US Senate passes landmark bill to tackle climate

The US Senate has voted to approve a budget bill that includes an estimated $369bn in spending for climate change and energy security, putting Democrats on the verge of enacting the largest climate bill in US history.

The Senate passed the bill today in a 51-50 vote, with vice president Kamala Harris delivering the tie-breaking vote. The vote marks the culmination of more than a year of on-again, off-again negotiations — which were revived just two weeks ago — to persuade all 50 senators who caucus with Democrats to vote for a budget with substantial climate-related spending.

"This bill will kickstart the era of affordable clean energy in America," Senate majority leader Chuck Schumer (D-New York) said. "It's a game changer. It's a turning point, and it's been a long time in coming."

Over the last year, the measure was pared down from initial plans to spend $3.5 trillion on a range of social programs and climate spending, in large part to meet demands from US senator Joe Manchin (D-West Virginia). The Senate approved the bill after an all-night "vote-a-rama" where lawmakers exempted private equity firms from a new 15pc minimum tax on corporations that earn more than $1bn/yr. The US House of Representatives intends to take up the bill later this week.

The budget bill is President Joe Biden's last realistic chance before the approaching midterm elections to use his party's unified control of Congress to approve a major climate bill. Biden has set a goal for the US to cut greenhouse gas emissions by at least 50pc below 2005 levels by 2030. Outside analyses have found the measure would put the US on track for a 40pc reduction.

Republicans have attacked the budget package as being out of touch with the priorities of the US public. Senate minority leader Mitch McConnell (R-Kentucky) argues the bill would not adequately deal with inflation, while raising taxes on corporations and "giving rich people money to buy $80,000 electric cars."

The bill, dubbed the Inflation Reduction Act, aims to support the use of renewable energy, carbon capture, biofuels, energy efficiency and other clean energy efforts by offering tax credits, grants and other support over the next decade. The bill would also direct billions of dollars to nuclear power, clean energy manufacturers, energy efficiency and electric vehicles.

That incentive structure aligns with the demands of Manchin, who wanted to use the bill to spur "innovation, not elimination." Manchin successfully stripped out an earlier program that would have penalized electric utilities that failed to transition to clean sources. Manchin also was able to negotiate for continued federal oil and gas leasing, the revival of a major lease sale in the US Gulf of Mexico and a side deal for a separate bill intended to speed energy permitting.

The bill would provide a short-term extension, through 2024, of a suite of expiring federal tax credits worth about $70bn that benefit wind, solar, biofuels and other energy sources. From 2025-2031, it would switch to a technology-neutral approach that would spend nearly $65bn on clean electricity and biofuels.

The measure includes other novel programs, including an estimated $13bn for a first-time tax credit for clean hydrogen, $30bn for existing nuclear power plants, $3bn for expanded carbon capture support and a sustainable aviation fuel credit expected to cost $49mn — a tiny amount by Washington standards — from 2023-25.

Democrats used the measure to push through an overhaul to federal oil and gas leasing, including raising minimum royalty rates to 16.7pc from 12.5pc, higher minimum bids and other policies meant to deter speculative leasing. Another provision will impose in 2023 a 16.4¢/bl tax on oil that would pay for hazardous waste cleanups under the Superfund program. One of the parts of the bill closely watched by the oil and gas sector is a first-time fee on excess methane emissions set to start at $900/metric tonne in 2024.

By Chris Knight