A Major Reckoning for US Energy Policy

Guest

Kevin Book

Managing Director of Research, ClearView Energy Partners

Transcript

Kevin Book: We are used to a certain amount of policy flux. We’re used to the idea that when a new administration comes to Washington, rules that were written by the past administration might be rewritten, but we’ve generally accepted that law is pretty stable and what we’re seeing here with the effort underway and sort of the nature of where energy policy is today is that the policy flux has moved upstream. And this is really very surprising. When you get right down to it, the molecules don’t vote, the rocks don’t vote, the electrons don’t vote. The fires, the floods and the freezes don’t check your party ID. It’s a weird way to do energy policy, but here we are.

Bill Loveless: Congress is rushing to enact what could be the most significant energy policy reversal in decades. The US Senate has begun work on an enormous budget reconciliation bill that would extend President Trump’s tax cuts while all but eliminating clean energy programs to help pay for them. The House version which passed by just one vote substantially repeals nearly all tax credits from the Inflation Reduction Act affecting everything from solar and wind development to hydrogen and carbon capture projects. According to the Columbia University IRA tracker, approximately $9.6 billion in unobligated IRA funds are at risk of rescission. Critics of the cuts say this could kill progress toward decarbonizing the energy and transportation sectors and they argue it will pull the plug on US clean energy manufacturing just as it’s ramping up, potentially costing many thousands of jobs. But supporters argue it’s necessary fiscal discipline.

So what’s really happening in the Senate? Can moderate Republicans preserve some clean energy provisions and with a Fourth of July deadline looming, will wild card events like grid disruptions or market volatility change the political calculus?

This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Bill Loveless.

Today on the show, Kevin Book.

Kevin is managing director of research at Clearview Energy Partners where he provides analysis on energy policy and congressional energy legislation and its real-world impacts for energy companies and consumers. In addition to leading Clearview’s research team, Kevin is a member of the Council on Foreign Relations and the National Petroleum Council, an advisory body to the Secretary of Energy. He’s also a non-resident senior associate at the Center for Strategic and International Studies.

I spoke with Kevin about the massive budget reconciliation bill currently moving through Congress, what’s at stake for different energy sectors and what elements, if any, of Biden-era clean energy policy might survive the budget process. We discussed the potential end of clean energy tax credits and other incentives codified in the IRA, the complex politics driving lawmakers’ decisions on these matters and how events like supply disruptions could reshape the debate. Kevin brings unique insight into how the congressional sausage-making process really works.

Here’s our conversation.

Kevin Book, welcome back to Columbia Energy Exchange.

Kevin Book: It’s great to be back, Bill. Thank you for having me.

Bill Loveless: Well, thank you for taking the time. I know how busy it is right now with all that is going on up on Capitol Hill and of course, as we speak, the US Senate has begun working on this enormous budget bill to extend President Trump’s tax cuts and make deep reductions in spending, including in energy programs to pay for them. The bill, as we know, passed by one vote in the US House and here we are looking at the Senate. Generally speaking, Kevin, what’s going on in the Senate?

Kevin Book: Well, the Senate has decided to go through the regular order process. So each of the Senate committees of jurisdiction is writing its own version of the language that the House passed. They are using the House-passed bill as a starting point and it will go as it did in the House from the committee level. It’ll get wrapped up by the Senate Budget Committee and then go to the floor for a vote and ultimately make its way out of the Senate if it passes. And I think that question, I’m sure you’ll get to it perhaps later in the discussion, but these things generally do pass eventually. And then the question of whether it goes directly to the House or whether a conference takes place has a little bit to do with how much it has changed and also other elements including timing.

Bill Loveless: I hesitate to bring this up, but for those who don’t follow this process exactly, what is a reconciliation bill?

Kevin Book: Well, in principle, the 1974 Congressional Budget Act created a process for managing debt and deficits, federal spending and taxes. And the stated purpose as the title of the law would suggest is really a budget management tool for Congress to responsibly be stewards of the American government and its spending. But what it has become, Bill, is essentially a partisan end-around to the Senate rules which require 60 votes to overcome a filibuster and filibustering can stop legislation without those 60 votes in most cases except for privileged measures like budget reconciliation bills. Now the words “budget reconciliation” are sort of a bit of a misnomer in the sense that first of all, as budget bills go in recent years, these budget reconciliation bills have ended up spending more money rather than saving it. So calling it a budget bill seems a bit like a misnomer. And then reconciliation though it has a financial meaning in terms of sort of partisan reconciliation, this is the opposite of that.

