The $ 3.5 trillion budget could transform the U.S. electricity sector – and slash climate pollution

In the coming weeks, Congress may pass one of the most important climate policies in U.S. history.

The $ 3.5 trillion budget plan includes a provision known as the Clean Electricity Payment Program, which will use fees and penalties to encourage utilities to increase their share of the electricity they sell from sources. with no carbon each year. If it works as expected, the law will ensure that the electricity sector can generate 80% of its electricity from sources such as wind, solar, and nuclear plants by 2030, cutting more than a billion tons of electricity. annual greenhouse-gas emissions.

The move will mark a fundamental step by President Joe Biden ambitious climate plan, which aims to put the country on track to eliminate climate pollution from electricity generation by 2035-and achieve net-zero emissions across the economy by middle age.

There are real questions, though, about whether the program will capture its aggressive targets. How the country’s complex electricity sector truly responds will depend on how it is implemented by the agency that manages the program, and especially where payments and penalties are set, some economists said.

It’s also unclear if the scale will pass anything like its current form – or at all.

How does it work?

The Electricity Charge Program is a spin on a clean electricity standard, a regulation that many states have enacted that requires equipment to reach a certain level of clean electricity in specific years. Research is primarily chosen for payment and penalties on binding mandates because it can be passed under a ethical process known as budget adjustment, which requires only a simple majority of Senate votes.

If companies increase their share of clean electricity above the annual target, they will get paid for every additional megawatt-hour of electricity they sell that comes from carbon-free sources, according to an analysis of the Clean Air Task Force. Those who do not meet that standard will have to pay a fee.

The program does not require all power providers to reach the same level at the same time. This will fit the annual objectives according to the point from which each one starts. But the overall target is for the U.S. electricity sector to produce 80% of its electricity from clean sources, on average, over the next nine years.

U.S. Senator Tina Smith of Minnesota is the one who spearheaded the move, which is likely to be overseen by the Department of Energy.

The budget plan also includes federal tax incentives for building cleaner electricity generation. In credits, the program will be funded by nearly $ 150 billion to $ 200 billion, according to the Third Way, a think-left-tank in Washington, DC.

In addition, the package measures come with “the largest, most ambitious climate and clean energy policies that the United States has ever implemented, to date,” said Josh Freed, head of the organization’s climate and energy program.

What will the program do?

If the measures achieve the goal of 80% clean electricity by 2030, it will more than double the share of carbon-free electricity in the U.S. and significantly accelerate the move to clean energy.

Now, about 38% of the electricity generated in the US from non-carbon sources: 18% from renewables and 20% from nuclear energy.

Pushing the electricity sector to 80% would cut carbon dioxide emissions by 86% from 2005 levels, according to an analysis by the Natural Resources Defense Council, included in an Evergreen Collective report. published this month.

More than a billion tons of annual climate pollution will be eliminated over the next nine years. In comparison, the electricity sector has reduced annual emissions by a little more than 800 million tons in the 14 years leading up to 2019, almost everyone was motivated to shift from coal to natural gas and add innovations.

How can this help?

That brings a giant blow to one of the most common sources of climate pollution in the U.S.. The electricity sector is doing a quarter of the country’s total greenhouse gas, second only to the transportation sector at 29%.

Cleaning up the electricity sector has also accelerated the addressing of other major sources of emissions. This ensures, for example, that more electricity is used to charge carbon-free electric cars, trucks, and buses. The same goes for things like heating and cooking when regulations require more homes and businesses to switch to electric stoves, heat pumps, and other clean technologies.

“If we want to achieve real, deep emissions reductions, we have to do it through clean electricity,” said Leah Stokes, an assistant professor of political science at the University of California, Santa Barbara. , consulting policy. .

Meanwhile, other studies have found the transfer of almost 80% of electricity without carbon. encourage $ 1.5 trillion investment in clean energy, generative hundreds of thousands of jobs, and save hundreds of thousands of lives in the coming decades by reducing air pollution.

But will it give us 80% clean electricity by 2030?

“Who knows?” says James Bushnell, an environmental and energy economist at the University of California, Davis.

The downside to going with more stringent incentives is that you can’t be sure of the final outcome. The government will have to make some incomplete predictions, or continue to check and refine how many sticks and how many carrots will have to bring about the desired changes, according to Bushnell.

Careful planning of the program is also needed to prevent the industry from playing it. He sees scenarios where utilities can combine multiple additions to clean electricity in a few years and narrow losses of others, in ways that can reduce penalties, increase fees, and reduce downtime. program progress.

Another problem is that much of today’s data on U.S. electricity production and sales is self-reported, while the “cleanliness” of electricity purchased in real-time markets is not always clear. That’s why the government will likely need to put in place strict processes for monitoring and verification, and develop reliable ways to verify or track where carbon-free electricity comes from and where it ends up. .

What does this mean in electricity prices?

Most reviews of the Clean Electricity Charge Program conclude that it will lower consumer prices. Because it is funded by the federal government, and utilities must be used to use the payments to benefit customers.

“In a traditional [clean electricity standard], the cost is carried by electricity rates, and therefore by available customers, ”reports Evergreen, which is with Stokes. In contrast, the payment program will protect Americans from rising electricity bills, according to the report.

But Bushnell said that even if the payments to make it are used to lower prices, it’s still possible they could tick a few times. That’s because all the equipment is available for limited sources of both fresh and clean electricity, which can drive up the price. Prices for dirty electricity could fall for both demand and supply reasons. However how all that balances the transition from market to market remains to be seen, he said.

So why not just enforce the mandates?

While simply mandating equipment to sell clean electricity levels through specific hours offers a clearer path to the desired outcome, the proposed payment plan has a strong advantage. : it can be political.

Specifically, legislators may be able to incorporate the proposal into the budget reconciliation process. Congress was allowed to approve the bill on a number of issues, related to taxation and spending, with 51 votes in the Senate – exactly the number of Democrats if Vice President Kamala Harris were to vote.

A regulatory rule cannot qualify for reconciliation, which it needs to secure 60 votes to overcome the threat of a filibuster.

So does it really mean to pass?

Not really.

There are strict restrictions on what different steps can be included in the reconciliation process, under the so-called Byrd rule. The Senate will not consider “excessive” provisions requiring any proposals to replace federal or tax spending in ways that are more important to other policy purposes, among other trials.

That is why there is always a chance that the Senate legislator may decide that certain measures are ineligible, removing them in the final bill.

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