← Shift Key with Robinson Meyer
Shift Key with Robinson Meyer
Climate Policy in America: Where We Go From Here
01:10:47
Rob does a post-vacation debrief with Jesse and Heatmap deputy editor Jillian Goodman on the One Big Beautiful Bill.
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- [00:01]
A
You are listening to Shift Key Heat Maps weekly podcast about decarbonization and the shift away from fossil fuels. On this week's show, the Republican reconciliation bill will transform the country's climate and energy policy. So what is in the bill? What made the cut? What does it mean for the energy transition and how are we feeling about it? It is all coming up in a blockbuster episode of Shift key. After this, ShiftKey is brought to you by the Yale center for Business and the Environment. Do you want to accelerate your career in clean energy? Then it's time to explore online certificate programs from the Yale center for Business and the Environment. Whether you're designing policy, unlocking, financing or developing important projects, Yale's online clean energy programs equip you with tangible skills and powerful networks and you can continue working while learning in just five hours a week. Propel your career and make a difference. Learn more about Yale's year long Financing and Deploying Clean Energy program or their Clean and Equitable Energy Development Program, which is just five months long by going to CBEY Yale. Edu that's CBEY Yale. Edu Hi, I'm Robinson Meyer, the founding Executive editor of heatmap News.
- [01:18]
B
And I'm Jesse Jenkins, a professor of Energy Systems engineering at Princeton University and.
- [01:22]
A
And you are listening to Shift Key Heat Maps weekly podcast about decarbonization and the shift away from fossil fuels. Jesse, I go on vacation for two weeks and the entire landscape of American energy and climate policy changes around us. I don't know.
- [01:39]
B
Did something happen? Did I miss something?
- [01:41]
A
I think on this week's episode we are talking about everything that has just changed in federal climate policy. On July 4, President Donald Trump signed the One Big Beautiful Bill act partisan reconciliation law passed by Republicans in the House and Senate that has changed the face of not only federal tax and spending law, but specifically federal climate policy and energy policy. Taking a number of policies that we have long covered and discussed here on Shift Key, many of which were passed in the Inflation Reduction act and transforming them in significant and highly impactful, for lack of a better term, ways that are going to change just about every part of the US Energy economy in years to come. It is actually hard to understate the significance of this legislation, which represents, I think importantly, not only a change to like energy policy, US federal energy policy post2022 when the inflation Reduction act passed, but for decades the goal of US Energy policy has been to develop and then to deploy what was once called alternative energy sources and we now tend to call renewables or advanced energy sources or decarbonized zero carbon energy sources so that the US could diversify away from fossil fuels and reduce the pressure, global pressure on fossil fuel prices and lower costs for consumers as well as lower air pollution in the United States. And this legislation reflects a significant turn away from that. That being said, I was away for all of it. I mean, what an amazing time to go on vacation as a climate reporter. And so I have missed the entire last chapter of this saga. And so in this episode, we're going to get up to speed on what happened. We're going to discuss our initial reflections on where energy and climate policy in the United States goes from here. And so I'm excited to talk. I'm also excited to welcome to this episode my colleague Gillian Goodman. I'd say Gillian is usually here for Przewski episodes. She's just on the other side of the virtual recording studio. But since she actually oversaw our coverage over the past two weeks, we wanted to bring her into this discussion. Gillian, welcome. I feel like we've had you maybe once or twice before, but welcome to Tiffski.
- [03:55]
C
I've been on before. Yeah, thank you. Nice to be here. Always nice to be here, even when I'm just lurking.
- [04:04]
B
Great.
- [04:04]
A
Well, with all that said, let's get into it. Jesse, what just happened? Where do you want to start here? What just happened?
- [04:16]
B
We can get into what was preserved here because this is not a full repeal of the Inflation Reduction Act's clean energy policies, particularly some of the key tax credits did survive, some in an altered form. But the short story here is that tax credits that were driving accelerated deployment of wind power, solar power and electric vehicles that were responsible for the largest near term impacts of the Inflation Reduction act, including the biggest impacts on greenhouse gas emissions, air pollution and energy costs, have all been repealed effectively at the end or earlier than the end of this year. Those are the biggest whammies there. Right? And what they're not going to do is stop the deployment of wind, solar and EVs, but they will slow wind, solar and EV adoption. They will make the stuff that we do deploy more expensive and particularly on the electricity side because we're adding less new clean electricity to the grid. Our estimates are about a nuclear power fleet worth of new clean electricity that would otherwise have come online by 2035 will now not be added to the US grid. Because of this law, we're going to be basically having less and more expensive new clean energy. And that's going to mean that electricity prices overall are going to go up and because we're deploying less EVs, gasoline consumption will also go up. And that also means prices at the pump go up. So in a nutshell, we're going to have dirtier, more expensive energy and less rapid deployment of wind, solar and electric vehicles thanks to the passage of this bill.
- [05:48]
A
You kind of gave us the brief flyby tour, but I want to go through to some degree the major policies in the Inflation Reduction act and what has become of them. And let's start with the biggie, the one that drove the most emissions reductions in the Inflation Reduction Act. So in the ira, man, I'm realizing that.
- [06:08]
C
Are you like initially processing this live?
- [06:11]
A
No, I've kind of understood it, but I am realizing that there's a series of phrases I've used to describe a bunch of policy that was on the books that I'm now about to say for the last time. In the ira, there were two tax credits. A technology neutral clean electricity production tax credit credit and a technology neutral clean electricity investment tax credit that for the first time ever subsidized the either investment into or production of electricity from any technology source. From any kind of source, provided it didn't significantly increase greenhouse gas emissions. Well, previously US Tax credits had gone to say, solar and wind, but not geothermal or not hydro or not nuclear. It was always a changing set of policies that US Federal energy policy supported. For the first time, the US Government said we are just going to support any technology, be it wind or solar or nuclear or geothermal, provided it produce electricity and relatively no greenhouse gases. What has happened to those two policies? What did the bill do to those two policies?