This is the sound of one party voting, but in any case, they offer a privileged route through the Senate. They enable a party in power that controls the House, Senate, and White House to essentially enact policy. There are some limitations. One of the limitations that you hear about, you’ll read about very often, is a provision of the Congressional Budget Act called the Byrd Rule. And there are actually many elements to the Byrd Rule, but one of the most important is that it requires that policy provisions of a bill like this reconciliation package, the One Big Beautiful Bill Act, those provisions must have more than a merely incidental relationship to revenue, debt, or taxes and the Senate parliamentarian, the official charged with interpreting the rules of the Senate and of course the Congressional Budget Act, in this context, Elizabeth MacDonough, is responsible for determining whether or not the legislation that comes to the Senate floor is compliant with the Byrd Rule. So this is an end-around, it is an expedited mechanism. It is a partisan tool, but it comes with limitations.

Bill Loveless: In a way, what we are seeing today reminds us of what happened when Democrats controlled all three branches of the government in 2022. That was of course when the Inflation Reduction Act passed through the reconciliation process. Republicans at the time criticized the bill’s provisions for the tax provisions, the spending, the potential impact on inflation, and Democrats supported it as a major achievement in climate policy, healthcare and deficit reduction. It passed the Senate with Vice President Kamala Harris casting the tie-breaking vote. It’s the same process but a different script and different players today.

Kevin Book: Yeah, you’re right to point that out. And it’s interesting because you would think that partisan legislation would be generally less durable than bipartisan bills that go through the process with both parties supporting them. And actually if you look at some of the major budget reconciliation packages that have passed, including the Inflation Reduction Act, as you mentioned, before that there was the 2017 Tax Cuts and Jobs Act, the Republican package that’s being extended in this one and modified of course, and before that of course the Affordable Care Act in 2010, which created so-called Obamacare, and they’ve turned out to be mostly relatively durable until now. Part of the reason was that Obamacare and the Tax Cuts and Jobs Act delivered something that I would suggest the American people mostly wanted. American people like healthcare, American people like tax cuts. It’s not as clear that there’s as much buy-in on every front for the Inflation Reduction Act.

And one consequence of this bill, and I think this is important for some investors and for people who look at the stability of legislation as sort of a way that you can have a dependable expectation for the future, we are used to a certain amount of policy flux. We’re used to the idea that when a new administration comes to Washington, rules that were written by the past administration might be rewritten. We’re becoming accustomed to the idea that permits that are administered by the agencies that write those rules might be reviewed, possibly rescinded, but we’ve generally accepted that law is pretty stable. And what we’re seeing here with the effort underway and the nature of where energy policy is today is that the policy flux has moved upstream. And this is really very surprising. When you get right down to it, the molecules don’t vote, the rocks don’t vote, the electrons don’t vote, the fires, the floods and the freezes don’t check your party ID. It’s a weird way to do energy policy, but here we are.

Bill Loveless: Yeah. Well let’s start with the House bill. That measure passed on May 22nd, substantially repeals nearly all the tax credits enacted by the Inflation Reduction Act to promote the development and deployment of clean energy technologies, including renewable electricity generation, energy storage, clean hydrogen, advanced manufacturing. The bill also rescinds all unobligated funding for clean energy and climate programs enacted by the IRA and the Infrastructure Investment and Jobs Act back in 2021. Kevin, give us some examples of what’s lost under the House bill when we’re talking energy provisions.

Kevin Book: Well, it’s as you say, substantially all of the tax credit provisions that were in the IRA to encourage clean energy development and deployment are either substantially prorated or effectively rescinded. And there are several big buckets. I think it’s easiest to think about this in broad categories and we could dig into specifics, but one broad category you might call clean electricity, what’s called the Clean Electricity Investment Credit, Clean Electricity Production Credit, and also credits for residential clean power. Those are very substantial in terms of their projected cost by the Congressional Budget Office, the nonpartisan group on Capitol Hill that evaluates the revenue impacts of such legislation over a 10-year interval and estimates what they think the cost will be or the benefit will be to the US government and to the budget. And they work in tandem with the Joint Committee on Taxation, which does the evaluation of the tax credits.

