Joe Biden’s climate law is too valuable to repeal

LG

18/09/2024 11:00

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are his own.)
    By Gabriel Rubin
       WASHINGTON, Sept 18 (Reuters Breakingviews) - Rare is
the politician who turns down an invitation to a ribbon-cutting
ceremony, especially one that comes with the promise of hundreds
of manufacturing jobs. In 2022 no Republican members of Congress
voted for U.S. President Joe Biden’s signature climate
investment law, yet its most lucrative provisions are likely to
survive even a possible return of Donald Trump to the White
House. A gusher of private investment and strategic placement of
projects in Republican-leaning areas has made the Inflation
Reduction Act too valuable to repeal.
    Trump is no ally of climate policy. The former president
opposes tax credits for electric vehicles, endorses conspiracy
theories about offshore windmills, and prefers to open up
federal lands for oil wells rather than solar farms. If he were
to win office while Republicans took control of Congress, he
would likely appoint climate skeptics to key administrative
posts and roll back environmental rules. But the nominee has
also spoken favorably of expanding nuclear power and has diluted
somewhat his opposition to battery-powered cars, perhaps in part
due to his courtship of Tesla  TSLA.O  CEO Elon Musk. That has
allowed members of his party leeway to support some green
initiatives.
    Crucially, there has been no significant groundswell of
opposition to the IRA, unlike the organized campaign against
President Barack Obama’s healthcare law in 2010, which swept
Republicans into control of Congress and statehouses throughout
the country. On the contrary, Republican gripes against climate
policy have focused on narrow issues like emissions standards
for cars or skirmishes over consumption of red meat and cooking
on gas stoves. The largest piece of climate legislation in
American history remains largely unscathed.
    The muted response has solid financial foundations. In the
two years following the law’s passage, U.S. business and
consumer investment in clean technologies and infrastructure
totaled $493 billion, a 71% increase on the prior two-year
period, according to Rhodium Group, a consultancy. 
Utility-scale solar panels, batteries, and the electric vehicle
supply chain have been the biggest winners. But nascent
technologies like carbon capture and storage and small-scale
nuclear reactors have also attracted funds from Bank of America
 BAC.N  and oil giants like Chevron  CVX.N  and Exxon Mobil
 XOM.N . Demand for the law’s tax credits for production and
investment has been so overwhelming that initial cost estimates
have faced eye-popping revisions. The governmental Congressional
Budget Office initially calculated the 10-year cost of the
credits, most of which are uncapped, at less than $400 billion.
Goldman Sachs  GS.N  and other forecasters reckon the final bill
will be at least three times that figure. 
    Initially reticent Republicans have taken notice. Eighteen
of the party’s members of Congress in August wrote to Mike
Johnson, the Republican speaker of the House of Representatives,
calling on him to protect the law’s investment and production
tax credits, citing the jobs and economic activity the IRA has
spurred in their districts. Given the party’s current slender
grip on the House, and continuing strong support for the IRA
among the Democratic caucus, those members likely make
large-scale repeal of the law impossible. 
    The bipartisan bullet-proofing of the law didn't happen
accidentally. Companies deliberately targeted investments in
Republican states and districts, both to neutralize the politics
of climate investments and to take advantage of more
business-friendly tax regimes. Georgia, for example, under
Republican Governor Brian Kemp, has successfully courted battery
and solar manufacturers. South Korea’s Hanwha Qcells has
announced plans to supply Microsoft  MSFT.O  with solar panels
from its $2.5 billion factory in the state, while Hyundai Motor
 005380.KS  and LG  003550.KS  teamed up on a $4.3 billion
battery plant. An executive from VSK Energy, a solar
manufacturer, last month told the Financial Times it was looking
to place a photovoltaic production facility in a Republican
state for strategic reasons. 
    Different states have stakes in disparate parts of the law.
While Midwestern states might depend on production and consumer
credits for electric vehicles, Nevada benefits more from
incentives that encourage the mining and processing of minerals
like lithium in the United States rather than relying on imports
from China.
    Officials in the Biden administration and Vice President
Kamala Harris’s campaign have eagerly highlighted the location
of climate investments. Appearing in the battleground state of
North Carolina this month, Treasury Secretary Janet Yellen cited
data showing that households in the state had claimed hundreds
of millions of dollars in tax credits from the IRA, and dared
Republicans to make the “historic mistake” of repealing them. 
     Yet while the IRA’s credits for production and investment
would probably survive even a full Republican takeover in
November’s election, other parts of the law may be more
vulnerable. For instance, Republicans might freeze grants which
encourage homeowners and landlords to install energy efficient
heating and appliances, and repurpose the funds for other
priorities. The party’s representatives could also tweak
eligibility requirements for clean hydrogen and carbon capture
tax credits, making them more accessible to the fossil fuel
industry. Wind power projects, which come in for particular
scrutiny from Trump, might find it harder to receive federal
permits, while new oil wells and liquid natural gas plants would
likely be fast-tracked.
    If elected, Trump could use his executive authority to award
new leases on federal land or change the eligibility criteria
for particular programs, as these decisions don’t require buy-in
from Congress.
    But the core of the IRA will remain intact. Corporate
investment was the linchpin in the law’s design: its tax credits
were meant to be generous enough to spark a virtuous circle of
investments in green technology, which would then further drive
down prices and support new supply chains and jobs in the United
States, placating even the most skeptical political foe. It’s
hard to repeal a law with a shovel in your hand.
    Follow @Rubinations on X

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Graphic: Manufacturing construction has boomed since the IRA
passed    https://reut.rs/3AyWKqv
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 (Editing by Peter Thal Larsen and Sharon Lam)
 ((For previous columns by the author, Reuters customers can
click on  RUBIN/ 
gabriel.rubin@thomsonreuters.com))