- [07:18]
B
The final bill passed by the Senate, unlike the House version of the bill, actually preserves those credits for every technology except for wind and solar through the end of 2033 at full value, whether those are energy storage projects or new nuclear power plants or geothermal. Anything that's carbon free electricity generation or energy storage that commences construction through the end of 2033 will retain the full value of those tax credits. That includes the energy community and domestic content bonuses that increase the value of those credits. If you buy American content or locate projects in particular communities that are home to fossil energy production historically. And that includes the transferability and direct pay provisions that make it easier to claim those credits. So for non taxed entities, they can just get paid directly. That's the direct pay rule. And for anyone else, they can sell those tax credits to a third party on a secondary exchange, usually for something like 90 or 95 cents on the dollar to someone else with business tax liability, all of that remains in law. The tax credits are available through the end of 2033 and then step down in 2034 and 2035. And again, that's for projects commencing construction in those years. And they have up to four years to complete construction after that. So the good news is for everything but wind and solar, those credits are preserved for basically a decade. The bad news is that for wind and solar, those credits are terminated, effectively. For projects that commence construction, there's actually three, three tranches here. Projects commence construction between now and the end of this year are under current law. So they will get the full credit, you know, under the inflation Reduction act terms. Projects that commence construction between January 1, 2026 and July 4, 2026, 12 months after the law was signed, they can retain the full tax credits if they meet new foreign entity of concern restrictions. These are anti China provisions primarily that are designed to keep Chinese influence out of U.S. supply chains. We can talk more about those details in a minute. Those go into effect for projects that commence construction after January 1, for projects that then commence construction after 12 months after passage. So after July 4, 2026, they would have to be placed in service by the end of 2027. So they have basically 18 months to not just commence, but also complete construction. That's a very narrow window that maybe only the fastest battery or solar projects could meet. And so the way I think about this, because the foreign energy concern rules are going to be very difficult to comply with, particularly at the very beginning, I think in effect, projects that commence construction before the end of this year are fine. And beyond that, it's very unlikely that wind or solar projects will be able to comply. It is important to note that those foreign entity of concern rules also apply to all other technologies that commence construction after January 1, 2026 as well. And I think for lithium ion batteries in particular, in the short term, that may also be a challenge for them to be able to claim those rules until the rules are first of all clarified by the Treasury Department and then the supply chain can manage to find ways to basically demonstrate compliance with those rules.
- [10:22]
C
So wait, so the placed in service.
- [10:24]
B
Requirement only applies to projects that don't commence before 12 months after passage?
- [10:30]
C
Oh my God, such stuff is so complicated.
- [10:32]
B
Yeah, which is sort of like at that point it's sort of pointless. Like they should have just sunsetted it 12 months after passing. Because like, like I said, like you have 18 months to finish. Like maybe a battery project could get done in that timeframe. But like the tax credit won't be bankable in that timeframe anyway because if you hit a three month delay, you're going to lose the credit. So it's sort of useless. Yeah, I guess just to sum us up again, the point is like we removed the accelerant of near term emissions reductions and we retained the long term tax credit available for quote unquote, advanced carbon free generation technologies. That is important. Both of those things are true at the same time. One of them is very bad for emissions, the other one is very good policy and has now been sustained by a Republican trifecta which is quite remarkable.
- [11:18]
C
It's not so much picking the winners of carbon free electricity generation so much as it is picking the losers. Like we know who the losers are. There are still a whole bunch of potential winners. But wind and solar definitely lost in this bill.
- [11:30]
B
That's right. I would say I would still expect basically all electricity demand growth and more actually in our case in the repeat projects estimates, all electricity demand growth, and then some between now and 30, 20, 35 will be met by carbon free electricity. It's just that we'll also lose another 820 terawatt hours of additional clean electricity that we could have built if we had sustained the ira, IRA tax credits. And that's again more than the entire contribution of the nuclear fleet or the coal fleet to our electricity supply today, which each supply under 800 terawatt hours. So this is where again we got a hold in our heads. Like if our goal is to confront climate change, right, we want to reduce emissions as fast as possible and that means deploying wind and solar, which are the technologies able to scale rapidly today. And Republicans said we're not interested in that. We, in fact, we don't like wind and solar, so we're going to remove specifically like you said, Julian, those are the losers of this bill. But wind and solar are still cost effective to deploy, just not at the same scale as they would be if we also valued the fact that they're contributing clean air and emissions reductions, things that the market doesn't value without some kind of tax policy or some kind of regulatory stick on the other side, which they're also unwinding, including the EPA power plant regulations, which could have a pretty substantial impact between in the2030s. That's not part of this law. That's a separate set of executive repeals that the Trump administration is also enacting. And in our estimates from repeat, those have a huge impact in the 2000 and 30s where they would basically drive the full scale retirement of the coal fleet. And without those tax credits in place, that is now much less likely that it's much harder to push offline old coal plants entirely by adding new clean supply, especially in an era of rapid demand growth. And so when you take those two things together, emissions in the power sector are substantially higher under this Trump era policy than they are under Biden era policies that were in place. And by substantial, I mean like 700 million tons per year scale in 2035, which is a lot.
- [13:28]
A
Let's move on, Jesse. As you mentioned at the beginning of the show, The IRA contained three different tax credits meant to support EVs. The first and the most famous was a $7,500 EV tax credit that was meant to go to households and Americans buying a new EV for personal use. It subsidized the cost of a vehicle purchase by up to $7,500. The second one was a used EV tax credit. This went to folks within certain income caps. It would subsidize the purchase of a used EV up to $4,000. And the third was a commercial vehicle tax credit that supported businesses that were buying a new electric vehicle. It drew a distinction between heavy duty vehicles, which were subject to a kind of percentage investment based subsidy, and then for small kind of personal size light duty vehicles, it allowed the same $7,500 EV tax credit. And that one was to allowed for dealerships to buy vehicles and then lease them out. And so one of its many uses was that it allowed basically a leasing side EV tax credit. What has happened to those three different pieces of EV tax policy?
- [14:39]
B
All three of those credits are repealed for vehicles acquired after September 30th of this year. So we basically have the remainder of this quarter. At the end of September 30th, those credits are gone for both individual purchases and businesses or leases. There was a fourth credit that also supported charging infrastructure, the alternative Fuel vehicle refueling property credit 30c, which supported households installing chargers and I think importantly also 30% of the cost with certain caps for business installations like DC fast chargers on the highways or level 2 chargers at workplaces or things like that. That was only available for rural and low income zip codes. As a personal property credit that is repealed after June 30th of 2026. So we get a little bit longer on the EV charger credit than the purchase of EVs, but that one's in place basically for one more year through the end of June 2026. So yeah, the major supports for EV adoption and EV chargers also being cut dramatically short. All four of those credits should have been in place through the end of 2032 and so are now cut short basically this year or next year.
- [15:44]
A
That was on the demand side of the electric vehicle supply chain. On the supply side of the electric vehicle supply chain, the IRA created a new production tax credit, so called 45x that subsidized the production of solar, wind, inverter and battery components, as well as the refining of critical minerals. It was quite important to make factories pencil out in a number of these industries and to make them competitive with China. But it was particularly important, as I understand it, for batteries and EVs. What is the fate of that advanced manufacturing tax credit?
- [16:15]
B
Yeah, so that credit was retained for most things. It sunsetted for wind component manufacturing after 2027. Republicans really just don't like wind power, I guess, even though actually of those industries, wind is one of the ones we make more have a much higher domestic content share with companies like Vernova being leading global wind suppliers. But yeah, that credit is no longer available for wind component manufacturing after 2027. For others it is still available through 2030 with a phase down between 2031 and 2032, critical minerals production, which is also eligible for a 10% production subsidy under that 45x credit that was actually extended through 2034. So the bill actually provides a longer term phase down for critical minerals production. And on all of those it adds new foreign entity of concern rules as well, which may make it more difficult for some manufacturers to claim those credits if again they have some Chinese involvement in their supply chain. Those rules go into effect again after this year for contractual arrangements reached after this year. It sounds like Ford believes that their deal with Catl Chinese battery producer, where they're going to license lithium iron phosphate battery technology for production in Michigan. That deal will be grandfathered in before the new foreign and any of concern rules. But going forward, licensing arrangements like that one, where you're licensing technology from Chinese firms, where Chinese firms are producing substantial shares of your supply chain, where they own substantial amounts of the debt or equity in projects and suppliers throughout the supply chain, any of those could invalidate tax credit eligibility for 45x and for basically all of the other tax credits that these foreign entity of concern or FIAC rules have been applied to. Oh, and just for fun, they also added a short term and smaller tax credit for metallurgical coal production. That's coal that's used not for power generation, but for steel making. That gets a 2.5% tax credit through 2029 for met coal production, most of which by the way over 60% we export abroad, contributing to supply chains that their global supply that folks like China use to produce cheap steel which then is dumped back on the market. Just a straight up giveaway to whatever Colbaron managed to hire an effective lobbyist and get that in there.
