes much of the pressure off President Biden to rely mainly on executive actions to address climate change, including declaring a climate emergency.

  • Also, some potentially thorny issues have been punted to a separate legislative effort that Sen. Joe Manchin (D-W.Va.) has secured, which is aimed at reforming the approval process for pipelines and other energy infrastructure.
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