Super Joe, Energy and Climate Hero?

Super Joe, Energy and Climate Hero?

May 18 2022

Sen. Joe Manchin has been huddling behind closed doors with a small group of moderate Democrats and Republicans to negotiate a slimmed down climate change bill AND a companion fossil fuel energy bill. On May 12, Roll Call reported significant progress that both sides of the aisle can support. Swift and surprising bipartisan solutions are possible when negotiations happen behind closed doors. Ronald Reagan and House Speaker Tip O'Neill showed that in 1983 when they reached a bipartisan deal on social security, one of the thorniest of issues.

Manchin favors the oil/gas/coal industry over climate policy as we personally witnessed from his remarks at the leading global energy conference in Houston in March. When we asked the Senator about his plans for increasing renewable energy supplies in the US, he only wanted to talk about more oil and gas leasing on federal lands and ocean bottoms, along with building (not stopping) more oil and gas pipelines. The Ukraine war has certainly reversed the energy calculus making it a national priority to produce and ship as much O&G to Europe as soon as possible. But it will be years before Manchin’s leases and pipelines can increase production.

TCC has proposed adding a sure-fire measure in the bill to immediately increase O&G production. The US government would guarantee a ~$60 per barrel price for the next eight years for every barrel of oil produced in the US (with a similar proposal for natural gas). This is needed because over the past five years, the price of oil has rarely exceeded $60 a barrel – the threshold at which it is profitable to frack oil on land or from the Gulf of Mexico. Battle-scarred Industry executives and investors are reluctant to add new capacity with suspect long term profit potential. Nobody seems to remember that in 2020 oil was selling below zero.

On climate, the bipartisan group is considering a carbon border adjustment (CBA) which is a tax/tariff on carbon-intensive imports on iron, steel, aluminum, cement, fossil fuels, petrochemicals, plastics, etc., from countries (mostly China/Asia) that are heavy consumers of coal to make their export products. The US has a distinct advantage because natural gas is the largest source of U.S. electricity generation (38%), and it burns 50% cleaner than coal. China gets 85% of its electrical power from coal; in the US it’s only 22%. TCC has written favorably about a CBA and Europe is moving forward with its own carbon border tax on emission intensive imports. This would be advantageous for US industry versus the high emissions/polluting companies they have had to compete with.

The now abandoned BBB included $300 billion in clean energy and EV tax credits. Manchin has called many of them “ludicrous.” Why do we need EV incentives, he argues, when there are waiting lists to buy electric cars? He’s right there, but we do need incentives for charging stations, expanding and remaking the national electrical grid with eminent domain powers and environmental law waivers for high voltage power lines. We need more solar panels and to speed regulatory approvals for mining essential materials like lithium, nickel and cobalt. Incentives for nuclear production and expanding 45Q carbon capture credits are other Republican-friendly items likely to find their way into the bills.

While Americans pursue wealth and happiness in our free enterprise/entrepreneurial system, it’s up to Congress to pull levers to nudge capitalism to promote the common good. It turns out the oil and gas companies need the support of Congress just as much as the clean energy transition.

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The US finally has an industrial policy. And it's a game-changer, providing huge incentives for investors and innovators to help us catch up to China on climate tech, and perhaps surpass them in the future.

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