- [18:28]
A
Let's just quickly move through the rest. The Inflation Reduction act also changed the tax credit 45Q which pays out to companies that both draw CO2 out of a smokestack or some kind of industrial operation or capture it from the air and inject it back into the ground. 45Q and the IRA kind of had this three part structure. You got paid $85 a ton if you captured CO2 from an industrial process and injected it into the ground, thereby keeping it out of the atmosphere. You got about $60 a ton if you use that CO2 to then drill for oil in a process called enhanced oil recovery. And you got the most amount of money, $180 a ton if you captured CO2 from the air and then injected it underground, thereby theoretically achieving a negative emission. I have to say it was kind of a big deal when it passed because it was a negative carbon tax. The US government would pay you $180 to remove carbon from the atmosphere. What is the fate of that policy? Jesse?
- [19:27]
B
The Republican Party has sustained that negative carbon tax or carbon removal subsidy and carbon capture subsidy largely because the oil and gas industry is quite a fan. Particularly certain companies like Exxon and Occidental Petroleum who have made major investments in the so called carbon utilization management sector. So the 45Q credit for carbon sequestration is maintained through the end of 2033 as it was in the IRA. No change to that phase out date. The only thing that was changed is it now aligns the credit value for carbon utilization and storage. So Instead of getting $85 per ton for storing the CO2 and only $60 if you use it now, you get $85 per ton for either storage or utilization, including enhanced oil recovery or other uses of CO2 that's captured at industrial facilities or carbon removable facilities. So minimal changes to that one, although some benefits for those who want to use it for enhanced oil recovery. Although we should say $180 a ton. It sounds like a lot, but it's still far from enough to pay for most.
- [20:27]
A
It doesn't pay for the process really.
- [20:29]
B
For any current direct air capture. So that direct air capture Industry will continue to rely on some voluntary offtake from from large companies or others.
- [20:38]
A
What's the kind of most recent DAC cost? 500, 600. The ton? Yeah, yeah, yeah.
- [20:43]
B
Nobody knows. Hundreds of dollars per ton at that minimum.
- [20:47]
A
Last thing, the IRA contained a slew of, I'm just going to call them smaller tax credits. Obviously they're important in a lot of industries and they had a kind of whole of the economy focus when taken together. But individually they're a little tiresome to go through on the podcast.
- [21:02]
B
Yeah. So the ones that affect households that you and I might interface with the residential clean electricity credit that you could use to install rooftop solar or a heat pump system. The personal tax credit that is repealed at the end of 2025, along with the energy efficiency tax credit that you could use to cover heat pump installation or energy efficiency retrofits in your home. Both of those gone at the end of this year. So if you're planning to do one of those things, get it done. Before the end of the 2025. There was a business tax deduction for energy efficient commercial buildings and another tax credit for builders of energy efficient new homes. The deduction is now gone after June 30, 2026. Although should say that there is a new 100% bonus depreciation for all capital expenditures with a 20 year or less amortization life that is now permanent tax code for all business expenditures. And so that might cover quite a few upgrades to energy efficient buildings and things like that as well. But those credits are also terminated. The energy efficient home builders credit at the end of June of this year. And then on the supply side there are a couple other ones. There's the clean hydrogen tax credit that actually is still available for projects that commence construction through the end of 2027. And again they have a four year period after they commence construction to actually be placed in service. So hydrogen projects coming online through 2031 probably will be eligible for the 45B Clean Hydrogen Credit 45U which provides kind of a backstop subsidy for existing nuclear that is also retained unlike in the House version where it was cut short. So that is still in place through the end of 2032. And then there is a tax credit 45Z for biofuels which is actually extended. It was originally set to sunset in 2027 and is now extended through the end of 2029. There are new FIAC rules, foreign entity of concern restrictions applied. It restricts the use of certain feedstocks from outside of North America. So certain changes like that. And it also relaxes some emissions calculations rules around land use related emissions impacts and animal waste related emissions, something we talked about with Michael Grenwald on our episode on Eating the Earth. These indirect land impacts or emissions impacts of using land for biofuels are explicitly not able to be counted now in the lifecycle emissions impact assessments used for biofuels.
- [23:15]
A
So let's talk about two kind of key policies in the law and then I want to get to what this effectively means for our real life energy economy. They are the foreign entity of concern rule and this kind of placed in service versus star construction distinction. Let's first talk about the foreign entity of concern rule. To some degree there has been a foreign entity of concern rule for some parts of the ira. Basically since the law was written, it's been a provision that was there. It was insisted on by Manchin and it basically said makers of batteries, makers of EVs, had to ramp up the amount of North American or US trade partner produced or refined materials over the late 2000s in order to gradually phase out the amount of Chinese or Chinese sourced components that came into the supply chain. We should add, by the way, that foreign entity of concern is this federal legal distinction that refers to four states in particular, China, Russia, North Korea and Iran. For our purposes, Russia, North Korea and Iran are not particularly major players in the clean energy supply chain. But China of course is very much. And so although foreign concern is this kind of legal euphemism, it effectively only refers to China because it's not like Iran's really sending us BYD vehicles off the line. How does the reconciliation bill change the federal and the foreign entity of concern status quo?
- [24:38]
B
Gillian, do you want to take that one?
- [24:40]
C
Well, yeah. For one thing, as you mentioned, it originally only applied to electric vehicles and batteries and now it applies to everything. So it adds this whole new effectively regulatory barrier to producing and manufacturing clean energy in the United States. Jesse, I will maybe defer to you as to what exactly the rule says in the final bill because it went through many permutations like from the House to the Senate and in those final sort of fevered hours of trying to pass the bill. Essentially you can't use any sort of component from China in any part of your manufacturing. You can't use any component from China. You can't use any component from a company that's owned by a Chinese state entity. You can't use any component from a company that like talked to a Chinese investor at some point in its investment process. It's Very, very stringent. The one thing that did change in the the end game, if I recall correctly, is that piece that Jesse mentioned about the requirement applying only to contracts like new contracts. Basically, if you have entered into a contract with a supplier that falls under one of these prohibitions already by the time the bill passed, you can still honor that contract and qualify for the tax credits as long as you qualify under all the other new restrictions. That's just a business continuity thing that was added at the last minute. No, it's really, it takes a provision that was designed to support American manufacturing of electric vehicles and electric vehicle components in particular, and applies it across the clean energy supply chain in ways that are going to be effectively impossible to comply with.
