The Inflation Reduction Act is ready for take-off, but something doesn't add up
PRESENTED BY THE TRILLBILLY WORKER’S PARTY
Hey folks, glad you stopped by to check in on what’s happening with climate in our nation’s capital. U.S. PIRG, Environment America, and ClientEarth have filed a lawsuit against Washington Gas for “consistently misleading more than one million customers by advertising its use of natural gas as a ‘smart choice for the environment.’” And a multiple-burst lightning strike in Lafayette Square yesterday evening killed an elderly couple from Wisconsin and left two others in critical condition, the deadliest component of a storm front that knocked out power for tens of thousands of people.
What? You came to get the latest on the Inflation Reduction Act, the energy-healthcare-taxes reconciliation bill crafted by Sen. Joe Manchin (D-W.Va.)?
Let’s get to it, then.
The big news is that the IRA is now cleared for take-off, as all 50 Democratic senators are on board and strapped in. The final major holdout, Sen. Kyrsten Sinema (D-Ariz.), won changes to the tax package to gain her vote, protecting the $14 billion carried-interest loophole used by billionaire asset managers and a $100 billion manufacturing depreciation loophole for the corporate minimum tax in exchange for a 1% excise tax on stock buybacks expected to raise $123 billion.1 She also negotiated $5 billion more for Southwest drought relief.
The next step for the bill is approval of its provisions by Senate parliamentarian Elizabeth MacDonough, expected today.2 Senate Majority Leader Chuck Schumer has scheduled the the vote that brings the bill to the floor on Saturday afternoon, followed by “debate for up to 20 hours before holding an open-ended series of votes on amendments, known as a vote-a-rama, before a final up-or-down vote, which is now expected Sunday or perhaps early Monday morning.”
After Senate passage, the House will most likely come out of its August recess to pass the bill before August 17th, the date at which the Affordable Care Act subsidies that are extended in the bill will expire.
You might be confused by the reports that both the climate movement and the fossil-fuel industry are enthusiastic about the IRA. The League of Conservation Voters’ Tiernan Sittenfeld has called the bill “the single-biggest thing our country will have ever done to combat the climate crisis.” Yet Occidental Petroleum CEO Vicki Hollub said “this is turning into for us a net very positive bill should it get passed.”
Big Green is bullish on IRA in large part because it promises to “help slash climate pollution in the U.S. by an estimated 40 percent by the end of the decade.” (It’s a 10-percent cut from current trajectories.3)
Big Oil is bullish on IRA in large part because the expanded 45Q carbon-capture credit is a new multi-billion-dollar industry subsidy.4
As it turns out, Bigs Green and Oil are talking about the much the same thing in their praise: the promise of capturing the carbon pollution from burning fossil fuels and burying it underground. The expectation of big carbon cuts comes from a few groups using functionally equivalent models—Princeton professor Jesse Jenkins’ REPEAT Group, the Rhodium Group, and Energy Innovation.
The REPEAT model shows the IRA having little effect on U.S. oil and gas production or exports, with the global price of oil and gas having a much greater impact:
So the 10-percent cut in carbon pollution isn’t coming from a decline in oil and gas production—much of it is coming from carbon capture and sequestration. The REPEAT Group projects about a billion tons of CO2 capture over the next decade, thanks to the $85-a-ton 45Q carbon-capture credit:
The other groups’ models are similar, because they’re using the same underlying assumptions. REPEAT’s projection of about 550 million tons for industrial carbon capture were taken from a Rhodium Group report.5 To reach its projected 450 million tons (approximately) of energy-sector CO2 capture, REPEAT uses Evolved Energy Research’s Regional Investments and Operations (RIO) model, which, in turn, gets its numbers for geological sequestration potential from Princeton’s Net-Zero America Project study, which was co-authored by Jenkins and funded by Exxon and BP.
As Dr. Emily Grubert noticed, the Congressional Budget Office expects a much smaller use of the 45Q credit—amounting to a total cost of $3.2 billion over ten years, which translates to less than 40 million tons of CO2 sequestered.
So something doesn’t add up.6
Although the modelers are bullish on coal CCS (it’s the pink wedge above), CCS has never worked for coal plants. Perhaps that’s why the coal industry is mad about the bill.
Other opponents of the deal are Indigenous environmental activists and the Appalachian residents along the pathway of the Mountain Valley Pipeline, the approval of which Manchin has said he has secured. Bloomberg’s Kellie Lunney and Daniel Moore spent months working on the story of the people fighting this over-budget fracking nightmare.
A federal judge has thrown out the Biden administration’s attempt to expand coal mining in Wyoming’s Power River Basin, but globally, coal is still king.
Republican state treasurers have quietly banded together to punish bankers who try to go green.
Freedom under oil isn’t: checking in with Steven Donziger.
The dollar amounts given are the projected ten-year government receipts.
This is a ritual known as the Byrd bath, after Sen. Robert Byrd (D-W.Va.), the erstwhile Senate Majority Leader who added a rule in 1985 that budget reconciliation bills, which are immune to filibusters, cannot include non-budgetary provisions—as interpreted by the Senate parliamentarian. The Democratic majority could overrule the parliamentarian if it wished, it’s just another one of the ways the Senate adds conservative roadblocks to the legislative process.
From 2005 levels, not current levels. Officially, U.S. greenhouse pollution is already down 15% from 2005 levels. Current policy is expected to bring us down to about 30% below 2005 levels, with an additional 10% attributable to the IRA. Of course, the official numbers involve a drastic undercounting of methane pollution, so they aren’t very good numbers.
As Jonathan P. Thompson writes:
The section on 45Q looks like it came right out of the playbook of the Carbon Capture Coalition—which counts Shell, Valero, Peabody Energy, and Arch Resources as members.
From the REPEAT deck:
Industrial CO2 capture volumes are fixed exogenously based on analysis in Larson et al., 2021, “Capturing the Moment: Carbon Capture in the American Jobs Plan,” Rhodium Group, April 2021.
Well, a few things. It bears mention that in addition to the debatable prospect of those CCS figures being technologically achievable, the way the IRA’s 45Q credit is written will allow plants to get the credit even if they’re only capturing a small fraction of CO2 generated (plants qualify on specs, not performance).