In the next few weeks, Congress may pass one of the most important climate policies in American history.
The $3.5 trillion budget plan includes a clause called the Clean Power Payment Plan, which will use payments and fines to encourage utility companies to increase their share of carbon-free electricity in their total annual sales. If it operates as expected, the legislation will ensure that 80% of the electricity in the power sector will come from sources such as wind, solar, and nuclear power plants by 2030, reducing greenhouse gas emissions by more than 1 billion tons per year.
This measure will mark a fundamental step for President Joe Biden Ambitious climate plan, Its goal is to put the country on track, eliminate climate pollution caused by power generation by 2035, and achieve net zero emissions for the entire economy by the middle of this century.
However, there are still some practical questions about whether the plan will achieve its aggressive goals. Some economists say that how the country’s complex power sector actually responds will largely depend on how the agency implementing the plan is designed, especially where payments and fines are set.
It is unclear whether the measure will be passed in its current form or not at all.
How will it work?
The Clean Power Payment Program is a turning point in clean power standards. Many states have implemented a regulation that requires utility companies to achieve a certain level of clean power in a given year.The proposal mainly chooses payment and fines rather than binding authorization, as this can make it known as Budget reconciliation, Which only requires a simple majority vote in the Senate.
Once the company raises its share of clean electricity above the annual target, they will be paid for every MWh of electricity sold in carbon-free energy. An analysis Provided by the Clean Air Working Group. Those who fail to meet the threshold will have to pay for it.
The plan will not require all power suppliers to reach the same level at the same time; it will adjust the annual target based on each starting point in time. But the overall goal is for the US power sector to generate an average of 80% of its electricity from clean energy sources in the next 9 years.
U.S. Senator Tina Smith of Minnesota supports this measure, and the Department of Energy may oversee this measure.
The budget bill also includes the creation of more federal tax incentives for clean power generation. With these credits, the program will receive approximately US$150 billion to US$200 billion in funding, According to the third way, A center-left think tank in Washington, DC.
Josh Freed, the organization’s climate and energy project leader, said that together, the measures in the package would constitute “the largest and most ambitious climate and clean energy policy issued by the United States to date.”
What will the program do?
If these measures achieve the goal of 80% clean electricity by 2030, they will more than double the share of carbon-free electricity in the United States and significantly accelerate the pace of transition to clean energy.
Currently, about 38% of U.S. electricity generation From carbon-free resources: 18% from renewable energy sources, and 20% from nuclear energy.
According to the analysis of the Natural Resources Defense Council, pushing the power sector to 80% will reduce carbon dioxide emissions by 86% from 2005 levels. The analysis is included in the Evergreen Collective report Publish This month.
This will eliminate more than 1 billion tons of annual climate pollution in the next nine years.In contrast, the power sector’s annual reduction in emissions is slightly higher than 800 million tons In the 14 years before 2019, it was almost entirely driven by the transition from coal to natural gas and the increase in renewable energy.
How does it help?
This has dealt a huge blow to one of the largest sources of climate pollution in the United States.Electricity sector production One quarter of the country’s total greenhouse gases, Second only to 29% of the transportation industry.
Cleaning up the power sector can also make it easier to address other major sources of emissions. For example, it ensures that more of the electricity used to charge electric cars, trucks and buses is carbon-free. If regulations require more homes and businesses to switch to electric stoves, heat pumps, and other cleaner technologies, so will things like heating and cooking.
“If we want to achieve real and deep emissions reductions, we must do so through clean electricity,” said Leah Stokes, assistant professor of political science at the University of California, Santa Barbara, who has advised on the policy. .
At the same time, other studies have found a shift to around 80% carbon-free electricity Will irritate 1.5 trillion US dollars in clean energy investment, creating Hundreds of thousands of jobsAnd save Thousands of lives By reducing air pollution in the next few decades.
But by 2030, will it really allow us to obtain 80% of clean electricity?
“Who knows?” said James Bushnell, an environmental and energy economist at the University of California, Davis.
The disadvantage of taking incentives instead of strict requirements is that you cannot guarantee the final result. Bushnell said the government needs to make some imperfect predictions, or constantly evaluate and improve how big a stick and a lot of carrots are needed to bring about the expected changes.
It must also carefully design the program to prevent the industry from playing games on it. He believes that utility companies may consolidate large amounts of clean electricity in some years, and reduce mistakes in other years to minimize fines, maximize payments, and slow the progress of the plan.
Another problem is that most data on electricity generation and sales in the United States today is self-reported, and the “cleanliness” of electricity purchased in the real-time market is not always clear. Therefore, the government may need to establish strict monitoring and verification processes, and develop reliable methods to verify or track the source and destination of carbon-free electricity.
What does this mean for electricity prices?
The evaluation of most clean electricity payment schemes concluded that it will depress consumer prices. That’s because it is funded by the federal government, and utility companies will be required to use these payments to benefit customers.
“In tradition [clean electricity standard], The cost is borne by the electricity bill, and therefore by the utility customers,” the Evergreen report co-authored by Stokes pointed out. The report says that by contrast, the payment plan will protect Americans from rising electricity bills.
But Bushnell said that even if these performance rewards are used to lower prices, in some cases they may still rise. This is because utility companies will compete for limited sources of new and old clean electricity, which will push up prices. Due to the same reasons of market demand and supply, the price of dirty electricity may fall. He said that the actual results between the markets remain to be seen.
So why not just issue the decree directly?
Although simply forcing a utility company to sell a certain level of clean electricity at a specific time provides a clearer way to achieve the desired result, the proposed payment plan has a strong advantage: it is politically feasible.
Specifically, it can enable legislators to incorporate proposals into the budget reconciliation process. This allowed Congress to approve certain taxation and spending-related legislation with 51 votes in the Senate—if Vice President Kamala Harris intervened in the vote, the Democrats would have the same number of votes.
The regulatory rules did not meet the conditions of the settlement, requiring it to obtain 60 votes to overcome the threat of obstruction.
So does this mean it will definitely pass?
Not at all.
According to the so-called Byrd rule, there are strict restrictions on what types of measures can be included in the settlement process. The Senate cannot consider requiring any proposal to change the “irrelevant” clauses of federal expenditures or taxes in ways that are unrelated to other policy objectives. In other tests.
Therefore, it is always possible for members of the Senate to rule that certain measures are unqualified and completely strip them from the final bill.