And so you’re looking at very big line items for clean electricity if you sort of gross it up and take it across the categories using the numbers that the CBO released this week. And of course I say that on June 6th, then we’re talking about $281 billion over the 2025 to 2034 interval, which is just in the clean power alone. The next biggest bucket I would refer to as sort of the vehicles bucket and there are very significant incentives for electric vehicles, but perhaps lost on some of us. The domestic EV credit as it stands today, has a number of limitations that actually have made it harder to access for some of the vehicles, even the ones manufactured here in the US. But there was created a commercial clean vehicle credit, the 45W credit, if you want to get into the wonky weeds, and I suspect we won’t, but it provided essentially an end-around to the domestic content controls and it’s a much bigger line item, substantially bigger, tens of billions of dollars bigger than the main EV credit that we’ve heard so much about.

But taken together those credits along with alternative fueling credits for infrastructure to charge vehicles ring in at approximately $192 billion over the 10-year interval. So those are the two biggest buckets. Then I’ll just give you sort of three other smaller ones. One is what I would call the future clean energy bucket, mostly because it refers to things that aren’t commercially promulgated at size today, clean energy in the form of clean hydrogen, the 45V credit or carbon capture in particular, as well as the advanced manufacturing technologies in the 45X credit. So in many ways, if you think about those clean electricity and clean vehicle credits, those are demand-pull credits. They create an incentive to procure technologies. The 45X advanced manufacturing production credit is actually what I would call a supply-push credit and it involves some of the hardware and critical minerals. So all in that bucket’s about almost $65 billion over 10 years. There’s efficiency credits about $27 billion over the 10 years. And then interestingly enough that the fifth and final bucket in our very simplified accounting is for biofuels. And biofuels are very popular on Capitol Hill. Farmers are very popular in most industrialized democracies, most countries really. And we have on a net basis roughly $45 billion going out to farmers.

One of the other aspects that actually spends money rather than raising money is that the future clean bucket that I mentioned includes outlays that allows for sort of a different tax treatment, a publicly traded partnership tax treatment for hydrogen and carbon capture technologies, which is a difference to where they stand today. A lot of other energy infrastructure is already able to claim this publicly traded partnership tax treatment, which again, we could get too far into the wonky weeds, but there’s really essentially only two outlays. Everything else is a revenue raiser. So all in, we are talking about raising on a net basis about $520 billion, on paper anyway, the way the Congressional Budget Office and Joint Committee on Taxation have scored it. So a very substantial offset to the spending that the Republicans envisioned in the House bill.

Bill Loveless: And that’s leaving an impression as they try to work through this bill. Critics of the House Bill warned that it threatens to pull the plug on US clean energy manufacturing and deployment just as it’s ramping up. They warned of shuttered factories, lost jobs, missed opportunities in communities around the country. Some thought that message might resonate in the House among members whose districts are home or whose states anyway are home to many of those projects, but it didn’t happen. Why?

Kevin Book: Yeah, it’s very interesting you bring that up. So the House Republicans have, there’s a fairly big center of the party and then there’s the sort of the fringy parts and I think that there are 38 members that I would put into the hard conservative right wing of the party who wrote a letter calling for the complete repeal of the IRA. And then if you look across four different letters written to Republican leadership, there were 38 Republican moderates who basically asked to preserve some aspect of the IRA tax credits or clean energy provisions, sort of an interesting and wonderful symmetry to have 38 on each side. But two things about that. First of all, of the 38 who lined up behind the clean energy tax credits, absolutely none of them refused to vote for the bill on that basis. Whereas a number of the conservatives in the first group basically said, this is a hard line. And they are still saying that.

Second, the arguments that they made were mostly about continuity of investments and expectations for stability, competition for these future sectors, and this is no surprise, I think it’s been widely documented by many capable parties that the vast majority of industrial investment into clean energy manufacturing happens to be in districts that are Republican-aligned. And that’s not a surprise because the vast majority of manufacturing in general happens to be in those districts. It reflects a number of things, labor forces, it reflects the state laws and enabling technologies. It has a lot to do with the resource basis of some of those states. And in fact, if you go right down to it, about 80% of the BTU, 80% of the primary energy generated in America happens to be in the red states. So none of this is particularly surprising. What I think was surprising was the argument wasn’t very persuasive. It didn’t seem to resonate very heavily. And so there’s another tack. There have been four senators, and I suspect you might’ve been about to bring this up, who’ve written similar letters to their own leadership saying they want to preserve clean energy credits in the process that’s unfolding now. And one of the arguments they’ve been making is that these credits, if they disappear, will raise end-user power prices. It’s a question of whether or not that might be more persuasive and I suppose we’ll find out.

