Democrats are likely to drop or scale back a key proposal in their party-line bill that would make it easier for clean energy developers to use federal tax credits, as they race to clinch a deal with holdout Sen. Joe Manchin III (D-W.Va.) in the coming weeks, according to two people familiar with the matter.
Manchin has indicated that he will not support a budget reconciliation bill that includes direct pay, in which payments are sent directly to companies that produce clean energy for consumers, according to the two individuals, who spoke on the condition of anonymity to describe the private negotiations. Politico first reported Manchin's opposition to the proposal.
The Democrat from West Virginia has expressed concern that direct pay would be a handout to the private sector and could reward companies that are losing money, the two people said. He has also voiced concern that the policy could be inflationary amid the fastest inflation in four decades, one of the people said.
While the debate over direct pay is wonky, it has major implications for whether the United States deploys renewable energy projects at the speed and scale necessary to tackle climate change and meet President Biden's clean energy goals.
The issue comes as Democrats face a narrowing window to pass the package, with just three legislative days left before lawmakers leave town for the Fourth of July holiday.
Here's how direct pay works, why Manchin's concerns are somewhat ironic, and why it all matters:
How it works
Clean energy developers often don't have enough tax liability to use clean energy credits themselves. As a workaround, many developers go to the tax equity markets, where they trade the tax credits for a smaller amount of cash upfront.
But Democrats say this system is problematic because some of the value of the credit goes to financial markets, rather than clean energy development. They argue that direct pay is a simple solution.
“Current energy tax credits are often difficult to access, with big banks serving as middlemen for byzantine agreements,” Senate Finance Chair Ron Wyden (D-Ore.), whose panel has jurisdiction over the credits, said in a statement to The Climate 202.
“Our goal here is to make it easier for startups and nonprofits in particular to deploy the credits to fund projects,” Wyden added. “Cutting out the middlemen will help get projects off the ground more quickly.”
When asked Tuesday about direct pay, Wyden declined to comment on the specifics of the negotiations with Manchin.
In a twist, proponents say direct pay would help turbocharge the technologies that Manchin has publicly championed, such as nascent technology to capture carbon from the air and store it underground.
“The irony here is that some of the technologies that Manchin has been most publicly supportive of, like carbon capture and hydrogen in particular, would be most hurt by taking direct pay out of the tax package,” Sasha Mackler, who leads the Energy Project at the Bipartisan Policy Center, told The Climate 202.
“They have a harder time taking advantage of tax equity compared to some of the more mature technologies like wind and solar,” Mackler added.
A potential compromise?
It's unclear whether Democrats can reach a compromise with Manchin that salvages some aspects of direct pay, or whether they will need to jettison the proposal to win his vote.
One individual familiar with the matter said a deal could be possible. “There’s a lot of middle ground between no direct pay and direct pay as envisioned in December,” the individual said, referring to when Manchin said he could not support the spending package in its current form.
However, another person close to the negotiations said it would be difficult to limit which companies could take advantage of direct pay, such as by excluding privately traded companies.
“I am not aware of a way to limit it,” the individual said, “that will make a difference to Joe Manchin.”
Sam Runyon, a spokeswoman for Manchin, did not respond to requests for comment.
Biden to urge Congress to suspend federal gas tax for 3 months
President Biden will urge Congress today to suspend the 18.3-cent federal gas tax until September, marking the White House’s latest attempt to address inflation and prices at the pump, Cleve R. Wootson Jr. and Tony Romm report for The Washington Post.
The effort will probably face tough opposition in Congress from lawmakers on both sides of the aisle, with some echoing concerns that the relief would never reach the average consumer.
“I do not like the idea of a federal gas holiday that’s being talked about,” Rep. Pramila Jayapal (D-Wash.), the top lawmaker on the Congressional Progressive Caucus, said in an interview Tuesday. “I don’t think that’s going to make it down to the consumer.”
Republicans in particular also see a potential gas tax holiday as a political stunt meant to increase Democratic leadership ratings on a key economic issue ahead of the midterm elections.
Chevron urges Biden to stop criticizing Big Oil ahead of Granholm meeting
Energy Secretary Jennifer Granholm will meet with the nation's top seven refiners on Thursday to discuss strategies to lower gasoline prices, according to the White House, Morgan Chalfant reports for the Hill.
