Climate Change Policies in a Changing Political Climate

Up this week: House Speaker Kevin McCarthy’s (R-CA) debt limit bill includes permitting, Inflation Reduction Act (IRA) rollbacks as threat of default looms, the European Union (EU) approves new carbon border tax, and the Solar Congressional Review Act (CRA) clears Ways & Means with only one Dem. Here’s what you need to know.

McCarthy’s Limit, Save, Grow Act: Recently, House Speaker Kevin McCarthy (R-CA) released the Republicans’ long awaited debt limit bill. In exchange for lifting the debt ceiling for one year, the bill includes billions in federal spending cuts, rollbacks of major elements of the Biden administration’s agenda like the Inflation Reduction Act (IRA), and several H.R. 1 provisions. While using the budget reconciliation process as a vehicle for repealing legislation is certainly not a new tactic – a similar play was run after ObamaCare passed – threats to repeal the IRA specifically are likely to be a bit more fraught for Republicans. For starters, the IRA disproportionately benefits red states and districts, public opinion polling is also very much in favor of funding climate provisions – roughly 3 in 5 voters according to Morning Consult.

But while cutting IRA programs is seen to be unpopular, many H.R. 1 provisions are not. Almost the same share of voters who support funding to fight climate change support provisions to speed up the federal permitting process for energy and infrastructure projects; however, voters are split on McCarthy’s plan to pass permitting reform in exchange for raising the debt-ceiling (37% in support, 36% in opposition and 28% saying they don’t know or have no opinion, according to Morning Consult survey results from last week). 

Speaker McCarthy’s plan is to bring the bill to the floor this week; concerns about Republicans’ ability to pass it out of the house have prompted Democrats to urge President Joe Biden to rethink his refusal to engage with Speaker McCarthy on this proposal. Goldman Sachs and others in the private sector raised alarm bells last week that final deadlines on the debt ceiling could be sooner than expected based on “weak” tax collections so far, so stakes are only going to continue to rise as we approach the summer. 

Europe’s Carbon Border Tax Gets Final Sign Off: After years of negotiations and approvals, the EU parliament approved its Carbon Border Adjustment Mechanism (CBAM) last week, spelling incoming change for importers of iron, steel, cement, aluminum, fertilizers, electricity, and hydrogen. The CBAM – which will apply to carbon-intensive imports from countries that don’t impose carbon taxes – is largely seen as an effort by the EU to assert climate leadership and push other nation’s to follow suit. However, the measure will also serve as a protection mechanism for industries within the bloc. October 2023 through December 2025 will serve as a transitional phase during which importers will report emissions data on imported products; however, come January 2026, payments will kick in and be phased in through 2034. 

Happening in parallel are the ongoing U.S.-EU negotiations on a Global Arrangement on Sustainable Steel and Aluminium (GSSA). While the EU has already signaled that a GSSA would not exclude American steel and aluminum manufacturers from the new CBAM requirements, a U.S. carbon tariff likely would. And it just so happens that such proposals have been gaining traction in Congress, even among Republicans like Sens. Bill Cassidy (R-LA) and Kevin Cramer (R-ND).

Note: Lot Sixteen will soon kick off a new trade conversation series featuring SVP Nasim Fussell. This will be similar to the permitting reform conversation recently hosted by Colin Hayes. Be on the lookout for an invitation soon.

Solar CRA Gets One Dem Vote In Committee: As mentioned in the last update, the House Ways and Means Committee voted Wednesday to report out the CRA disapproval resolution H.J. Res. 39. While a few Democrats were absent from the vote – notably one of the bill’s co-sponsors, Rep. Dan Kildee (D-MI), who was out due to emergency surgery – the fact that Rep. Terri Sewell (D-AL) was the lone Democrat to support the resolution was largely viewed as a win for the industry, albeit a small one. 

The Biden administration released a statement today threatening to veto the resolution – which is set to be brought to the floor this week – stating it would “create deep uncertainty for jobs and investments in the solar supply chain and the solar installation market.” If it passes the House, there are two routes it can take in the Senate. Finance Committee Chair Ron Wyden (D-OR) – a supporter of the resolution – can bring it up for a markup and vote it out. However, the process can be bypassed altogether if a discharge petition with 30 signatures gets filed.

When it comes to climate change policies, we’ll always be keeping an eye on the changing political climate. Check back here for more updates. 

To read Lot Sixteen’s full Federal Update, click here.