- [26:21]
B
Yeah, I mean, it's not quite that strict in the sense that there are thresholds that you have to. Basically the problem is you have to positively demonstrate that you meet a certain threshold in the case of the manufacturing tax credit, material inputs, and in the case of the deployment related subsidies like the EV, I mean the clean electricity credit or the 45x or in the case of many of the deployment subsidies like clean electricity or clean hydrogen, you have to prove that the manufactured products and components meet these thresholds. That basically a positive demonstration that a certain threshold does not come from any of these prohibited foreign entities. So these Chinese influenced or owned companies and that threshold goes up over time. Initial drafts were that you literally couldn't have a single, like a single screw or piece of steel or whatever from a prohibited foreign entity. In the Senate side, that was updated to include a set of thresholds. They're different for each of the tax credits just to make our lives extra complicated. But for example, for the clean electricity and energy storage subsidy, the production tax credit and investment tax credit, that threshold starts in 2026 at 40% of content and rises by 2030 to 60% of content. So you basically have to demonstrate that at least 60% of your content by 2030 does not come from firms with Chinese influence in their ownership or their IP that they bought or all kinds of other things. And so the reason that the industry is very concerned about it, that still views it as largely unworkable, although maybe not entirely unworkable for some industries, is simply that it requires this positive demonstration of a bunch of criteria deep into your supply chain, not just one tier up, but like multiple levels up the supply chain. And that's going to be very difficult to police and to demonstrate as a, you know, as a matter of practical recourse. And so I would Expect certain, over time, like certain firms will be able to positively demonstrate, hey, we're a clean supplier that doesn't fully of these and then we attest to that and you can trust us or something like that. But it's gonna be very difficult for say like a wind farm developer, or maybe more accurately, since the wind farm credit is going away, a lithium ion battery grid connected battery project, to be able to very clearly say, like, hey, there is no manufactured content in my inverters or in my switchyard or in my batteries or anywhere up and down my supply chain that doesn't come from one of these firms, or at least that no more than 40% of it doesn't come from, from one of those firms.
- [28:45]
C
Even for the limited application of the foreign entity of concern rules in the Inflation Reduction act, it took Treasury a good few years to develop guidance for how to comply with those requirements. And so now there are all these graduated requirements and like different levels of how you can't interact with China. And just, it's going to be, it's hard to fathom how treasury is actually going to put this into a tax code.
- [29:07]
B
That's right. And that's why, like, again, since for wind and solar, technically they can claim the credit through the through 12 months after passage if they commence construction before July 4, 2026. However, because these new foreign entity concern rules go into place for projects that commence in the new year after January 1st, in my view, that is basically the end of the road for wind and solar. And there will probably be a period where particularly the lithium ion batteries, for which China has a huge presence in the supply chain. Chinese companies, I should say, not just like sourcing from China itself, but Chinese companies, whether they're located in Europe or the United States or Morocco or whatever, they also are subject to this prohibited foreign entity definition, it'll be very difficult, I think, for lithium ion battery projects, for example, to demonstrate immediately they meet these rules, especially since the rules aren't clearly defined and probably won't be by January 1, 2026. So there's going to be this period where while the tax credits technically exist on paper, it will be very difficult, I think, for projects to confidently tell banks, hey, I'm going to be able to claim this credit and therefore be able to account for the credit. Maybe down the line they'll be like, oh great, it's an upside, I get to claim it and they'll get a little bit extra profit. But they're basically going to make these credits what we call unbankable meaning no one trusts that you'll necessarily be able to get them. And if you can't trust that, then you can't take it as part of your pro forma to the bank and say hey, this is part of our guaranteed revenue and you should help finance our project.
- [30:28]
A
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- [32:33]
B
I think that's a risk and that's certainly something that many people were concerned about as the bill was advancing, which is why they're trying to make sure that the rules were as clearly defined in the statute as possible and that ideally they would not apply until new guidance was issued or things like that. People could safe harbor until that point. We can put this in the show notes. There's a great blog post unpacking these provisions from the Bipartisan Policy Center. And they note that following the IRA's enactment in August of 2022, treasury didn't publish final guidance for the original foreign identity of concern rules for the tax credits until May 2024. So nearly two years later. And in addition, the bill is shortening the phaseout requirement for timeline for a lot of these things, including clean hydrogen and wind and solar. And so they write that these changes combined with long implementation timelines for fiat guidance will dramatically shorten the window and in which companies can claim the relevant energy tax credits. The net result of this will be significant reduction in energy projects that qualify for the credits that are developed and put into service. Basically, in effect, this is throwing up huge barriers to actually making use of these credits. Now, while I was worried about a long term dragging of their heels on this, what we got actually Last week on July 7th was a new executive order on quote, ending market distorting subsidies for unreliable foreign controlled energy sources from President Trump. This was an order that is part of sort of the horse trading that got the House Freedom Caucus to finally get on sides and vote for this one big bad bill, despite the fact that it added something like 3 to 6 trillion dollars to the deficit, depending on how you calculate the deficit impacts, something the Freedom Caucus said they would not support. They also don't like renewables. And apparently they got some deal from President Trump who said that if you vote for this thing, I will use my executive authority to make it as difficult as possible for wind and solar to claim these credits, even if they have a little bit longer of a Runway. That includes two directives. One is that the Treasury Department implements these foreign entity of concern rules. And the second is that they revisit the definition of what commencing construction means to make it harder, presumably for projects to safe harbor before these rules go into effect, both within 45 days. So I guess that means sometime in early September, the idea that they would implement new enhanced foreign concern restrictions within 45 days, when it took the very dedicated staff at the Treasury Department under the Biden administration nearly 1820 months to do the first time around, seems a little bit insane, but that's what the executive order Sundays. So within 45 days, they, following enactment of this one big beautiful bill, the Secretary of Treasury shall take prompt action as as the Treasury Secretary deems appropriate and consistent with applicable law to implement the enhanced foreign entity of concern restrictions in the bill as well as to take actions to ensure to issue new and revised guidelines as appropriate necessary, consistent with the law to ensure policies concerning the Beginning of construction are not circumvented, including by preventing the artificial acceleration or manipulation of eligibility and by restricting the use of broad safe harbors until a substantial portion of a subject facility has been built. What they're referring to there is that historically projects could claim they had commenced construction in one of two ways. And once they did that, basically whatever the tax law was at the time that they commenced construction, they were locked into that rule set for up to four years, as long as they were completed within four years of that time they commenced. And there are two ways to do that. One is to basically buy spend about 5% of project, more than 5% of project capital expenditures on like long lead time items, like buying transformers or wind turbines or solar modules or whatever else, even if you hadn't actually started construction on site, you'd just been warehousing and ordering those long lead time items. And then the other was to actually do substantial construction activities on site. And what I, as I read the executive order, what it looks like they're probably going to do, we don't know exactly yet, is they may strike that 5% long lead time item rule and require actual physical construction on site in order to safe harbor. And that will again restrict the pool of projects that are actually able to lock in the tax credit for wind and solar, or for clean hydrogen, or for other credits with these foreign entity of concern rules apply to before the end of this year when they would go into effect.
