by Reinout Debergh
The White House has recognized that we face a climate crisis and that time is running out to act [1]. In early October, 23 federal agencies published reports on how the climate crisis will affect their respective domains. Notably, Defense Secretary Lloyd Austin called climate change a “destabilizing force” [2]. Therefore, the Build Back Better Act (BBBA) has been introduced. It includes several climate measures. Besides climate measures, it also includes historic investments in childcare, healthcare and social measures [3].
Build Back Better Act: Political context
Originally, the BBBA was worth 3.5 trillion USD. Republicans do not support the plan and have therefore not been part of the negotiations with Democrats [4]. The key issue lies in the US Senate where Democrats only have 50 votes. But in order to limit the time to debate a bill, a procedure called invoking cloture, 60 senators must vote in favor. Else the debate could go on forever, known as filibustering, and the bill would never pass [5]. An alternative is a process known as budget reconciliation. This allows the Democrats to pass a bill with a simple majority vote (at least 50 senators) and Vice President Harris, a Democrat, would then break the tie. But there are limits to this procedure and not just anything can be put in a reconciliation bill [6].
The key result is that all 50 Democratic Senators need to vote in favor, but two of them have refused to do so: Joe Manchin (West Virginia) and Kyrsten Sinema (Arizona). While Manchin’s problem was with the high costs of the bill, Sinema did not publicly state her positions. This vote has shown the infighting within the Democrats between centrists and progressives. Progressives have delayed the vote on the Bipartisan Infrastructure Bill as leverage in the negotiations for the BBBA [7].
Finally, after months of negotiations, lawmakers put forward the updated BBBA bill on October 28th. It had been reduced to 1.75 trillion USD [8].
Build Back Better Act: Climate measures
In total, the BBBA provides 555 billion USD to tackle climate change. According to the government, it will reduce greenhouse gas emissions by more than one gigaton in 2030, reduce energy costs for consumers, improve air and water quality, create many jobs and advance environmental justice [9].
Clean energy tax credits
320 billion USD are freed up for this measure [9]. Renewable energy tax credits have long been a key part of US climate policy [10]. A tax credit is defined as the amount of money that taxpayers can subtract directly from taxes owed to the government [11]. Therefore, they incentivize investments, in this case in clean energy. This will help make the energy grid and transportation cleaner. For example, a tax credit can be given for buying an electric car, making them more affordable and thus more accessible [10].
Resilience investments
105 billion USD will be invested to reduce the impact of extreme weather events, tackle pollution and establish a Civilian Climate Corps (CCC) [9]. Examples of potential projects are coastal restoration, forest management, and soil conservation. The CCC will protect important recreation sites, ensure the preservation of biodiversity, increase flood resiliency, and enhance carbon sequestration through conservation projects [10].
Investments and Incentives for Clean Energy Technology, Manufacturing, and Supply Chains
110 billion USD will be invested to grow renewable energy production in the US itself [10]. It aims to keep production domestically rather than abroad and create hundreds of thousands of jobs domestically. It will, for example, boost the competitiveness of important industries such as steel, through grants, loans and tax credits [9].
Clean energy procurement
20 billion USD will be used to incentivize governments to make use of their purchasing power and focus on clean energy and materials during their procurement processes [9]. This will create demand for clean energy and materials, thereby growing the market [12].
How to pay for it?
To pay for this bill, there will be several tax reforms:
- A minimum tax on the corporate profits that corporations, with more than one billion in profits, report to shareholders;
- A surcharge on corporate stock buybacks
- A minimum tax on foreign profits of U.S. corporations to avoid that companies benefit from shifting profits and jobs abroad
- Surtax on the income of multi-millionaires and billionaires, which are the top 0.02% of Americans
- Enforcement of existing tax laws [3].
Conclusion
The BBBA draft bill is historical when it comes to climate investments in the US [3]. It is necessary to improve the US economy and protect US citizens from climate change [13]. The bill, however, is about half of the original 3.5 trillion USD proposed investment, with many important provisions struck from the final version. For example, the clean electricity program designed to penalize utilities that fail to increase their use of renewables and pay those that do, did not make it in the final version due to opposition from Senator Manchin [14, 15]. It was the key part of Biden’s climate agenda [16]. For now, it is key that the BBBA passes through congress.
