Daily on Energy: Democrats shoot down carbon tax backup plan

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CARBON TAX TROUBLE: That was fun while it lasted. Senate proponents of including a carbon tax in Democrats’ reconciliation package to replace the fading clean electricity performance program are quickly being reminded that it faces massive political headwinds of its own.

“The carbon tax is not on the board at all right now,” Sen. Joe Manchin, the centrist West Virginian who also opposes CEPP, told reporters this morning after departing an Energy Committee hearing he chaired.

It’s not just Manchin. Sen. Jon Tester of Montana, another relative centrist, told Politico, “you might have problems with me on a carbon tax.”

“It’s just not going to work,” Tester added.

House Democrats, meanwhile, did not include carbon pricing in their version of the reconciliation package, as the idea has fallen out of favor with liberals.

"I don’t think you can have any carbon pricing bill that you could introduce to the House today that you would get the majority of Democrats," Rep. Sean Casten of Illinois told Josh and co-host Neil Chatterjee for a new episode of the “Plugged In” podcast that just dropped this afternoon (check it out here, and also on Apple podcasts and Spotify).

“I share that concern," Rep. Jared Huffman, a California Democrat, told Josh this afternoon. "Putting aside economists just love it and some people think it’s the holy grail, we’ve got a difficult political needle to thread here and I am skeptical carbon pricing can be made to work."

Casten specifically took aim at an idea championed by Senate Finance Committee Democrats, led by chairman Ron Wyden of Oregon, who want to use the revenue from the tax for rebates or checks for low-income people. Casten’s point underscores that Democrats would have a hard time agreeing on how to use the revenue, as some prefer to use it for clean energy and infrastructure resilience investments.

“An even worse idea is tax and dividend because if you tax and dividend you say, ‘I am going to put a price on carbon and then I am going to expressly guarantee the money I take in will not be used for C02 reductions,’” Casten said.

Not giving up on CEPP: Casten is continuing to gun for the CEPP program, and warned fellow Democrats such as Manchin that weakening or removing it is tantamount to not giving a “rat's ass about climate.”

“If you take out or weaken the CEPP it’s no longer a climate bill,” Casten added.

Casten, a clean-energy businessman and scientist, says that a program of incentives and penalties for utilities to generate more zero-carbon power is more effective than a carbon tax. A carbon tax would raise the cost of fossil fuels but not necessarily induce developers to build more clean energy to replace coal and natural gas.

“I built clean energy projects in response to incentives,” Casten said. “I never built a clean energy project because my competitors had a change in their cost structure. The CEPP is not ideal, but much closer to the optimum than a simple carbon tax would be. There is enough people in the House that share my views it would be very hard.”

The advocacy of Casten and other Democrats has done nothing to persuade Manchin on CEPP.

And with broader opposition to carbon pricing among their ranks, that means Democrats are scrambling to come up with a mix of policies that can ensure President Joe Biden has a shot at meeting his climate change goals.

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Josh Siegel (@SiegelScribe) and Jeremy Beaman (@jeremywbeaman). Email jsiegel@washingtonexaminer.com or jbeaman@washingtonexaminer.com for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

BUT...CARBON TAX ‘ON THE TABLE’ FOR WHITE HOUSE: A carbon fee, or tax, is “on the table,” according to top Biden domestic climate adviser Gina McCarthy.

“There's a lot of things in the mix now that people are thinking about ... climate fees are one of them, whether it's a sector based or it's a broad based fee, none of those issues are off the table," McCarthy told a meeting of Biden's council of advisers on science and technology, Reuters reported yesterday.

Up until now, the White House has been quiet about carbon pricing, preferring to focus on promoting CEPP, its top priority to decarbonize the electricity sector.

Sen. Sheldon Whitehouse, Democrat of Rhode Island, recently told Josh he’s tried to convince administration officials that exempting gasoline from a carbon price included in reconciliation would make the tax consistent with Biden's pledge to not raise taxes on people making less than $400,000 a year.

ROMNEY GOADS DEMOCRATS ON CARBON TAX: Who saw this twist coming? Sen. Mitt Romney of Utah, one of the few Republican proponents of carbon pricing, is criticizing Democrats for not pulling harder for including a tax in reconciliation.

“For the life of me I don’t understand why Democrats right now through reconciliation are spending and taxing on their own but they are not planning on putting in place a price on carbon,” Romney said yesterday in a conversation with the Milken Institute (hat tip to Tom Moyer of Utah Citizens’ Climate Lobby for flagging).

“They talk about this as if this is the holy grail and they know it’s the only thing that really makes a big difference but they are not planning on doing it in reconciliation,” Romney added.

Romney has previously told Josh he is seriously considering and reviewing the merits of a carbon tax that would return the revenue to taxpayers, but he has not yet introduced or co-sponsored legislation.

CARBON TAX WOULD HELP BIDEN MEET CLIMATE GOALS...STUDY: A carbon tax of $20 per ton, combined with an extension of renewable electricity production and investment tax credits, would reduce power sector emissions by 80% by 2030 and would result in small (or no) increases in wholesale electricity prices, according to a new study released yesterday by a Harvard University economist.