- [36:42]
C
And this was something that clean energy advocates were arguing for that definition of start construction to be codified in this law to avoid this very eventuality.
- [36:52]
B
In fact, it is in the statute. It says very clearly in the statute that the commenced construction definition shall be the one in place as of January 1, 2025, including two specific previous guidances that go all the way back to 2013, except for in the implementation of these four identity of concern rules. We'll see where the lawyers come out on this one. This one might be another one where the Trump administration is pushing a letter of the law and may ultimately get sued and lose this one. But by the time they do that, we'll have run down the clock on much of the rest of this year and added substantial policy uncertainty that will make it much harder for projects to confidently commence construction by ordering turbines or other long lead time items. It definitely seems like they're trying to do as much as they can to be as difficult as possible, despite the fact that the statute and the congressional intent was very much the opposite, saying, hey, don't mess with this and give projects some time to actually commence construction before you start changing the rules on them.
- [37:48]
A
Let's touch on two quick things and then I want to take a step back. The first is that during the Senate's final push to pass this legislation during the Votarama, an excise tax was proposed for wind and solar energy. This was going further than just repealing the tax credit for producing new wind and solar. It actually would have increased the cost and taxed wind and solar, supposedly because of its deleterious effect on the grid. There's a lot to say here and what a dumb policy it was. I will say that what it did successfully do was make the repeal of a lot of important IRA policies seem more moderate because there was this completely insane energy policy on the proposal and by ditching it it was like, okay, well at least they're not actively going to try to murder the wind and solar industry.
- [38:37]
B
Yeah. And whether it's made the other one seem more modern, what it did definitely do is suck up a lot of last minute lobbying effort over the last like five days of the bill's debate to try to remove this utterly insane excise tax that as you said, would have raised taxes by somewhere roughly 10 to 20% on wind and solar projects after 2027 if they didn't again positively demonstrate that they met these foreign entity of concern type rules. So quite, quite egregious in my view.
- [39:02]
A
The second policy that we've discussed previously on the show was this attempt to do backdoor permitting reform through the reconciliation bill. This would have created a fast track system where you pay.
- [39:11]
B
Pay for play.
- [39:13]
A
Yeah, this policy would have created a pay to play system where you as a project developer, when you apply to a federal agency to get your National Environmental Policy act report written and studied, you could have paid a little extra, varied through the process. Maybe 125% of what it would have cost normally to get not only a report that was produced quickly, but a report that was immune to judicial review and so one that could not be challenged by the courts. This policy in the letter remains in the bill. There is this new fast track NEPA process that was created by the legislation. However, the parliamentarian rejected the part of the policy that would have made that report immune to judicial review or non reviewable by the courts. And given that the non reviewability of that NEPA study was the thing that really represented certainly an experimental and adventurous and aggressive approach to permitting reform, I think it's fair to say that permitting reform as a kind of major policy did not make it into this bill. There is this new process, but it's unlikely to be material to getting projects done. So let's take a step back. Let's do Jesse first and then Gillian on this one. How are you thinking about the structure of US like Jesse, how are you thinking about the structure of US Energy law at this point? Because the whole thing about the IRA was that in 2022, for the first time ever, you could look and say the US Has a whole of economy climate policy. It's not the world's best whole of economy climate policy, but it does have an approach and a strategy to dealing with emissions going forward. It seems to be embracing a number of technologies that historically the US has been more skeptical of. It seemed like we were going in a certain direction. What do you make of the current state of US Energy policy? Jesse?
- [41:06]
B
Well, I think it reflects what happens when you elect a Republican trifecta, which is that they don't particularly care much about accelerating emissions reductions and driving an all of government approach to to climate policy. And so what we've got is a set of executive repeals that are very systematically dismantling the Biden administration's efforts to regulate greenhouse gas emissions from tailpipe emissions from vehicles and smokestack emissions from power plants and methane emissions from the oil and gas industry. Right. All of that is being dismantled on the regulatory side and we now have repeal of the most expensive and significant credits that we're driving near term emissions reductions by accelerating deployment of the relatively mature and scalable options we have today, which are wind, solar batteries and EVs that we're going to do the bulk of the emissions reductions work. So I think in some ways it's a very clear reversal of the Biden administration's efforts to and Democrats efforts to put in place that kind of whole of government approach to decarbonization. On the other hand, it is not a full repeal of all of the IRA level policies. It retains a substantial share of them, including ones that are hard to justify except for because of their emissions reduction impact. And so in some ways they actually reflect a bipartisan consensus that something slow and less direct should be done about climate change. But at least we should be supporting more nascent technologies that have the benefit of reducing emissions, whether that's advanced nuclear or geothermal or energy storage, or even hydrogen and carbon capture. There's not much of a reason to develop carbon capture technology if you don't care about CO2 emissions. Right? And yet Republicans just voted to sustain Those policies through the end of basically a decade long tax credit. I'm of two minds about it. It's very clear that this is a reversal and a repudiation of Biden era climate policy. On the other hand, it is a retention of some degree of a kind of investment and innovation led approach to driving more advanced technologies into the market. Where there seems to be either a substantive disagreement or just a political disagreement is over whether or not we need policies that can basically accelerate deployment of scalable solutions. Right. Mature technologies. Where you could argue, well, we shouldn't be deploying these things as they're already mature and the government doesn't have a role picking winners at that point and we should only be investing in innovative technologies. On the other hand, we've subsidized all kinds of energy production for a long time. The US has always had a substantive public policy interest in having a diverse and abundant and affordable set of energy resources. And we're now pulling back support from the fastest growing sources of new electricity capacity and energy at a time of rapid demand growth. That doesn't seem particularly wise. But I think it also could be just that. These are the technologies that present the biggest immediate market threat to the incumbent fossil fuel producers. Right? What is eating into global gasoline and diesel consumption? Electric vehicles, you know, and hybrids. And what is eating into us Natural gas consumption, wind and solar, and to a lesser degree, energy efficiency. This bill basically kneecaps the main competitors or at least removes the supercharging public policy support from them. It's hard to disentangle that the sort of substantive argument for like, oh yeah, we shouldn't be supporting mature technologies from the political reality that these are also the biggest threats to the oil and gas industry and they have a pretty substantive influence over what Republican policy looks like.
- [44:28]
A
It seems like there's two different arguments for these policies and we never quite. Advocates never quite figured out exactly which one they wanted to make. Right. One is that, well, wind and solar are the fastest growing energy sources and so we need to maintain support for them or else electricity prices will go up, we're not going to build as much as we would. On the other hand, the kind of reason that a lot of these policies exist was actually to internalize a lot of what we would otherwise call externalities of carbon emissions, air pollution, lots of other negative environmental effects that we, that would cause us to prefer renewables. But that like never quite got fit into the political argument for the bill. Rather, it seemed like advocates wanted to make an argument that we needed to maintain solar and wind that then wound up backfiring because at the, because what lawmakers heard when they were trying to find any penny they could use to pay for these tax cuts or to offset the deficit increasing impact of these tax cuts was, oh well, you really like solar and wind, but we're going to add a lot of solar and wind energy anyway because it's where the so much of future supply is going to come from. And so if we're going to add a lot of it anyway, then I actually don't need to maintain these tax credits anymore.
