Biden needs massive funds for climate plans. Where will he find them?
Until now, any lawmaker who asked for $2 trillion in federal funding without offsetting savings would have been laughed out of politics.
But then came the Green New Deal. And then the coronavirus pandemic. And then another bout of rock-bottom interest rates.
Suddenly, a couple of trillion dollars doesn’t sound like as much money as it used to. And that’s good news for President-elect Joe Biden, who is planning to pursue a costly package of climate change policies aimed at transforming the country’s economy, including the way farmers plant crops and the way automakers design engines.
For Biden, who helped oversee the $900 billion economic stimulus bill President Barack Obama signed in 2009, this seems doable, and he will seek to merge the need for stimulus spending with the need for climate action — without taxing crude oil, carbon or gasoline, as previous presidents tried to do in vain.
“We do need to worry about balancing the budget down the road,” said Rep. Debbie Dingell (D-Mich.). But, she added, “right now, we need to be investing in our economy. The chairman of the Federal Reserve said that. We just need to start doing it.”
Congress made an initial down payment late Monday, passing a stimulus bill that includes a package of energy measures, including new funding for renewable technology, research and development; aid to low-income families to install renewable energy sources in their homes; money for the Energy Department’s sustainable transportation program, the Advanced Research Projects Agency-Energy, and nuclear energy.
It helps, said David G. Victor, a professor at the University of California at San Diego, that during the presidential campaign, Biden couched his plan as “an investment in infrastructure and investment in industries of the future.”
Biden intends to insert or earmark new money for climate plans in every department budget: the Transportation Department, for highway construction; the Energy Department, for research and appliance standards; the Treasury Department, for tax incentives; the Defense Department for renewables at bases; the U.S. Army Corps of Engineers, for resilient shoreline construction.
Marshaling political support will pose obstacles, especially if Republicans “rediscover that they care about fiscal probity,” Victor said. But the economywide ambition for climate change will mean benefits — and jobs — for virtually every congressional district, especially in the battleground states of the industrial Midwest.
Political support for federal assistance also could come from states that are struggling to balance their budgets as required by law. California this year spent $1 billion on firefighters and their equipment — $650 million over budget.
One early target for new spending is infrastructure. President Trump came into office promising a big infrastructure bill, but he never delivered. Now Biden can turn that into an opportunity.
New interstate road projects could feature electric-vehicle charging or hydrogen refueling stations; space for bicycles could be added to roads within cities. Fixing old roads and bridges would take priority over new ones.
Repairing and expanding light rail could get more people out of their cars and into mass transit. Such changes are costly. The New York City Transit Authority estimated in September 2019 that it would cost more than $40 billion to fix decrepit subway and bus systems.
Pete Buttigieg, Biden’s nominee for transportation secretary, is ready to help. During his presidential campaign, he proposed a $1 trillion infrastructure plan.
New shoreline walls are another big-ticket item. For congressional Republicans who are uneasy about acknowledging man-made climate change, these projects could be built under the banner of resilience to protect port cities such as Boston, Miami and New York from rising seas. Many House Republicans, including the Rep. Garret Graves (La.), the ranking Republican on the House Select Committee on the Climate Crisis, have expressed support.
Automakers are saying they’ll need federal financial help to speed up the development of electric vehicles. The government currently offers a $7,500-per-car tax credit to buyers of electric vehicles. But the tax credit vanishes once a manufacturer has sold 200,000 of the electric vehicles. Tesla and General Motors, for example, have used up their allowances. Other companies receive partial allowances for plug-in hybrids, depending on battery size. Biden said he would remove limits on the electric vehicle tax credit to further incentivize purchases.
One other incentive: California has a program known colloquially as cash-for-clunkers that allows owners to trade in vehicles for more fuel-efficient models. Senate Minority Leader Charles E. Schumer (D-N.Y.) supports the idea.
Government could pitch in, too, by converting municipal and school buses into electric ones. The Bezos Earth Fund recently awarded $100 million in seed money to the World Resources Institute, a portion of which will go to accelerating the electrification of U.S. school buses. The United States has more than 450,000 school buses, and WRI plans to team up with other organizations to make them entirely electric by 2030. The National Renewable Energy Laboratory, part of the Energy Department, is already testing buses. (Jeff Bezos owns The Washington Post.)