The meeting will include the heads of ExxonMobil, Shell, Valero, Marathon, Phillips 66, BP and Chevron. President Biden sent a letter to all of them last week threatening to invoke emergency powers if they don't increase refinery production, saying they need to help alleviate pain at the pump for American consumers.
In a response to that letter, Chevron CEO Michael Wirth on Tuesday called for an “honest dialogue” on balancing environmental and economic priorities.
“Chevron and its 37,000 employees work every day to help provide the world with the energy it demands and to lift up the lives of billions of people who rely on these supplies,” Wirth wrote. “Notwithstanding these efforts, your Administration has largely sought to criticize, and at times vilify, our industry. These actions are not beneficial to meeting the challenges we face and are not what the American people deserve.”
When asked about Wirth's letter on Tuesday, Biden replied: “He’s mildly sensitive. I didn’t know they’d get their feelings hurt that quickly.”
Biden to nominate first woman, person of color to head White House science office
President Biden on Tuesday announced his intent to nominate Arati Prabhakar to lead the White House’s Office of Science and Technology Policy. The announcement comes months after Eric Lander, the president’s former chief science adviser, resigned after an internal review found that he mistreated and demeaned staff.
If confirmed by the Senate, Prabhakar would be the first woman, immigrant or person of color to head OSTP. The office, which plays a role in numerous scientific matters, held a first-of its-kind roundtable in February with leading climate scientists on the need to counter arguments for delaying climate action.
Biden boosts pay for federal firefighters as wildfire season heats up
The Biden administration is significantly increasing pay for federal wildland firefighters, as agencies have trouble recruiting or retaining firefighters in Western states amid an already severe wildfire season, The Post's Anna Phillips reports.
Funding for the pay increases will come from the $1 trillion infrastructure law that President Biden signed last year. For the next two fiscal years, agencies will raise firefighter salaries by $20,000 per year, or by 50 percent of their current base salary, whichever is lower.
Pay for federal firefighters has historically lagged behind the salaries offered by some states and municipalities, making it difficult for the Forest Service and other agencies to recruit and retain employees. The new funding is intended to be an investment in the people on the front lines as climate change turns wildfire seasons into wildfire years.
On the Hill
Rep. Cuellar defeats Jessica Cisneros in Texas runoff
Rep. Henry Cuellar of Texas won the Democratic nomination for the 28th Congressional District by 289 votes on Tuesday after a contentious battle with Jessica Cisneros, an immigration attorney, The Post’s Mariana Alfaro reports.
Cuellar had already declared victory after the May 24 election, but because the results were so close Cisneros filed for a recount. The key race had major climate implications, as The Climate 202 previously reported.
Forest Service says it failed to account for climate change in New Mexico blaze
The Forest Service relied on poor weather data and failed to understand how climate change dried out the landscape when it set an intentional fire, meant to mitigate risk of an extreme blaze, in the Sante Fe National Forest in April that quickly became the largest wildfire in New Mexico history, according to a report published Tuesday, The Post's Joshua Partlow reports.
“Climate change is leading to conditions on the ground we have never encountered,” Forest Service chief Randy Moore said in an introduction to the 80-page report. “Fires are outpacing our models and … we need to better understand how megadrought and climate change are affecting our actions on the ground.”
The Calf Canyon and Hermits Peak fires, which have so far burned more than 341,000 acres combined and displaced thousands of people, were set based on the Forest Service’s current standards and policies. But they burned “under much drier conditions than were recognized,” with numerous weather conditions being either “overlooked or misrepresented,” the report said.
In the atmosphere
Excessive heat swelling from Midwest toward the South — Matthew Cappucci for The Post
8 ways renters can make their homes greener — Rachel Fairbank for The Post
Environmental group staffers say it's a ‘nightmare’ to go to work — Robin Bravender for Politico
Solar-power developers pledge to buy U.S. panels — if someone makes them — Phred Dvorak for the Wall Street Journal
the prophecy has been fulfilled pic.twitter.com/jB0Md2VuT3
— klassy (@killklassy) June 20, 2022
Thanks for reading!
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