Bill Loveless: Yeah, we’re watching now to see how these developments play out because the politics is so very important. You’ve made the point time and again that the Senate is the saucer, right? That cools the hot cup of tea produced by the House of Representatives and Senate committees now have begun working on parts of the chamber’s budget bill. What are you seeing so far?

Kevin Book: Well, we’re early in the process. So again, the bulk of the tax credits, a lot of the big spending that we just talked about in the CBO numbers is going to come from the Senate Finance Committee and the most complicated and most difficult legislation usually emerges last in this process and that’s what we expect to see here. So the Environment and Public Works Committee, which has some of the same jurisdictional purview as the House Energy and Commerce Committee has already, as we say this on Friday, has already put out its bill and it retains substantially the same provisions including among other things. The methane fee that was created in the IRA is delayed until 2034 onset as the House would’ve done so provision, a lot of people have talked about that could have impacted upstream oil and gas development, but the Senate Finance Committee and the Energy and Natural Resources Committee have yet to release their legislation and there is a lot of effort underway right now from the various constituencies on both sides of the issue to try to shape those outcomes.

There’s also effort underway coming from the other side of the Capitol, from all the House members who took a stand and they are now trying to dig in and suggest that any big changes that the Senate might undertake would invalidate their support, that they would turn against the bill that came back to them. Bill, I think you can take that with a grain of salt. There’s a reason why Congress gives medals of valor to soldiers and not the other way around, and that’s because you don’t see a lot of courage on Capitol Hill. When push comes to shove, it tends to be career-limiting to take a courageous stand. And where we look at the House right now, we know that one member for sure is going to vote against the bill. So Thomas Massie from Kentucky has made that very clear and it’s possible that Warren Davidson who voted against it the first time might do so again, he also might not, but what we’re getting from the House now or that some of the people who said No, we threw a flag or raised a concern, are doubling down and this too has a chance of changing that cooling effect of the saucer that you mentioned.

I think there was a quote from Josh Siegel in Politico that he took from Thom Tillis saying that all of the tax credits would be extended longer than the House and it’s our contention at ClearView that we’re likely to see the House bill as a high watermark and then we’ll find a less stringent final result, but that’s constrained by the viability in the House. Now as far as the idea that you could have a longer runway, I don’t want to get too nerd-ful, but if you’ll allow me a slightly nerdy moment, I talked about those CBO numbers and I talked about those numbers over the 10-year interval, but actually if you look at the numbers that the CBO put out, they divide it out by year and they also look at the first five years and compare it to the full 10 years.

And one of the interesting things you’ll see is that the front five years account for about 31% of the revenues raised over the 10-year interval, a lot of the impact of these credits in terms of their cost or their cancellation as a benefit to the budget is back-loaded because they are nascent technologies and their diffusion and promulgation ultimately would ramp up over time. And so what that suggests is that there might be some opportunity for the Senate to slide back the sunsets a little bit and history shows that a little bit is sometimes more than sufficient because expiring credits can be reauthorized in subsequent legislation if they’re popular enough and if the political stars line up, but that’s another discussion.

Bill Loveless: Yeah, and we’ll see. As you note, there has been indications in the Senate they would like to see some of those provisions in the House when it comes to clean energy modified at least. Senators Lisa Murkowski of Alaska, Thom Tillis of North Carolina, John Curtis of Utah among others have cautioned against a full-scale repeal of the credits and warned it could weaken the US position as a global energy leader coming particularly at the time where President Trump is looking for dominance when it comes to energy in the United States. I guess it’s a question as you say, of whether or not those senators and maybe some others will hold to those positions in the face of other battles, even bigger battles when you talk about Medicaid or the race and the debt limit, some of these bigger issues, whether they’ll hold the line on these clean energy programs as they’ve indicated so far that they would like to do.