That would fulfill Biden’s pledge to achieve 80% clean electricity by 2030 in order to enable economy-wide emissions to fall in half by then.

James Stock, the Harvard economist, and his co-author Daniel Stuart of the Analysis Group, find the tax credits alone result in only modestly more emissions reductions than under current policies.

The relatively modest carbon tax Stock and Stuart model is similar to the range Senate Democrats are reportedly considering, starting at $15 to $18 per ton and increasing over time, the New York Times reported.

ANOTHER VIEW...US CAN MEET GOALS WITHOUT CARBON TAX OR CEPP: The U.S. can fulfill Biden’s pledge to reduce emissions 50 to 52% below 2005 levels by 2030 without a carbon tax or CEPP, the research firm Rhodium Group says in a report this morning.

But doing so “will be one of the most challenging things the U.S. has ever attempted,” Rhodium concludes, and involve a mix of policies including expanded and extended clean energy tax credits along with a steady stream of standards and regulations by federal agencies and accelerated action by leading states and companies.

“I have always thought there are lots of different ways for us to get from here to there,” John Larsen, a Rhodium Group director and lead author of the report, told Josh. “If one policy opportunity doesn’t have all the bells and whistles, it puts onus on the next round of opportunities to do more or better.”

Democrats including a carbon tax or clean electricity program, along with a methane fee, would make the task easier, Larsen said, but Rhodium did not model those policies, given their political roadblocks.

“It’s hard to say the presence or absence of one policy in 2021 is going to make or break achieving a 2030 target,” he said.

But it will be very hard: With no new policies, the U.S. is on track to reduce emissions only 17- 25% below 2005 levels in 2030.

While Rhodium says the Biden target is achievable, they say emissions reductions would be needed at a level the "the same as zeroing out emissions from the entire state of Florida every year for the next nine years."

In other terms, the U.S. will have to cut emissions as much as its best non-recession year in recent history every year between now and 2030.

PROBING MANCHIN’S CLAIMS ON CEPP: Manchin is not backing down from his opposition to CEPP, repeating for reporters yesterday that “utilities are already transitioning” to clean energy.

“We’ve transitioned,” Manchin said, taking that claim a step further.

Proponents of the clean electricity performance program, which is imperiled because of Manchin’s opposition, are calling him out for making exaggerated statements about progress from utilities.

House Democrats’ version of the CEPP program would pay utilities that expand clean electricity at least 4% annually. Only a few utilities, out of 3,300 nationwide, currently plan to add 4% or more of clean electricity per year, according to data compiled by Evergreen Action, a liberal environmental group. The most clean electricity growth the power sector has ever achieved in a year was 2.3% in 2020.

David Brown, the senior vice president of government affairs for Chicago-based utility Exelon, recently told Josh in an interview that the CEPP “encourages companies not only to build clean generation, but to do it faster than we would see in a business as usual scenario.”

BIDEN NOMINEE PHILLIPS PROMISES ‘BALANCED’ APPROACH AT FERC: Biden’s nominee to be the newest commissioner of FERC, Willie Phillips Jr., says he would take a “balanced” approach to his job and does not support a total transition off fossil fuels.

“I am very aware we are in an energy transition,” Phillips said during his confirmation hearing this morning before the Senate Energy and Natural Resources Committee. “I want to do everything I can to push forward innovation to achieve our goals.”

Phillips said he supports an “all of the above strategy” and stressed that energy regulators cannot afford to “sacrifice reliability” in moving the power grid to cleaner sources.

“I believe climate change is real and we have a moral and ethical obligation to address it,” Phillips said. “I believe it starts with balance. We have to have balance in our approach.”

Phillips, considered a moderate, seemed to please Manchin, the committee’s chairman, and John Barrasso, the top Republican, who sought to be assured that FERC won’t lose sight of “affordability and reliability of electric and natural gas services,” as Barraso put it.

His approach to fossil fuel infrastructure: Later in the hearing, however, Phillips seemed to side with FERC’s sitting Democrats who want to take a more critical look at emissions downstream effects when reviewing pipelines and LNG projects.

“The D.C. Circuit has been clear to FERC that they have a responsibility to climate change and environmental justice,” Phillips said.

If the Senate confirms Phillips, who would replace Chatterjee, it would give Democrats a 3-2 majority.

Phillips is chairman of Washington D.C.’s Public Service Commission, the utility regulator, and was previously assistant general counsel for the North American Electric Reliability Corporation.

LEADING RETAILERS COMMIT TO ZERO-CARBON SHIPPING BY 2040: A group of nine retail giants have signed on to a statement that commits them to employing ships exclusively powered with zero-carbon fuels by 2040.

Amazon, IKEA, and Michelin are among the companies to sign the Cargo Owners for Zero Emission Vessels (or coZEV) initiative, which was facilitated by the Aspen Institute as a means of complimenting the Paris agreement’s global climate goals.

