Surprise Deal Would Be Most Ambitious Climate Action Undertaken by U.S.

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WASHINGTON — The $369 billion climate and tax package forged in a surprise deal by Senate Democrats would be the most ambitious action ever taken by the United States to try to stop the planet from catastrophically overheating.

The agreement, which Senate Democrats announced late Wednesday and hope to pass as early as next week, shocked even some who had been involved in the sputtering negotiations over climate legislation during the past year. The announcement of a deal, after many activists had given up hope, almost instantly reset the role of the United States in the global effort to fight climate change.

And it was delivered by Senator Joe Manchin III of West Virginia, the holdout Democrat who had been reviled by environmentalists and some of his own colleagues after he said this month that he could not support a climate bill due to inflation concerns.

“By a wide margin, this legislation will be the greatest pro-climate legislation that has ever been passed by Congress,” Senator Chuck Schumer, the Democratic majority leader, said in announcing the deal with Mr. Manchin.

The bill aims to tackle global warming by using billions of dollars in tax incentives to ramp up wind, solar, geothermal, battery and other clean energy industries over the next decade. Companies would receive financial incentives to keep open nuclear plants that might have closed, or to capture emissions from industrial facilities and bury them underground before they can warm the planet. Car buyers with incomes below a certain level would receive a $7,500 tax credit to purchase a new electric vehicle and $4,000 for a used one. Americans would receive rebates to install heat pumps and make their homes more energy-efficient.

“This is the action the American people have been waiting for,” President Biden said, hailing the bill’s “investments in our energy security for the future.”

Senate Democrats estimated that the legislation would enable the United States to cut greenhouse gas emissions by 40 percent below 2005 levels by 2030, putting the nation within striking distance of the aggressive climate goals laid out by Mr. Biden last year.

Mr. Biden wants to slash U.S. emissions to at least 50 percent below 2005 levels by the end of this decade, which is roughly the pace scientists say the whole world must follow to limit global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) above preindustrial levels. That’s the threshold beyond which scientists say the likelihood of catastrophic floods, fires, storms and drought increases significantly. The planet has already warmed by about 1.1 degrees over the past century.

The bill “keeps us in the climate fight and makes it possible that executive action, state and local government policies, and private sector leadership can get us across the finish line,” said Jesse Jenkins of Princeton University, who modeled the effects of earlier versions of the legislation. “Without this bill, we’d be hopelessly far from our climate goals.”

Diplomats and climate experts said they hoped the deal would revitalize international efforts to tackle global warming, which have flagged in recent months as the war in Ukraine and surging oil prices have led many countries to focus on shoring up fossil fuel supplies. The world’s governments are far from doing what they must to meet the target of 1.5 degrees, and leaders are scheduled to meet in Egypt in November to discuss stepping up their efforts.

Understand What Happened to Biden’s Domestic Agenda

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‘Build Back Better.’ Before being elected president in 2020, Joseph R. Biden Jr. articulated his ambitious vision for his administration under the slogan “Build Back Better,” promising to invest in clean energy and to ensure that procurement spending went toward American-made products.

A two-part agenda. March and April 2021: President Biden unveiled two plans that together formed the core of his domestic agenda: the American Jobs Plan, focused on infrastructure, and the American Families Plan, which included a variety of social policy initiatives.

The Infrastructure Investment and Jobs Act. Nov. 15, 2021: President Biden signed a $1 trillion infrastructure bill into law, the result of months of negotiations. The president hailed the package, a pared-back version of what had been outlined in the American Jobs Plan, as evidence that U.S. lawmakers could still work across party lines.

A surprise deal. July 28, 2022: In a reversal, Mr. Manchin said that he had agreed to a deal to include hundreds of billions of dollars for climate and energy programs and tax increases in a package to subsidize health care and lower the cost of prescription drugs. The package’s climate proposals would be the most ambitious climate action ever taken by Congress.

“We all needed good news,” said Tina Stege, the climate envoy for the Marshall Islands, which is at risk of disappearing beneath rising seas. The climate deal “puts much-needed wind in our sails,” she said, though she cautioned that “we remain far from where we need to be.”

Jonathan Pershing, who served as Mr. Biden’s deputy climate change envoy until January, said that in recent weeks he had fielded concerns from former counterparts from Africa and China who were acutely aware of the seeming collapse of U.S. climate legislation.

“They were like, ‘OK, you guys aren’t going to do this, so why should we do it,’” Mr. Pershing recalled. “I think you now have a fundamentally different narrative.”

Senator Edward J. Markey, Democrat of Massachusetts, said the legislation would restore American credibility in international negotiations. “You can’t preach temperance from a bar stool, and you can’t ask China, India, Brazil or other countries to cut emissions if we’re not doing it ourselves in a significant way,” he said.

Senate Republicans are unanimously opposed to the legislation.

“It is nothing short of an attack on the American family,” Senator John Barrasso, Republican of Wyoming, said in a statement. “If we want to reduce inflation, lower energy costs, and cut the deficit, the recipe is clear. Congress should cut spending and unleash American oil and natural gas production.”

The bill would affect nearly every aspect of U.S. energy production. It includes $30 billion in incentives for companies to build solar panels, wind turbines and batteries and to process critical minerals in the United States, aiming to reverse the longstanding migration of clean energy manufacturing to China and elsewhere.