Kevin Book: Yeah, there are bigger asks out there, and you see this very much in the House. I mentioned that 0 of 38 notional IRA defenders stood up when it came time to defend the IRA, but they had other concerns that were of greater importance to their political careers and to their constituents back home, state and local tax deductions being one of them. For many of the very same moderate Republicans, which hill were they going to die on? Well, you can only die on one hill, you can only die once. And so when you look at some of those moderates, that’s where they put their political capital in the end. The same might also turn out to be true in the Senate, but in the Senate there are senators who represent entire states and in the polarized context in which we find ourselves, there are no instances you can point to right now of state and local tax deduction advocates who happen to be in the Senate Republican Conference because you have a very red sort of bias that’s driven a lot of that conference. You mostly have red states represented by Republicans as opposed to the blue states represented by Republicans that we have a small number of in the House.

Bill Loveless: The House bill aims to accelerate permitting for some energy infrastructure projects like natural gas pipelines through fees for expedited review. How would that work and is that likely to remain when the Senate considers the bill?

Kevin Book: It’s one of those Byrd Rule considerations we talked about. The House language includes several instances, some in the energy and commerce title, some in the natural resources title that would provide expedited permitting in return for a fee. The fee is a sort of twofold, if you will, two birds with one stone mechanism in that it scores, it shows up as a revenue addition to the federal government in projections from the JCT/CBO related parties, and it also has the effect of qualifying for Byrd Rule compliance. So it’s raising money, which is sort of the point I think of budget exercises if you go back to their origin and it also could potentially qualify, but it’s controversial. Are these more than merely incidental nexus to revenues? Is this fee the only way that this expedited permitting could work and the parliamentarian is going to have to make a decision about that.

Senate majority leader John Thune has said he’s going to honor the decision of the parliamentarian. What’s interesting about those provisions though, Bill, is that they would provide a fast track to a very thorny issue. As Congress has wrestled with permitting reform, they’ve had a lot of difficulty getting to the point of agreement on anything but the most low-hanging of fruit. The Fiscal Responsibility Act, which was driven by the upcoming debt ceiling issues that they faced in 2023, took a lot of the consensus issues off the table. And in 2024, former Senate Energy chairman Joe Manchin and then ranking member John Barrasso reached a fairly substantive, if not comprehensive deal, but among other things, it wasn’t able to dig into the judicial review provisions Republicans had been seeking to prevent essentially the court fights and the invalidation of permits that have started to complicate infrastructure development. And so where are we now? Well, this would be a solution to that if it works. It’s a very high-stakes play. We don’t know how it’s going to turn out, but it’s going to matter very, very, very much.

Bill Loveless: I mentioned the parliamentarian and we had an episode recently in the Senate where they ignored advice and went ahead and rescinded the California waiver on vehicle emissions and a rule that would’ve established a phase-out period for gasoline-powered vehicles in California. That took a lot of people by surprise. Do you think the Senate is likely to stick to the parliamentarian’s advice going along? You said Senator Thune said he would, but will he be under any sort of pressure to abandon that stance?

Kevin Book: I think we’re at a point in history where some of the institutional bulwarks that have been in place for a long time are starting to topple. Both parties are starting to look at pressure from their constituencies to get things done when they’re having trouble. We have a theory of the case at ClearView. We wrote about in 2019, we had a report called “Swipe Right for a Green New Deal,” which is a title I didn’t come up with myself, but I like very much. And the point was that technology has accelerated us as a society. I think a lot of people point to technology for all kinds of woes, subverting the canon, dividing us. But no, the idea that it’s been speeding us up makes it very hard for our slow, linear and hierarchical democratic process to play out the way that it was envisioned by the framers.

And that tension between fast technology and slow democracy has been coming up over and over again. And one of the ways that we’ve seen it recently in the Senate is that the filibuster, which has been intact since 1806, has been recently modified in several substantial ways. First Democrats did it to expedite the approvals of nominees and then Republicans saw that they could do it too. Even the great institutionalist Mitch McConnell turns out he’s also a pragmatist. And seeing that they’d broken the seal on this particular institutional bulwark, it wasn’t long before both parties seized upon it. So now we’re at a point where we ask, well, is this going to keep going? Are we starting to see a collapse of these norms or is there a lot of new blood that doesn’t have that institutional memory, doesn’t have the patience, is also accelerated by technology.