Biden can claim that the school bus initiative would create jobs, cut emissions and reduce air pollution that disproportionately affects children, the poor and communities of color.
Agriculture offers another field for climate action. Experts want to change the way most farmers till and plant the soil so that they store more carbon. Some techniques require initial investments, and the Commodity Credit Corp. could provide capital earlier in the growing season, said Chris Harbourt, global head of carbon at Indigo Agriculture, a Boston-based technology company.
Farmers are still reluctant. So the government could provide coverage from the Federal Crop Insurance Program only to farmers who use climate-friendly best practices. Agricultural and climate experts say this linkage seems more and more appropriate every year, because floods that cause crop damage are growing more frequent as the climate changes.
The pocketbook of tax breaks rests in the Treasury.
Production and investment tax credits could be extended for wind and solar, although supporters say the incentives aren’t needed as prices decrease. The Joint Committee on Taxation has put the cost at $19.3 billion over five years.
The Treasury and Congress could agree to expand the 45Q tax credit. Originally passed in 2008 but greatly expanded in 2018, the credit goes to companies that capture carbon dioxide from the air or industrial flue emissions and then store it in empty oil and gas reservoirs or other geologic formations. The credit has bipartisan support, including from conservative Sens. John Barrasso (R-Wyo.) and James M. Inhofe (R-Okla.) and liberal Sen. Sheldon Whitehouse (D-R.I.).
If the definition of carbon storage were altered to include farmers and storing carbon in the soil, then farmers might switch their practices, Harbourt said. Right now, the cost of 45Q is minimal: $600 million over five years or $2.3 billion over 10 years. But with a flurry of corporate commitments to erase their greenhouse gas emissions, executives are looking harder at carbon capture.
The incoming administration is also seeking to boost spending on science and research, hoping for a breakthrough on energy storage that would make renewables easier to use and manage. The Energy Department, which runs 17 national laboratories, is home to much of the administration’s science budget. Biden could substantially increase spending in that area.
One example: The administration could bolster the Advanced Research Projects Agency–Energy program, which President George W. Bush created. Trump tried in vain to close down ARPA-E every year, but the popular program’s budget has nonetheless grown from $291 million in 2016 to $425 million in 2020. Biden has proposed creating an ARPA-C, a cross-departmental agency on climate.
Green banks are one device that didn’t feature in Biden’s campaign climate plan, but they are a key part of the European Union’s plans for leveraging government money and mobilizing private capital to a level governments’ budgets cannot reach.
Jeffrey Schub, executive director of the Coalition for Green Capital, said that an institution capitalized with $100 billion would drive $463 billion in total investment in four years. “You get enormous bang for your buck,” he said. Because it is a private-sector approach to a public problem, it has a shot at receiving bipartisan support. And the Office of Management and Budget may have some flexibility about how to score an appropriation for this purpose.
Many states already have such banks and they’re working well, supporting small businesses and creating jobs. Unlike other stimulus programs, green banks need seed money, and then they pay their own way with revenue they generate.
North Carolina, whose top environmental regulator, Michael S. Regan, has been tapped to run the Environmental Protection Agency, formed a “clean energy fund” in October, designed to leverage private investment and help the state meet its greenhouse-gas-reduction goals, said Jennifer Weiss, senior policy associate at the Nicholas Institute’s Climate and Energy Program at Duke University.
Biden also wants to reduce the carbon footprint of buildings 50 percent by 2035. He probably will instruct the Energy Department to tighten efficiency standards that Trump has been loosening and order the Department of Housing and Urban Development to make low-income homes more efficient.
One key area that remains controversial within Democratic ranks is nuclear power. Some experts want to subsidize a new generation of small modular reactors, which recently received approval from the Nuclear Regulatory Commission.
But experts say it’s a bad and costly idea. The Energy Department has agreed to share $1.4 billion in costs over 10 years for small nuclear reactors owned by the Utah Associated Municipal Power Systems. But UAMPS says eight of 36 public utilities in its group have dropped out. The project already has been delayed three years, and cost estimates have ballooned from $4.2 billion to $6.1 billion. The reactor design company, NuScale Power, said it would build four to six small reactors instead of a dozen.