References:
[1] Executive Order on Tackling the Climate Crisis at Home and Abroad, The White House, https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/27/executive-order-on-tackling-the-climate-crisis-at-home-and-abroad/, accessed on 06/11/2021.[2] Egan, L., Biden administration releases alarming reports on climate change challenges, NBC News, https://www.nbcnews.com/politics/white-house/biden-administration-releases-alarming-reports-climate-change-challenges-n1281036, accessed on 06/11/2021.
[3] The Build Back Better Framework, The White House, https://www.whitehouse.gov/build-back-better/, accessed on 06/11/2021.
[4] Cowan, R., Cornwell, S., U.S. Senate Democrats agree to $3.5 trln for budget reconciliation bill, Reuters, https://www.reuters.com/world/us/us-senate-democrats-rush-outline-massive-infrastructure-bill-2021-07-13/, accessed on 06/11/2021.
[5] Liasson, M., Why Possibly Changing The Filibuster Brings Threats Of Political ‘Nuclear’ War, NPR, https://www.npr.org/2021/03/29/981364153/why-possibly-changing-the-filibuster-brings-threats-of-political-nuclear-war, accessed on 06/11/2021.
[6] McDaniel, E., Snell, K., A $1.5 trillion question: What is budget reconciliation? Here’s an explainer, NPR, https://www.npr.org/2021/09/14/1026519470/what-is-budget-reconciliation-3-5-trillion?t=1636119512947, accessed on 06/11/2021.
[7] Luscombe, R., Joe Manchin and Kyrsten Sinema: the centrists blocking Biden’s agenda, The Guardian, https://www.theguardian.com/us-news/2021/oct/03/joe-manchin-kyrsten-sinema-democrats-biden, accessed on 06/11/2021.
[8] Congressional Democrats Reveal Updated $1.75 Trillion Build Back Better Act, AAMC, https://www.aamc.org/advocacy-policy/washington-highlights/congressional-democrats-reveal-updated-175-trillion-build-back-better-act, accessed on 06/11/2021.[9] READ: White House details Build Back Better spending framework, CNN, https://edition.cnn.com/2021/10/28/politics/read-build-back-better-plan/index.html, accessed on 07/11/2021.
[10] Cohen , R., The Build Back Better Framework from a New York Perspective, New York League of Conservation Voters, https://nylcv.org/news/the-build-back-better-framework-from-a-new-york-perspective/, accessed on 07/11/2021.
[11] Segal, T., Tax credit, Investopedia, https://www.investopedia.com/terms/t/taxcredit.asp, accessed on 07/11/2021.
[12] What is GPP, European Commission, https://ec.europa.eu/environment/gpp/what_en.htm, accessed on 07/11/2021.
[13] Gore, E., With Infrastructure Act Headed to President Biden, the House Must Now Quickly Pass the Build Back Better Act, Environmental Defense Fund, https://www.edf.org/media/infrastructure-act-headed-president-biden-house-must-now-quickly-pass-build-back-better-act, accessed on 07/11/2021.
[14] Scholtes, J., Levine, M., Miranda, A., What’s still in the Dem megabill? Cheat sheet on 12 big topics, Politico, https://www.politico.com/news/2021/10/25/whats-still-in-the-dem-megabill-cheat-sheet-on-12-big-topics-516844, accessed on 07/11/2021.
[15] Van Voorhis, S., Unlocking the Transition: Biden, Congress aim to fill gap from clean electricity plan’s demise, Utility Dive, https://www.utilitydive.com/news/unlocking-the-transition-biden-congress-aim-to-fill-gap-from-clean-electr/608395/, accessed on 07/11/2021.
[16] Davenport, C., Key to Biden’s Climate Agenda Likely to Be Cut Because of Manchin Opposition, The New York Times, https://www.nytimes.com/2021/10/15/climate/biden-clean-energy-manchin.html, accessed on 07/11/2021.
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