They’ll have iPhones in their pockets after all. And so the example of using the Congressional Review Act, which is a 1995 law, which gives Congress the opportunity to roll back rules that had come out generally from the executive branch and to use it for a waiver after the general, sorry, the Government Accountability Office, formerly the General Accounting Office – I’m showing my years here – the Government Accountability Office Controller General had concluded that it actually wasn’t eligible for use to roll back these California vehicle waivers. And the Senate parliamentarian had agreed, had concurred with that. The Senate Republicans claimed that this was not actually overriding the parliamentarian. They were taking a decision separately on their own. There is a formal process to override the parliamentarian, which like the changes to the filibuster can be undertaken by a simple majority. Republicans have the votes to do it now, and it’s referred to as a nuclear option because the implication is that it’s incredibly destructive to the bipartisan comity that has been such a big part of Senate tradition, but here we are on the other side of some of those traditions.

Bill Loveless: Who knows what might happen because things happen and change so quickly. You’ve said that nothing changes energy policy faster than a supply disruption. Wild card events like blackouts, oil market spikes could shape the outcome of legislation too. And this comes at a time when there’s a lot of discussion, particularly among those who are supportive of the clean energy provisions in the IRA that this spending, this government support is necessary to further build the grid to make sure we have adequate supplies and secure supplies of electricity in this country. They say without it, we’re more likely to see shortages of electricity going forward. So that raises the question, could maybe a supply disruption associated with the grid or some other event, an oil market spike, could that have some impact on the way this whole process plays out or is there not enough time left for that?

Kevin Book: Well, it depends on how much time we really have. So I’ll deal with that question separately in a second. To your point, to your question about whether or not events, “events, dear boy” could get into this process and change outcomes, I think we have a very good recent example of exactly this process and exactly that result. And that was the Russian invasion of Ukraine in February of 2022, taking the stalled Build Back Better Act that then-President Biden had been pushing for and bringing it back to life after prices spiked in June. Suddenly members who couldn’t find their way to agreement, and a lot of this again concerned former Chairman Manchin, did. And it wasn’t necessarily driven by energy not showing up for work. It wasn’t an explicit supply disruption, but a very significant perturbation in prices that everybody in America focused on. When you saw $5 a gallon national average, it wasn’t just an economic question but a political one.

And in August of 2022, we get the Inflation Reduction Act. And so you can see this as a catalyst, you can point to other major legislation. The latency is often longer. That was actually a fairly short interval between the event that catalyzed the legislative move and the legislation actually passing itself. But if you go to blackouts in 2003, there was a pretty stuck Energy Policy Act process that ultimately culminated in the Energy Policy Act of 2005. And the things that unstuck it were mostly supply-related electricity supply and blackouts started to move things along after the August, 2003 blackouts in the northeast, and then the rising price of energy on the roads mobilized among other things, support for renewable fuel standard. So in this context, we do have to take seriously that a hot summer and supply disruptions could start to change the way we think about what the end result of this might be. Are we headed into a situation where the idea of “all of the above” comes back to life because the lights go out? It doesn’t seem very likely right now, but public appetites for rolling back credits might diminish if a blackout comes, if some sort of major disruption on the grid shows up and suddenly Republicans are forced to reckon with questions about whether or not they’re doing something that will raise prices for end users. I wouldn’t rule it out, Bill. Not at all.

Bill Loveless: Speaking of timing, the deadline set by leaders in Congress and the President is July 4th to get this bill done. That’s still a ways to go until July 4th, but do you think that target is likely to be met?

Kevin Book: No, is the easiest answer It could be. It could be out of the Senate by then. It is entirely possible for the Senate to conclude its process, whether it goes to the President by then, whether it goes to the president before the August recess seems likely to be driven by one very specific thing. Currently, the One Big Beautiful Bill Act includes language that would raise the debt ceiling. The debt ceiling was effectively breached on January 2nd. And since then, the treasury department’s been engaged in essentially what they call extraordinary measures. The effect of finding money under the couch and notionally, sort of metaphorically kiting checks to find ways to keep the government solvent when the true so-called X date, when the actual solvency of the United States is at risk shows up is a moving target. And right now, Treasury Secretary Scott Bessent has suggested that it could arrive as soon as August, and it might be as late as October.

