Perplexing Policy Paradoxes
After scoring some major legislative victories in its first two years, the Biden administration's climate agenda is running headfirst into political realities in year three – exposing divisions and contradictions that are manifesting themselves in the congressional agenda.
Case study No. 1: For starters, the domestic content provisions contained in the Inflation Reduction Act (IRA) have the administration tying itself into knots trying to appease a range of affected parties. Included in the IRA at the behest of labor unions, the domestic content requirements associated with the electric vehicle (EV) tax credits have the European Union up in arms over impact to European manufacturers. Treasury Secretary Janet Yellen has faced criticism in recent appearances before House and Senate committees over the administration's suggestion that free trade deals could help U.S. trade partners qualify for the IRA's domestic content requirements (the Treasury Department later released a white paper that addresses this subject). And while the domestic content rules are ostensibly good for domestic mining interests, environmentalists are less than thrilled at the prospect of new critical minerals production. Stuck between a rock and a hard place, the Biden administration last week announced it may ban mining around a South Dakota watershed for two decades – the latest in a series of actions taken to prevent domestic mines from moving forward.
Case study No. 2: The upcoming Senate vote on a disapproval resolution that would terminate President Biden's two-year reprieve from new tariffs on solar panels from four Southeast Asian nations is another example. In this case, the IRA injected huge sums into clean energy deployment, only to run smack dab into the Antidumping and Countervailing Duties (AD/CVD) case brought by Auxin Solar. While Biden's tariff pause has provided some peace of mind, the administration may find itself struggling to keep otherwise sympathetic lawmakers in line on the Congressional Review Act (CRA) petition vote amid widespread anti-China sentiment among members of both parties.
Finally, case study No. 3: Biden's aggressive climate policies are running headfirst into the need to keep energy prices low. The left continues to press Biden to prioritize climate action, but Russia's ongoing war against Ukraine and sky-high inflation call for increasing energy supply to help consumers at the pump (not to mention getting Democrats re-elected). This was on display last week, when Biden approved the Willow Project in Alaska's National Petroleum Reserve-Alaska (albeit on a smaller scale than ConocoPhillips wanted), prompting howls from environmental groups. Republicans want Biden to go further, and you can expect to hear plenty more about drilling when the House GOP energy package hits the floor next week.
Individually, these pieces appear to paint a contradictory policy picture, but with a little perspective, one can see the administration working to advance their priorities while making the compromises they feel are necessary to balance the very real political realities they face. Their success hinges on how well they continue to balance these competing priorities in the months to come…while still making progress as the 2024 race heats up.
