Policy & Regulation

Could the $3.5 trillion budget bill be cut in half?

Could the $3.5 trillion budget bill be cut in half?
Concerns by Senate Democrats could see the $3.5 trillion budget reconciliation package (and its clean energy investments) cut in half.

President Biden is lobbying support in Congress for his legacy-defining infrastructure and clean energy proposals. While a $1.2 trillion bipartisan infrastructure bill has received broad support, a $3.5 trillion budget reconciliation package, which contains substantial investments in climate change mitigation and clean energy, faces a more uncertain future because of concerns from moderate Democrats in the U.S. Senate.

The budget reconciliation mechanism requires only Democrat support in the House and Senate, but moderate Democrat Senators Krysten Sinema of Arizona and Joe Manchin of West Virginia remain uncomfortable with the $3.5 trillion price tag.

Manchin, chair of the key Senate Energy and Natural Resources Committee, said on Thursday that he would support a $1.5 trillion budget reconciliation package -- less than half of the original proposal. Notably, Manchin receives roughly a half-million dollars per year in dividends from coal investments.

"I've never been a liberal in any way, shape or form," Manchin said, according to CNN. "I'm willing to come from zero to 1.5 (trillion)."

Progressive Democrats in the U.S. House have said they won't support the bipartisan infrastructure bill without guaranteed, simultaneous approval of the budget reconciliation package -- imperiling both of Biden's key proposals.

Ben Stewart, Sinema's outreach director in Washington, told renewable energy stakeholders that Sinema will support legislation that is crafted in a "bipartisan manner."

Stewart predicted the size of the budget reconciliation bill will cross the finish line at about half of its initial size.

"She's been very public that she doesn't support the full $3.5 trillion," Stewart said. "She always goes back to, as long we're working in a bipartisan way, and it makes sense, and we're not saddling the nation with more taxes and more debt, that's what her mindset is."

The U.S. can nearly reach the Biden administration's goal of cutting greenhouse gas emissions with the approval of a bipartisan infrastructure bill and $3.5 trillion budget reconciliation package, Senate Majority Leader Chuck Schumer wrote to colleagues in August.

CNN first reported the analysis by Schumer's office that said the bills would position the U.S. to cut emissions by 45% compared to 2005 levels by the end of the decade, just short of President Biden's goal of 50%.

Schumer's office said the Clean Electricity Payment Program and tax credits for renewable energy sources will make the biggest impact, accounting for 42% of emissions cuts. Incentives for electric vehicles would make up 15.7% of cuts, the analysis shows.

“When you add Administrative actions being planned by the Biden Administration and many states - like New York, California, and Hawaii - we will hit our 50 percent target by 2030,” Schumer said in the letter, according to The Hill.

Lindsey Walter, deputy director of climate and energy for the think tank Third Way, joined Renewable Energy World's John Engel to discuss the importance of the Clean Electricity Payment Program.

President Biden's signature climate initiatives would cut greenhouse gas emissions by nearly a billion tons in 2030, according to a report on key pieces of the legislative proposals.

Rhodium Group analyzed several of the most significant provisions within the $1 trillion bipartisan infrastructure package and the "Build Back Better" plan within the $3.5 trillion budget reconciliation bill, which are both still working through the US Congress.

The report finds that the proposals -- long-term clean energy tax credits, a Clean Electricity Performance Program, funding for rural electric cooperatives to decarbonize, new electric vehicle tax credits, fees on methane emissions, and boosted funding for agricultural and forestry programs that achieve carbon removal -- can cut US emissions by 830-936 million tons in 2030 compared to current policy.

Beginning in 2023, the Clean Electricity Performance Program would reward utilities that increase their share of clean energy by 4% per year with grants and punish utilities that fall short by imposing fees.

The report estimates that long-term EV tax credit enhancements in the "Build Back Better" plan would lead EVs to make up as much as 61% of total vehicle sales in 2030, even more than President Biden's goal of 50%.

Rhodium Group estimates that the initial policies outlined in the infrastructure and reconciliation plans, though subject to change, would be equivalent to removing the annual emissions from all light-duty vehicles in America or zeroing out net annual emissions from Texas and Florida combined.

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