How to Hand Out Billions in Climate Subsidies? Very Carefully.
WASHINGTON — John Podesta, President Biden’s clean energy adviser, said the administration was working to ensure that a record $370 billion in new federal subsidies for electric vehicles, wind farms, batteries and other clean energy technologies is spent properly and avoids waste and abuse.
Mr. Podesta said the White House would issue tax code guidelines by early next year to speed the delivery of the money, and was meeting with inspectors general from across the federal government to get advice on ways to safeguard against fraud.
“It’s always better to have a lock on the barn door than to go chase the horse once it’s out,” he said in an interview.
The internal watchdog at the Department of Energy, one of several agencies that is receiving an influx of money under the Inflation Reduction Act, has already warned that her office does not have enough resources to properly monitor all the programs that will be created.
Under the new law, the Department of Energy budget will grow from $45.3 billion to more than $100 billion in funds and $336 billion in loan authority. Another new law, the CHIPS and Science Act, will pump an additional $30.5 billion into the department.
Republicans, who will take control of the House in January, have suggested that they will investigate the Biden administration’s handling of the flood of tax rebates, loans and incentives under the landmark climate and tax law.
The Biden Administration’s Environmental Agenda
- Climate Adaptation Policy: The Interior Department is giving money to Native American tribes to help them relocate away from areas that are vulnerable to climate change, potentially creating a model for other communities around the country.
- A Fundamental Shift: Fueled in part by the billions in government subsidies in President Biden’s climate bill, a growing number of electric utilities have joined forces to speed the transition away from fossil fuels.
- Divided Government: The Democrats’ strong showing in the 2022 midterms ensures that Mr. Biden’s climate bill will be fully implemented. But a Republican-controlled House is likely to try to slow some elements.
Mr. Podesta, who is responsible for overseeing the disbursement of the money, said complex rules expected from the Internal Revenue Service and other agencies would clarify who qualifies for various incentives and how the money will be doled out.
The federal dollars will be consequential to unleashing trillions of dollars in private sector energy investments, he said.
“I’ve spent a fair amount of time listening to people who are anxious to invest in the United States as a result of this legislation, and are preparing business plans, assuming that those tax credits will have certainty,” Mr. Podesta said. He said the agencies were “on track” and would begin to issue official guidance “by the end of the year and early next year.”
On Thursday the White House made public a guidebook meant to help companies and consumers as well as state, local and tribal governments navigate the new law. Mr. Podesta said his aim was to create a road map that would especially help communities that disproportionately face pollution and climate hazards to take full advantage of the tax incentives.
The guidebook breaks down the approximately two dozen tax provisions by agency and area of investment, like electricity, domestic manufacturing, energy development on tribal lands and the deployment of clean vehicles.
“Our challenge is to ensure that these programs are stood up, particularly given the fact that two-thirds of the support for clean energy is coming through the tax code,” Mr. Podesta said.
As the White House works to turn the new law into reality, the stakes are high. President Biden has promised to cut United States greenhouse gas emissions at least 50 percent below 2005 levels by the end of this decade, a target aimed at keeping rising global temperatures on a trajectory that would most likely avoid the most catastrophic consequences of climate change.
The ability to meet that goal depends on how quickly the new law helps shift the American economy away from coal, oil and gas and toward wind, solar and other cleaner energy sources. It also will require new federal regulations to further cut emissions from power plants and vehicles, which Mr. Podesta said would be issued “very soon.”
The administration is under pressure to move quickly. It has just two years left to prove its theory that a low-carbon America can also create jobs and turn a profit.
“John’s biggest challenge is to prove to working class voters who have gone increasingly Republican that clean energy can bring them economic and consumer benefits, not just cut emissions,” said Paul Bledsoe, a former climate aide in the Clinton administration who now works at the Progressive Policy Institute, a think tank.
“There’s still a perception of a lot of these technologies as elitist,” Mr. Bledsoe added, saying the Biden administration must “reach the average American where they live and work” by things like ensuring apartments have adequate electric vehicle charging stations, or rural areas see new jobs in solar production.
Battles are already brewing. This week Senator Joe Manchin III, Democrat of West Virginia, warned Janet Yellen, the Treasury secretary, against a “broad interpretation” of the law’s electric vehicle tax credit. Mr. Manchin has said that could benefit foreign automakers. The law includes a provision inserted by Mr. Manchin that requires electric vehicles to be assembled in North America and use batteries made with minerals from allied nations in order to qualify for the $7,500 credit to consumers.
Another tension is around how quickly energy projects can be built. Mr. Podesta called the current pace of permitting and building solar and wind farms and the necessary transmission lines a “huge challenge” and “one of the things that keeps me up a little bit at night.”
But plans to speed up the permitting process are mired in politics. The Senate is expected to vote Thursday on a proposal by Mr. Manchin to overhaul environmental permitting. But while President Biden and Democratic leadership support the plan, progressive Democrats argue it will lead to more fossil fuel development and oppose it. Republicans generally favor permitting reform but some are nevertheless withholding support to deprive Mr. Manchin of a legislative victory.
Heather Reams, president of the Citizens for Responsible Energy Solutions Forum, a clean energy group that works closely with Republican lawmakers, said the new law has the potential to benefit and win over conservative America, but stalemates on issues like permitting reform hurt.
“A lot of the money going out the door is going to benefit red states,” Ms. Reams noted.
Meanwhile Republicans, none of whom voted for the new climate law, seem intent on slowing down its implementation.
Representative Cathy McMorris Rogers, a Washington Republican who is likely to chair the House Energy and Commerce Committee in January, has said she plans to investigate the billions of new dollars that will flow from the Department of Energy’s loan office. About a decade ago that office under the Obama administration issued $500 million to Solyndra, a solar company that filed for bankruptcy two years after receiving the loan. Ms. Rogers has called the new climate law “Solyndra on steroids.”
“They’ll try to find the one loan that for whatever reason goes bad, and my guess is there will be a big hunt for that on the House side,” Mr. Podesta said. But he dismissed the threat of hearings as an effort among Republicans to “rerun the last playbook” and “gum up the works” — a move he insisted would fail.
“We have the law on our side, we have the investment portfolio on our side and we’ll go ahead and implement the program,” he said.