- [45:42]
B
I mean, again, it's hard to know how much credibility to put into any of these rationales. Right? Republicans had several reasons why they might want to kill these things. Let's just enumerate them. One, Biden liked them, Democrats like them, environmentalists like them. Okay, so ideologically, if you're opposed to those people, then you want to kill the things they like and destroy their policy legacy. So that's argument one, right? Argument two is these are expensive. These are the most expensive subsidies in the IRA energy provisions, right? Because they're deploying technologies that are being deployed at scale and they're fairly generous and so they cost hundreds of billions of dollars. And so if you want to offset your $6 trillion in tax cuts at least partially with a few hundred billion dollars of pay fors, then this is one way to do that. I have a hard time taking the fiscal conservative arguments seriously when this bill, you know, explodes the deficit and makes no attempt to pay for itself when the inflation Reduction act at least did and under CBO scoring actually paid for itself twice over and was deficit reducing. But it is true that if you were looking for easy pay fors going after the most expensive credits here, these are the richest targets to go after in the bill because they're large scale. The other government you could say is, well, we don't deploy mature technologies. We only support technology policy that supports immature technologies. And so because wind and solar are mature, we're not going to support them anymore. Same with EVs. They should stand on their own feet now. They shouldn't require subsidies forever. Some version of that argument floats around as well. Another one which never really made much of sense at all was these are just subsidies for China, despite the fact that we have massive tariffs on Chinese imports and we had a very proactive policy industrial policy around building domestic industries that was succeeding. But that's sort of the other trope. And you see that I think in the foreign native concern rules being applied all over the place. So lots of different arguments being thrown around here on the, like why you would repeal this side. And again, we should add to that also, these are major threats to oil and gas industry donors who want to see these threats neutralized. And that wasn't an argument they were saying out loud. But I think it's definitely another reason why one might want to repeal these credits. And so you know, which one of those is the reason why? It's probably some combination thereof, but those are all reasons why Republicans might have wanted to go after these credits. What's interesting is that they sustained a lot of other ones too at the same time. And so it's hard to think about where the climate angle fits into that. Right. Are they getting rid of these because they don't give a shit about climate change, or are they getting rid of these because of all those other things I just said? Like maybe they actually do think climate change is important, but they don't think we should be spending lots of money on it or I don't know. It's hard to rationalize all these different competing arguments. I also think it's just worth noting there's a lot of different factions at play here. Right. And you saw that during the debate, right? There are Republicans who saw these as very good business investments, good for energy affordability, good for energy abundance, good for economic development in their districts that very much didn't want these tax credits to be repealed. There were others that were very much running around with the deficit hawk arguments or the anti China arguments or whatever. So there's lots of different factions at play. And at the end of the day, like whichever ones got to Donald Trump and got him to tell people how high to jump are the ones that kind of win in this weird politics of Washington D.C. right now. Gillian, what did you take away from the whole political scruffle at the, at the end here?
- [48:45]
C
I mean, it was, it was really messy and really, you know, a lot of policy was flying around, a lot of paper was flying around. You know, we kept talking about in.
- [48:54]
B
The middle of the night, yeah, we.
- [48:56]
C
Kept talking about these senators are in their 70s and they've been up for, or at least they've been debating. Debate has been ongoing for 24 hours or more in the middle of the night. We were trying our best to keep track of what was in and what was out. And so I think that what I'm trying to keep in mind is that it's going to take a pretty long time, I think, to understand in practice what a Lot of these provisions will do because they became so complex as the bill was drafted and a lot of that complexity was added towards the end of the process, other than to say wind and solar lost and it will be bad for America's emissions drawdown going forward. I still have a lot of questions about how the implementation will play out. I expect that we will not see the end of the build out of America's carbon free energy infrastructure. It's just going to look a lot different than what we thought it was going to eight months ago.
- [49:53]
B
Yeah, and I think, Robert, you were getting at. There's a few different arguments on the advocate side being floated around. It's hard to square all of those as well. Like the reasons why we want to subsidize these technologies are again, multifold. Right. Just like the reasons why you might want to stop doing it. And one of them, of course, is emissions reductions. And I think that you didn't hear a lot of that argument in this debate because the presumption was the Republicans don't care and the votes that we're trying to swing here are not the ones who are going to be swayed by the fact that there is an external damage caused by CO2 emissions and we need to internalize it in the market somehow. All of which is true. Right. But not something that we think that was going to be very convincing. There is an industrial policy argument here that like we want to compete with China for these industries. And I think that was particularly true for batteries and electric vehicles. And they're like those policies are substantively dismantled. We do still have 45x subsidies for batteries and critical minerals, but without the demand pull coming from the EV market, which will probably contract on the order of 40% by 2030 because of the loss of the $7,500 tax cut for EV adoption, that most of that new investment in battery manufacturing and EV manufacturing is no longer needed. And there's going to be dozens of plant announced projects that are going to be canceled and much less investment and innovation in that sector. And I think we'll be in a lot worse competitive position. The other argument is that on the electricity side, electricity demand is growing rapidly. Our estimates are still that despite slower electrification because of data centers and ongoing electrification and economic growth, demand for electricity could grow something like 25% between now and 2035. That's a 2% per year sustained growth rate in the face of rapid demand growth. You need more supply to keep up with that. Right. We need to add at least 25% of our current generation in new supply over the next less than a decade. If we can't add supply fast enough, and if we effectively raise taxes on the new supply that we're adding, we're going to drive up energy costs, right? We're going to drive up electricity costs. And so there was also an argument that, hey, you don't want to be contributing to an affordability crisis. Particularly, you know, a president who ran on a platform supposedly of addressing concerns about pocketbook and affordability issues, and a party that's trying to expand their working class coalition. They've now voted to effectively raise energy prices across the board for Americans. Our estimates at repeat project are several hundred dollars per year in higher energy bills, like a 13% increase in the average household's energy bills by 2035. Those are all the arguments that are swirling around there too. And I do think that those arguments, those sort of economic arguments about competitiveness, about investment in jobs and economic development, manufacturing, about energy affordability, those are the ones that advocates leaned into. They're also the ones that I think led to a sizable block of Republicans in both the House and the Senate saying, hey, wait a minute, we don't want to torch these policies. We want them to be at least rationally phased out over a several year period, if not sustained in the long term. And to the degree that any of these policies were sustained, whether it was for six months or 12 or even 10 years, it was, I think, because of those types of pragmatic, pro economic development, pro energy abundance and affordability type arguments that were most effective at securing support in Congress.
- [52:57]
C
And that's the other big question I have going forward is the scale of the impacts and when they will be felt and whether the political consequences will be apparent by next November.