But given that it could be here as soon as August, and also Congress is home in August, wouldn’t it be a good idea to get the bill done by mid-July? And the other answer though is that yes, it would be a good idea to get it done by mid-July. And so good idea, so good an idea that you should take this language out of the bill entirely, do it separately, intend with Democrats, dare them if you must to be responsible for the destruction of the full faith and credit of the United States. Neither party wants to be on the wrong side of that. And then what you have is a different situation because this propellant, this sort of date-certain time limit, time pressure is removed from the process and we might go well into the fall even into the winter in that context.

Bill Loveless: And there’s a lot at stake here, right? I mean for the president, many think this is it in terms of legislative options in this Congress, and so he has a lot riding on it for him as well as for the House and Senate Republicans. What happens to these various provisions, Kevin, if in fact, Congress decides to eliminate or more or less eliminate all of these clean energy provisions. Is there enough that, say, states can do to step in?

Kevin Book: There are some things that states can do to step in and there’s some history here in the first Trump administration. What we saw was that deregulation in Washington produced a sub-national response. We called it a “rollback rebound.” And essentially what happened was that state governments responded to deregulation by upping their climate ambition. These were the green-leaning blue states. They upped their renewable portfolio standards targets, imposed climate net zero targets for mid-century. All of this in response to what was happening in Washington setting rules in response to deregulation though is a different matter than spending money in response to defunding. All states, except I believe it’s Vermont, have balanced budget laws that prevent them from deficit spending. There are ways of course modulating through state rainy day funds and other mechanisms that are available to them, but they don’t have the pockets that Uncle Sam has.

So to come up with the tax credits that are essentially foregone revenues that would’ve gone to the federal treasury – which is perfectly capable and willing it appears to run deficits and issue debt – the states can’t possibly replicate the scale. So there are states that are willing to give incentives. The problem with this is if you look at the history, if you go back to the early days of the greening of transportation with hybrid vehicles, a lot of states stepped in on hybrid vehicles. But as the oil price rose in the early aughts, incentives for hybrid vehicles became organic and the uptake for tax these offsets, these spending, these grants, all these fiscal mechanisms either took money away or spent money out of state coffers, started to really ramp up. And even states that had very green ambitions started to see red and say, wait, we can’t afford this. And so it’s very unlikely that you’ll see something like the regulatory rebound that we found in Trump 1.0 happening on the funding side.

Bill Loveless: Before we go, I just want to step aside from this big bill if we can, and it’s difficult to do that right now, but it’s this whole question of Congress establishing laws that have long-lasting effects so that the country’s not operating off executive orders or policy that’s enacted under reconciliation bills. We had Senator Joe Manchin on the program earlier this week to talk about what it takes to get some sort of bipartisan agreement in the Congress these days. He’s working on a committee over at the Bipartisan Policy Center to try to come up with some ideas, and he certainly has the scars to show for his efforts over the years in this. But early in the conversation talking bipartisan, it just struck us that, well, there was this bill passed called the Bipartisan Infrastructure Act early on during the Biden administration, which was voted favorably by a number of Republican senators as well as a handful of Republican members of the House, which suggests that you can pass some bipartisan legislation. It’s tough. Perhaps it’s getting more so. You’ve observed this congressional process for many years now. Do you see it clearing out and anytime soon? Do you see an opportunity for there to be more of a bipartisan agreement on anything anytime soon? Or is this the way the Congress is going to operate for years going forward?

Kevin Book: Well, this sort of takes us back full circle to where we started with this idea that policy flux is moving upstream from permits and rules to laws themselves. And we’re finding that these laws that have been passed by one party aren’t nearly as durable as laws that were bipartisan. And the question of whether you can get that kind of bipartisan consensus on energy, if you go back to say 2008, you had two presidential candidates, John McCain and Barack Obama who were both campaigning in support of offshore drilling and climate legislation. Not necessarily in the same order, but they both had them on their list. We also had a time of scarcity and fundamentally, fundamental scarcity was a uniter. It also had the effect of aligning the climate agenda, which was about reducing greenhouse gases with the energy security agenda, which was about conserving hydrocarbon molecules.