The statement also calls for the full decarbonization of the maritime industry by 2050 and urges more firm climate action from policymakers.

“In order to combat the climate crisis, we must rapidly decarbonize marine shipping — which accounts for 1 billion tonnes of carbon emissions per year,” said Jonathan Lewis, director of transportation decarbonization at Clean Air Task Force, which supports coZEV. “CATF’s modeling and analysis has found that transitioning the sector from high-emitting fuels to zero-carbon fuels like hydrogen and ammonia is the pathway with the highest likelihood of success.”

EXPERTS FORESHADOW TEXAS GRID RECOMMENDATIONS: A panel of energy industry leaders and experts gathered for a virtual briefing this morning to discuss what they expect (and hope to see) in the Texas Public Utility Commission’s upcoming draft of market redesign recommendations, spurred by Winter Storm Uri’s devastation of the state’s grid earlier this year.

The consensus was that PUC needs to recommend a multi-fold approach that doesn’t too heavily favor fossil fuels and that leans heavily on demand-side solutions.

“I agree that they probably need fossil plants in the short term," said Alison Silverstein, a consultant and former senior adviser at the Texas PUC and at FERC.

But those aren't the end-all, Silverstein said, adding that the PUC needs to take a technology-neutral approach that looks at performance metrics and doesn’t exclusively favor fossils in addressing the supply side of the equation.

Panelists also riffed off a recent report from the American Council for an Energy-Efficient Economy report laying out a series of efficiency-related solutions, such as improving insulation in attics and other residential retrofitting programs to improve HVAC systems, and stressed the importance of efficiency and demand side solutions as a means of targeting gaps between supply and demand.

“Nothing solves the whole problem,” said Doug Lewin, a consultant with Austin-based Stoic Energy LLC. “We're not looking for silver bullets. “We're looking for silver buckshot.”

Texas PUC’s draft recommendations will be released on Thursday.

SUNLIT UK VERTICAL FARM BEGINS HARVESTING: The company behind a sunlit hydroponic produce operation in Worcestershire, England, has begun picking thousands of bunches of greens from the “fields” of its first vertical farm.

Shockingly Fresh’s products, which include pak choi, lettuce, and strawberries, are bound for British supermarkets next year. The company expects its first farm to yield some 2 million heads of greens per year.

“Production isn’t completely linear as it would be in a fully-lit vertical farm,” said Nick Green, Shockingly Fresh’s development director. “But we do match the consumption pattern of people — people don’t eat as much lettuce in winter as they do in summer.”

GREEN HYDROGEN HUB COMING TO MISSISSIPPI: Hy Stor Energy LP announced it is developing a clean hydrogen hub in Mississippi that, in its first phase, is designed to produce an estimated 110 million kilograms, or more than 121,000 tons, of green hydrogen per year.

The hub will also be equipped with storage of storage capacity amounting to more than 70 million kg of hydrogen through utilization of subterranean salt caverns.

“The biggest challenge the energy transition faces today is how to bridge the gap to allow renewables to replace fossil fuel electric power generation safely and reliably. In an era of increasingly frequent extreme weather, it’s imperative to have the ability to store large quantities of renewable energy capable of providing multiple days of power over long periods of high demand,” said Laura Luce, CEO of Hy Stor Energy.

The company is planning for 2025 for the hub’s entrance into commercial service.

EDF POLLS SUPPORT FOR METHANE REGULATION: Nearly three-quarters of independent voters and half of Republicans want to see tougher rules regulating methane emissions from oil and gas operations, according to a new poll conducted by Morning Consult and put out by Environmental Defense Fund.

Overall, 71% of registered voters support tougher regulations, the poll found.

“Reducing oil and gas methane pollution is the Biden administration’s fastest, most impactful path to addressing climate change, and an overwhelming majority of voters wants strong, comprehensive action from EPA,” said Jon Goldstein, EDF Action’s senior director of regulatory & legislative affairs.

The Rundown

Washington Post Russia allows methane leaks at planet’s peril

Wall Street Journal To strike a climate deal, poor nations say they need trillions from rich ones

Bloomberg Boris Johnson sees ‘extremely tough’ global climate talks in Glasgow

Politico ‘Brown recovery' wipes out hopes that pandemic stimulus would drive climate spending

New York Times Nuclear fusion edges towards the mainstream

Calendar

WEDNESDAY | OCT. 20

1:30 p.m. 210 Cannon. The House Select Committee on the Climate Crisis will hold a hybrid hearing titled, “Good For Business: Private Sector Perspectives on Climate Action.”

THURSDAY | OCT. 21

10 a.m. A subcommittee of the House Foreign Affairs Committee will hold a remote hearing titled, “Preparing for COP26: United States Strategy to Combat Climate Change through International Development.”

10:30 a.m. 2123 Rayburn. The House Energy and Commerce Committee’s Energy Subcommittee will hold a hearing on offshore wind.

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Tags: Energy and Environment, Daily on Energy

Original Author: Josh Siegel

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