- [53:08]
B
On the energy affordability side, probably not, just because most of these tax credits are affecting new construction of wind and solar or new purchases of vehicles. And by definition, the new stuff is only a fraction of the total market. And so like, it takes cumulative time before changing what gets built or what gets purchased on the lot, like affects the cost of gasoline or the cost of electricity by having a material effect on the overall market supply and demand. Those effects will probably take longer. That's why I talked about 13% by 2035. That's a long time from now. But, you know, these effects are cumulative. Where I think there could be some pretty immediate political liability, especially if someone's able to effectively capitalize on this, is there will be a lot of canceled projects, right? There's going to be a lot of canceled energy projects. There's going to be a lot of canceled manufacturing projects. Our estimates are that we'll see a half a trillion dollars of less cumulative capital investment between now and 2035 in the kind of supply side of the economy, clean electricity and clean fuels. And that's in addition to hundreds of billions of dollars of announced manufacturing projects that will probably also be canceled now. And so there could be some political vulnerability there when the plant that was going to invest a billion dollars in your community and hire 800 manufacturing employees now is scrapped because this policy was enacted. The question is whether anybody can connect the dots on those effectively. And that requires real on the ground organizing. Something that we didn't see enough of, I think going into this fight. Because if we'd seen more of it, I think there would have been a more effective defense mounted for these policies. Real, bottom up, community led understanding that these policies were supporting economic development in communities X, Y and Z, dozens of communities across the country. Very little was invested on the pro clean energy climate side of things in actually organizing those communities. And so what we were left with were effectively corporate lobbyists trying to go in and make that case, some better than others, without a whole lot of actual groundswell of support for these policies. And I think that was a big mistake. And it's something I, to be totally transparent, advocated folks should have done two years ago, right? Advocating investment and on the ground organizing in these communities to build this economic constituency out into a real organized political bloc. That didn't happen two years ago, it should happen now. So that the next time this fight happens there the industry has a much stronger base of political support.
- [55:24]
A
I want to disagree a little bit just with the idea that it's not going to be immediately salient politically because what the bill does has done is that President Trump and the Republican majority in Congress have taken now total political ownership of the economy and of every facet of the economy. Right. That's what it means to pass a giant bill and that's what it means to repeal a bill called the Inflation Reduction Act. In terms of me, as someone who observes the energy system, what's most crazy here is that the US is now going to like surrender a ton of scale in its battery industry and is basically going to not try to compete with China, really on EVs or batteries at the scale that I think is economically and nationally prudent for a country that is trying to maintain some kind of technological competitiveness with China. That's what strikes me as Crazy about this, like, as a person, what strikes me as crazy about this politically, within the normal curve of outcomes, is that we know electricity rate hikes are coming down the line no matter what anyway. We know that rates are going to go up anyway. Now they're going to go up more. That's it. That's the whole story. I mean, they just wrapped their arms around an electricity grid.
- [56:33]
B
Yeah. And even if this isn't responsible for those near term rate increases, it certainly isn't impossible for a talented politician to connect the dots for people to claim that they are or that this type of rate increase is saying, now they voted for more of those. Right. You can make that case.
- [56:47]
C
Well, I think it does require a talented politician to connect the dots though, because as you were saying that I could hear in my head Trump coming out and saying this is because of Biden, this is because of Democrats, this.
- [56:57]
B
Is because of their unreliable wind and solar.
- [56:59]
C
Yeah. That are, they're damaging our country. They hate our country. Yeah. So it really, those dots do not connect to themselves.
- [57:06]
B
No. It has to be done through very effective political communication. And again, ideally not just top down comms, but on the ground organizing. The reason I keep hitting that is like so much of the effort to build a kind of popular case for climate policy has been centered on this idea that if we just get people concerned enough about climate change that there'll be this sort of popular upswelling of support for climate policy. And I think that that popular upswelling has never been there. What was effective was getting the elites in Congress and the Democratic Party sufficiently motivated to put climate at the top of the political agenda for Democrats in 2020 and 2021 and 2022, and to keep it there despite all kinds of challenges. That's partly why we have the Inflation Reduction act, because they were able to keep climate at the top of the Democratic policy agenda, for better or worse. Politically, like they managed to pull that off, but not because there was some broad public upswell of support from Americans, but because there was an elite understanding and pressure amongst the sort of apparatus of the coalition that supports Democratic policymaking. That like this is the thing that had to get done, was a high priority. Where there is an opportunity, I think, to build a genuine popular base of support and a real sustained one around these industries is because of the economic benefits they bring, whether it's affordable electricity, whether it's economic development in rural communities, whether it's manufacturing, whether it's competitiveness. These are the cases that can be made across partisan lines across the country. And we've yet to invest in organizing that case in the same way that we invested in say, like activating climate voters through targeted Facebook ads or on the ground door knocking in urban communities during campaign season. We're just not investing in that kind of case and expanding this new and important base of power, one that can be sustained over the long term and importantly have influence across parties in a way that like LCV and Greenpeace and, you know, and Sunrise just don't have any influence over the Republican side of the aisle.
- [59:00]
A
I do want to disagree a little bit though, that I don't think organizing here is like maybe the key. When I look back on the ira, I think one of the things that stands out to me about it is that, yes, there was no groundswell of support from the people who had helped bring climate to the forefront. And I think even more importantly, the leaders of, let's say, the Sunrise movement. Right, let's say Sunrise Movement helped install climate as a major issue going into 2020. And I think they were successful at doing that. I think they were successful at raising the salience of climate change in elite media going into 2020 after the inflation Reduction act passed. You actually did see leaders in the Sunrise movement identify that the Inflation Production act was an important piece of climate legislation. They've since backed off. Some of those folks have left the Sunrise Movement. But there was a successful effort. Like they did say, hey, this is important.
- [59:53]
B
But that's my point is like the youth organizers in Sunrise are not like factory floor employees in North Carolina. These are not the same communities. They're not even talking to each other. I'm not just saying organizing is good. I'm saying specific political organizing efforts and institution building around an economic constituency that benefits from an ongoing clean energy transition. That's the thing that will sustain this in the long term and has political salience across both sides of the aisle and across a wide swath of the American populace. It's not going to be a populist mass uprising. Right. It's going to be an on the ground, economically rational case for defending these policies. One that has succeeded at, for example, defending policies in Texas from similar ideological attacks. As we've talked about on the show before, I've seen lead to bipartisan bills in North Carolina and Oregon and other places like that. Right. Like there, there are examples of this succeeding, but it was not a major plank of the kind of overall post IRA climate politics. I really do think it needs to be, in addition to having some talented Politicians able to actually, like, tell this story at a national level and a state level. Right. Gotta be more than just top down political communications and ads.
- [60:59]
A
Last question, because we're gonna skip upshift, downshift today because what possibly other topic could we feel like? It's the double downshift. Exactly. But I wanna ask a kind of version of the upshift, downshift question of both of you, which is like, how are you feeling? Like, you know, you both kind of had your faces up against the whole face of.
- [61:19]
C
I'm feeling dizzy.
- [61:21]
B
I would like a break. Yes.
- [61:24]
A
You both had your faces up against the coal face of this policy change over the past two weeks. And I'm not someone who thinks like, how we feel about climate change is always the most salient question at some point of working on it professionally. Like, well, this is the thing I work on and I get up in the morning and I try to make it better. And it doesn't really matter whether I'm optimistic or pessimistic at the moment because you just keep pushing. That's how it works.