Companies have said they are ready to respond quickly. QCells, a South Korean-based solar company that is already building a $171 million assembly factory in Dalton, Ga., is planning a multibillion-dollar expansion of supply chains in the United States if the bill passes, said Scott Moskowitz, QCells’ head of market strategy and public affairs.

Also included is $60 billion to address the disproportionate burden of pollution on low-income communities and communities of color; $27 billion for a “green bank” aimed at delivering financial support to clean energy projects; and $20 billion for programs to cut emissions in the agriculture sector.

The bill would also crack down on leaks of methane, a powerful greenhouse gas, from oil and gas wells, pipelines and other infrastructure. By 2026, polluters would face a penalty of $1,500 per ton of methane that escaped into the atmosphere in excess of federal limits. The methane fee will raise $6.3 billion from the oil and gas industry over a decade, much of which will be reinvested in measures to help prevent methane leaks.

The most immediate effect of the bill, energy experts said, will be to supercharge the growth of wind turbine, solar panel and electric vehicle production in the United States. Renewable energy production has slowed significantly this year, due to pandemic-related disruptions, trade disputes and uncertainty about federal policy, according to a recent report by the American Clean Power Association, which represents wind and solar energy companies and battery manufacturers.

“The entire clean energy industry just breathed an enormous sigh of relief,” said Heather Zichal, chief executive of the association. “This is an 11th-hour reprieve for climate action and clean energy jobs.”

For decades, the United States has provided tax credits for wind and solar power that expire after one to two years, subjecting the industry to a boom-bust cycle until the credits are renewed. Under the new legislation, the tax credits would last up to 10 years, to give companies the confidence to make long-term investment decisions.

The bill does not, however, address one of the biggest hurdles facing renewable energy: a lack of long-distance power lines to help bring wind and solar power to cities from far-flung rural regions. An earlier version of the bill had included tax credits for new transmission, but that was removed. Without that provision, many wind and solar projects could struggle to get built, said Rob Gramlich, founder of Grid Strategies.

In the longer term, the tax incentives in the bill are expected to nurture emerging technologies like carbon capture for industrial facilities such as steel and cement, next-generation nuclear reactors and the use of hydrogen as a low-carbon fuel. Many of these technologies are too costly for widespread use today, but the hope is that by creating a market for an initial round of projects, costs could be driven down — much as federal tax credits in the 2000s and 2010s helped transform wind and solar power from a pricey niche technology into an affordable mainstream option.

But the breakthrough on climate change also includes a number of fossil fuel provisions, a concession seen as necessary to win support from Mr. Manchin, whose home state of West Virginia is rich in coal and natural gas. For instance, the bill would mandate new lease sales for oil drilling in the Gulf of Mexico and Alaska’s Cook Inlet, something environmental groups had opposed and Mr. Biden had promised to halt as a candidate for the White House.

“I wasn’t budging from making sure we had a robust energy portfolio,” Mr. Manchin told a West Virginia radio show on Thursday. He talked about holding firm against unrealistic plans by some Democrats to “get rid of all fossil fuels, get rid of all coal, get rid of all oil, everything. Yeah, and we’ll go to hell in a handbasket.”

As part of the agreement, Mr. Manchin said he had also secured a commitment from both Mr. Biden and Speaker Nancy Pelosi of California that Congress would approve a separate measure to address the permitting of energy infrastructure, potentially including natural gas pipelines, before the end of the fiscal year on Sept. 30.

Such reforms could ease the way for a project in which Mr. Manchin has taken a personal interest, the Mountain Valley Pipeline, which would transport Appalachian shale gas from West Virginia to Virginia.

Some environmental advocates rejected the entire package because of those provisions. Brett Hartl, government affairs director at the Center for Biological Diversity called the deal “a total catastrophe” that would lead to more emissions in the atmosphere.

But even lawmakers who had fought for stronger climate provisions said Thursday they intend to vote for the package.

“It’s pragmatism,” said Representative Raul Grijalva, the Arizona Democrat who chairs the House Committee on Natural Resources.

Representative Ro Khanna, Democrat of California, said the prospects of new offshore oil leasing and faster pipeline approvals “are outweighed by the enormous good that the investments in clean technology will have.” He called the deal “a clean energy moonshot.”

Two weeks ago, when even Mr. Biden seemed to be writing an obituary for climate legislation, a small group of lawmakers continued to work with Mr. Manchin. Several Democrats and climate activists credited Senator John Hickenlooper of Colorado with helping to keep open the lines of communication with Mr. Manchin.

“When a lot of people said ‘That’s the end’ and everyone’s writing it off, I went to everybody I knew and said, ‘Wait a minute, we can’t quit,” said Mr. Hickenlooper, a onetime geologist for an oil and gas company. “We don’t have a satisfactory alternative.”

Many were wary about continuing negotiations because “they didn’t want to have their heart broken again,” Mr. Hickenlooper said. But, he said, Mr. Manchin insisted that he was still open to a deal.

Mr. Hickenlooper said the group worked closely with experts at the Wharton School at the University of Pennsylvania, and that Mr. Manchin put much stock in their data indicating that legislation could be designed that did not worsen inflation.

He called Mr. Manchin “an honest broker” in the talks, one who wanted to find a way to address climate change without creating a burden for the fossil fuel workers in his state.

“He never told me he was done, and I said as long as Joe Manchin is at the table, I’m at the table,” Mr. Hickenlooper said.