Hydrocarbons you don’t combust as a gas, you don’t emit. And they were both singing from the same psalter if in different keys. So now what we have is something a little bit different. Energy security is one of the great blessings of the last 15-plus years, but it also reveals some of the fundamental divisions. I mentioned that 80% of the BTUs come out of the red states. The red states are also very different in terms of their end-use profiles. If you look at it as a percentage of personal consumption expenditures, there is about a 1.1 to 1.3 percentage point greater share of wallet going to energy in the states that voted for Trump in the last election or which have their local governments in Republican control. That’s the high end of the range. And it’s really, it’s fundamental. You have essentially people driving longer distances in bigger cars on smaller wallets. They earn less than the folks in the big blue city states and they think differently about energy. They have different perspectives. It’s harder to get agreement.

You also have the fundamental challenges that come with energy infrastructure, which is that the benefits accrue at both ends of the linear apparatus, whether it’s a pipeline or a transmission line. The folks in the middle and a lot of them have a lot of perspectives on that infrastructure tend to get less benefit. And so where you have division that’s fundamental and you can quantify it politically and economically. You have trouble getting these bipartisan alignments to work. Both of the two big bills that went along with the IRA, the CHIPS and Science Act and the Infrastructure Investment and Jobs Act had slightly less than 20 Republicans, sort of 17 or 18 of them, came along with Democrats to get the bill across the line.

Most of them were longer-tenured, more moderate, or at least more steeped in the tradition of bipartisanship. As you see a lot of new blood in the Senate, folks who came without any memory of what it was like when there was a functional bipartisan majority for a lot of these legislative priorities, you’re going to see less of that, and it’s hard to see how that gets restarted without an external catalyst of some kind. Now, that can come from the White House, can come from events outside the United States, the necessity of the moment. I’m not ruling it out by any means, and I am very optimistic about the resilience of our system, but directionally, we’re moving into our partisan foxholes and we might be there for a while.

Bill Loveless: Yeah, well, it’s a tumultuous time, a lot’s riding for various energy programs at the moment, as well as for the country as well with what Congress is working on as we speak. So Kevin Book, thanks again for coming on Columbia Energy Exchange to help us understand this whole situation a whole lot better.

Kevin Book: Really great to be here. Thanks for having me.

Bill Loveless: That’s it for this week’s episode of Columbia Energy Exchange. Thank you again, Kevin Book, and thank you for listening.

The show is brought to you by the Center on Global Energy Policy at Columbia University School of International and Public Affairs. The show is hosted by Jason Bordoff and me, Bill Loveless.

The show is produced by Mary Catherine O’Connor from Latitude Studios. Additional support from Caroline Pitman and Kyu Lee. Sean Marquand is the sound engineer. For more information about the show or the Center on Global Energy Policy, visit us online energypolicy.columbia.edu or follow us on social media @ColumbiaUEnergy. If you like this episode, leave us a rating on Spotify or Apple Podcasts. You can also share it with a friend or a colleague to help us reach more listeners. Either way. We appreciate your support. Thanks again for listening. We’ll see you next week.

Congress is rushing to enact what could be the most significant energy policy reversal in decades. The US Senate has begun work on an enormous budget reconciliation bill that would extend President Trump’s tax cuts while all but eliminating clean energy programs to help pay for them. The House version substantially repeals nearly all tax credits from the Inflation Reduction Act—affecting everything from solar and wind development to hydrogen and carbon capture projects.

According to the Sabin Center for Climate Change Law at Columbia Law School/Columbia Climate School, approximately $9.65 billion in unobligated IRA funds are at risk of rescission. Critics of the cuts say this could kill progress toward decarbonization, and pull the plug on US clean energy manufacturing. But supporters argue it’s necessary fiscal discipline.

So what’s really happening in the Senate? Can moderate Republicans preserve some clean energy provisions? And with a Fourth of July deadline looming, what wildcard events could change the political calculus?

This week, Bill Loveless speaks with energy analyst Kevin Book about the massive budget reconciliation bill currently moving through Congress and what it could mean for US energy policy.

Kevin is managing director of research at ClearView Energy Partners. He has tracked congressional energy legislation and its real-world impacts for years. In addition to leading ClearView’s research team, he is a member of the Council on Foreign Relations and the National Petroleum Council, an advisory body to the Secretary of Energy. He’s also a non-resident senior associate at the Center for Strategic and International Studies.

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