Last week, Senate Majority Leader Chuck Schumer won the support of moderate Democrat Joe Manchin for a reconciliation proposal that some are hailing as the most significant climate legislation in U.S. history. The package includes $260 billion in tax credits for low-emissions electricity production, including nuclear power; $80 billion in new rebates for electric vehicles and home energy upgrades; and $60 billion for alternative energy manufacturing. Its inapt moniker aside, the “Inflation Reduction Act” signals the direction in which U.S. environmental policy is headed, though it leaves vital issues unaddressed.

Start with the climate claim. The bill’s drafters tout its potential to reduce U.S. emissions by 40 percent by 2030, but that figure is relative not to current annual emissions but to emissions in 2005, which were 12 percent higher than they are today. Rhodium Group, a research firm, estimated in July that U.S. emissions were on track to fall by up to 35 percent by 2030 “absent any additional policy action” such as the reconciliation bill. Market dynamics, as seen in the emergence of affordable natural gas, and existing policies, such as the National Ambient Air Quality Standards, combined to reduce emissions significantly and will continue to do so over the remainder of the decade. While the bill will likely produce further marginal reductions, claims that it will alter the nation’s fundamental emissions trajectory are misleading.

Indeed, the bill ignores two major policy levers: carbon pricing and permitting reform. Carbon pricing, the most basic way governments can nudge economies away from carbon-intensive goods and services, has been floated before. But while this bill includes a noteworthy methane fee, it doesn’t pursue setting a general price on carbon. Instead, it reorients the climate conversation away from reducing fossil energy use and toward ramping up production of alternatives. Such a change might be welcome news to those hoping for a growth-oriented, rather than restriction-based, approach to environmental issues, but it also invites bloat and self-dealing.

If carbon pricing represents a simple tool for governments worldwide, permitting reform is perhaps the most important policy in the U.S. for advancing low-carbon energy innovation. Intricate layers of environmental regulations and reviews, such as the National Environmental Policy Act, block the development of new production sites and the building of key infrastructure like transmission lines. The bill ignores this area.

Manchin says that comprehensive permitting reform will be addressed later this year in a follow-up bill, but such a deal is no guarantee. With environmentalist groups from the Sierra Club and EarthJustice to the Natural Resources Defense Council arrayed against streamlining reform, Democrats will face significant political pressure to keep barriers in place. Raul Grijalva, chairman of the House Natural Resources Committee, called permitting reform a “euphemism for gutting our most foundational environmental and public health protections.” So the refreshing turn away from anti-growth environmentalism and toward energy abundance that the bill promises may be less than meets the eye.

Meantime, the bill’s electric vehicle provisions may encounter technical difficulties. The proposal nominally expands eligibility for the federal electric vehicle tax credit by lifting manufacturer-based caps and offering a credit for the first time on used EVs. But stipulations placed on those credits will mean that their expanded availability may exist only on paper. Carmakers will be required to source EV batteries with at least 40 percent of their minerals extracted or processed by a nation that is party to a U.S. free trade agreement. That number will rise to 80 percent by 2027. According to Morgan Bazilian, director of the Payne Institute at the Colorado School of Mines, “These things aren’t in place, and might not be for more than a decade.”

China has charged ahead of the U.S. in mineral production and processing. President Biden’s decision-making in this arena has been emblematic of the often-self-defeating environmental ethos on U.S. resource production and energy abundance. While earlier this year, the Biden administration invoked the Defense Production Act to boost domestic supply of minerals, it canceled two federal leases for copper and nickel mining in Minnesota just months before, despite copper and nickel being key minerals for electricity transmission and batteries, respectively. Environmental groups heartily approved that decision. Unless Democrats and environmentalists come to grips with the energy economy’s tangible requirements, they will continue to act as brakes on the development they claim to desire.

Ultimately, energy abundance, low-carbon or otherwise, will require a significant recalibration of our veto-cratic environmental policy structure. Interior secretary Deb Haaland unabashedly extolled vetocracy in the leadup to the Minnesota mining lease cancellation, referring to “the public input necessary to make informed decisions about how mining activities may impact this special place.” To the extent that such a view prevails in the upcoming permitting negotiations, red tape will remain. “The trigger pulls the finger,” Breakthrough Institute deputy director Alex Trembath says. “As long as we have NEPA in its current form, people will find all sorts of rationales for weaponizing it.”

If Democrats can accept needed environmental-policy reforms, an energy boom may lie ahead. The dominant ethos in their party, however, suggests that such a future remains doubtful.

Photo By Tom Williams/CQ Roll Call


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