Here’s What’s in Democrats’ $370 Billion Climate Spending Deal

(Bloomberg) -- In a breakthrough that surprised much of Washington, Senate Majority Leader Chuck Schumer and Senator Joe Manchin announced Wednesday they agreed on a plan that includes a record $370 billion in spending to fight climate change.

The deal -- if it can pass muster with all 50 Democrats in the Senate, as well as progressives in the House -- would cut greenhouse gas emissions by about 40% by the end of the decade, according to analysts. That helps put the US on track to meet President Joe Biden’s goal of cutting emissions by as much as 52% from 2005 levels by the end of the decade. 

The spending package includes a bevy of hard-fought wins for greens, from a slew of tax credits for clean energy sources to the first-ever fee on methane emissions and $3 billion for the U.S. Postal Service to buy emission-free mail trucks.

“It’s the most significant climate agreement in US history,” said Collin O’Mara, president and CEO of the National Wildlife Federation. “We believe that the emissions reductions vastly exceed the potential increases.”

But the bill is no climate panacea. It includes mandates for more oil and gas leasing and other measures loathed by environmentalists. It also provides generous incentives for carbon capture that greens say could prolong the life of old coal-fired power plants. Here’s a look at what’s in the deal:

Tax Credits Galore

The bulk of the climate spending would be on a host of tax credits seen as key to helping the clean energy industry:

• 10-year incentives for wind and solar, hydrogen, rooftop solar, standalone energy storage, and other power sources.
• A production tax credit for nuclear power generators that could serve as a lifeline for struggling plants and a boon for utilities such as Southern Co. and Constellation Energy Corp.
• Also extended in the deal is a $1-a-gallon tax credit for biodiesel and renewable diesel through 2024, plus other alternative fuel and biofuel credits, and a new credit for sustainable aviation fuel.
• Subsidies of as much as $85 per metric ton for carbon capture, an amount seen potentially extending the life of coal plants with billions of dollars in tax credits, were also included in the legislation. The increase from the current level of $50 was backed by a coalition that included utility DTE Energy Co. and coal-mining giant Peabody Energy Corp.

Electric and Hydrogen Vehicles 

The deal extends a popular consumer tax credit for electric vehicles in a big win for manufacturers such as General Motors Co., Tesla Inc. and Toyota Motor Co. And in a twist, it gives hydrogen fuel-cell vehicles access to the tax credits as well.

• Automakers will continue to offer $7,500 in tax credits for the purchase of new “clean cars,” a category that includes electric and hydrogen vehicles.
• There are caveats: vehicles will need to be built with minerals extracted or processed in a country the US has a free trade agreement with, and have a battery that includes a large percentage of components that were manufactured or assembled in North America. “It’s a challenge, but it’s doable,” Joe Britton, the head of the Zero Emission Transportation Association, said in an interview.
• The deal also includes a cap on suggested retail prices of eligible vehicles: $55,000 for new cars and $80,000 for pickups and SUVs. Credits would be capped to an income level of $150,000 for a single filing taxpayer and $300,000 for joint filers for new vehicles, and at $75,000 and $150,000 for used cars.
• For the first time, buyers would be eligible to receive $4,000 for used clean cars.
• The bill also creates a 30% tax credit for commercial electric vehicles.
• In addition, it includes $3 billion for the U.S. Postal Service plus $1 billion for clean heavy-duty vehicles like school buses, transit buses and garbage trucks. The legislation also makes up to $20 billion available in loans to build new clean vehicle manufacturing facilities.

Oil and Gas 

The bill requires the sale of drilling rights in the Gulf of Mexico and Alaska. It also make new renewable power projects on federal land and water contingent on future sales. 

• Under the legislation, the Interior Department would only be able to issue new wind and solar rights over the next decade if it recently held oil and gas lease sales. The requirements would constrain the administration’s ability to pare fossil fuel developments on federal land, despite pleas from climate activists to halt drilling and rapidly pivot to green energy.
• The previsions were seen as needed to win over Manchin, a staunch defender of the fossil fuel industry, who serves as key moderate whose vote is needed in the evenly split Senate.
• The bill also includes a new Methane Emissions Reduction Program, under which oil and gas companies could tap into $850 million in grants, loans and other incentives over the next five years to monitor, trap and report emissions of the potent greenhouse gas from wells and other equipment.
• Companies would face a new fee for excess methane emissions starting at $900 a metric ton in 2024 and rising to $1,500 per metric ton in 2026.

Clean Energy Manufacturing

The bill includes a $60 billion production tax credit directly to companies involved in clean energy manufacturing, according to an analysis of the legislation by Height Securities, LLC.

• About half of the credits are for solar, wind, batteries and critical minerals processing, the group said in a research note Thursday. There’s also around $10 billion to build clean technology manufacturing facilities, Height said.
• Companies poised to benefit include First Solar Inc., the biggest US panel maker, as well as TPI Composites Inc., a maker of wind-turbine blades.

Green Bank 

The legislation also would create a green bank:

• The lender would be funded with $27 billion, to invest in zero-emission technology.
• That model has already been used in several states, and supporters say the federal version, dubbed the Greenhouse Gas Reduction Fund, could potentially leverage hundreds of billions more in private funding to catalyze critical emission-fighting technology.

Permitting Reform 

The spending package included the promise of separate legislation --expected to move this fall -- that would accomplish a bipartisan goal to speed up environmental permitting.

• Manchin said he had secured commitments from Biden as well as congressional leaders to move forward with “a suite of common sense permitting reforms this fall that will ensure all energy infrastructure, from transmission to pipelines and export facilities, can be efficiently and responsibly built to deliver energy safely around the country and to our allies.”

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