- [61:51]
B
I think that's how you survive in this game this long. If adopting an attitude like that.
- [61:55]
A
To some degree, the US Just went through a kind of clattering change to its energy and climate policy and got rid of a number of policies that I think were pushing the. Although flawed, we're pushing the U.S. energy system in the right direction and we're a real vote of confidence and of good faith in the energy transition. Has watching the events of the past two weeks made you feel pessimistic about the energy transition to come? Or are you feeling like for a world where Trump won and for a world where the US faced the constraints and the political environment that it did in 2023 and 2024 and 2025, we can work with this and there's going to be new stuff coming down the pipeline and we're going to keep deploying.
- [62:39]
C
I will say kind of similar to you, Rob. Doing this work is my way of processing my climate anxiety, or at least putting some kind of wall of professionalism between that climate anxiety and my daily life. This is my contribution and I think about it as a professional and I don't really think about it as a human as often. I will say it's shocking to me how much of a, you know, it is not a 100% policy reversal, but the extent to which the government of the United States was willing to throw out its existing climate policy that took however many years and decades to get to just really floors me. And it's the kind of thing that we can't do again, at least not in this way. It's not that US Companies will never again trust a climate oriented tax credit. I think that's a bit of an overstatement. But this approach has been tried and then it's been undone. And so whatever approach is tried in the future will have to be something new and it will have to be motivated by different arguments and it will have to have different structures. And that project I think is also kind of daunting.
- [63:52]
B
Yeah. So look, this is a terrible piece of policy for the United States and for the world. And so on the one hand I'm mad as hell about it. Right. We haven't even talked about the broader effects beyond climate of this bill. And it's going to kick some nearly 1 in 20Americans off of their health insurance. It's going to explode the deficit so that we can mostly give tax cuts to wealthy people and corporations who don't need it. It's going to reduce food stamp spending for people who can't afford to eat so that people who can afford first class flights can have another vacation. This is just bad policy. And it is a bad way to do energy policy to completely reverse course just because the other guy won the election rather than to have a more thoughtful rationalization of the tax code for energy investment. I think it's particularly scary to think about the implications for our automotive sector. And having basically replaced a pretty thoughtful and fairly successful domestic industrial strategy around EVs and batteries with basically nothing except for some subsidies that build a wall around the United States is really concerning. I don't know that we're going to have a globally relevant auto industry in five years unless we get really lucky and one of our automakers comes out with a really great set of vehicles. Very quickly here, like we were already so far behind and we just took the foot off the gas of our or the accelerator of our and our efforts to catch back up again that it's just dumb. It's bad policy, it's bad for the United States. It's going to raise energy costs. It's going to raise emissions by half a gigaton by 2035. Just this law additional another half a gigaton because of the regulatory repeals that Trump is pushing forward on the EPA side. So all that bad, bad, bad. Right. On the other hand, how am I feeling about the climate fight? Obviously it sucks to take a huge step backwards or at least we should say take our foot off the accelerator when what drives climate change is cumulative emissions. On the other hand, we are still moving forward. Right? The 95% of what we're adding to the grid today is wind, solar and batteries. Electric vehicles are gaining market share both in the United States and globally. Oil consumption globally is set to peak and that's unaffected largely by this bill. Coal consumption might be about to peak. China's emissions look like they're about to peak. These broad trends and signs of progress are continuing. The US Will add more clean electricity supply than is necessary to meet all demand growth under our latest scenarios. It just won't add a lot more that would further reduce emissions beyond that. And so I guess the only way to survive in this field is to recognize that we are making progress. And it sucks to see progress made evaporate. But not all of that progress evaporates. There is real tangible, durable impact of having extended tax credits that were about to expire in 2021 or 2022, like the wind and solar credits, like the UV credits, and having extended those for basically four years. Right? 2022, 3, 4, 5, right. Like we had at least a four year tax extender of EV credits and wind and solar. Any another, any other previous Congress like four year tax extender was a big deal for these things. At the same time, we created new tax credits that didn't exist before for clean hydrogen, for advanced manufacturing of clean energy components and critical minerals, for all other carbon neutral electricity generation and storage that didn't get this credit before. All of those are still now in law and enshrined by a Republican partisan only bill. Infrastructure that's built doesn't get ripped out. It's still there. Right? We've deployed tens of gigawatts of wind and solar under these credits on batteries. Those are going to still be there. We did open lots of new battery manufacturing capacity. We did open lots of new EV factories. Not all those are going to close, I hope you know, most of those are still going to be used to produce EVs and batteries. So I think we need to remember, and this is where the sort of the deadline ism and faux scientism of 1.5° or bust type narrative that we've already talked about on previous episodes on the show. This will lead to more emissions. More emissions are bad. But the policies that we enacted over in 2022 will lead to less emissions. Right. And we made substantive progress and we will continue to make additional progress. So we took two steps forward or three steps forward and two steps back or whatever under the Trump administration. But we're still making progress forward and that is important. And I don't think we, we need to not lose sight of that even as we can be mad as hell that, you know, hard fought, well earned victories and progress is now gone thanks to the decisions that the Trump administration and Republicans in Congress have made. I don't know that I agree, Julian, that like next time around we need to do something differently. Like in some ways like this is still by far the most successful interventions we've had. Much of those policies are now still sustained and will have mounting cumulative impact the longer they last. Right, because we're not deploying into nuclear power now. But if we could deploy 100 gigawatts in the 2000-30s thanks to these policies and that will make a big difference, then the general political strategy of trying to make clean energy cheaper rather than making fossil energy more expensive to drive economic development and investment did lead to a sizable economic and political block trying to preserve these credits. We didn't get as much as I had hoped we would at the end of the day, but I just don't, I still don't see a better strategy emerging in the wake of this. I guess the last thing I'll say is we should prepare ourselves for two new pretty important political realities. This overhang all of the future climate policy discussion going forward that were really not present in the IRA days. One is just fiscal constraints. I mean this bill is going to explode the US deficit on top of what was already a particularly bad fiscal environment at a time of high interest rates. And I think that the idea that we're going to have half a trillion dollars of subsidy to be able to throw around again in the future is unlikely. So we need to be really focused on removing non cost related barriers to the deployment of mature technologies and not necessarily just on expanding subsidies. And second, energy affordability I think is going to be a very politically salient issue across the country. And whatever politics of climate and energy policy we put forward, they have to speak to that concern in a way that I don't think was quite so relevant in the past either.
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We're going to leave it there. I feel like we are going to do. We have begun to touch on topics today that we're going to be talking about at a lot of episodes in the future. Let me just add a few program notes here. First of all, if this is your first shift key episode, maybe you heard Jesse on another show. Please subscribe. The second thing is that you may have noticed we interrupted Shiftkey Summer School because of the emergency nature of the times. We'll be back with the rest of Shift Key Summer School later this summer, but school is out for the moment as we attend to emergent events. And finally, as always, Shift Key is a production of heatmap News. Our editors are Gillian Goodman and Nico Loricella. Multimedia editing and audio engineering is by Jacob Lambert and by Nick Woodbury. Our music is by Adam Komalau. Thank you so much for listening and see you as always, next week.