By Robert Bryce for RealClearEnergy
Never doubt the power of The Swamp.
That is the clear lesson to be learned from Senator Joe Manchin’s turnaround on the energy-related provisions of the pending Reconciliation Act. Last month, Manchin derailed the measure that included about $300 billion in energy-related utilities. Manchin was pilloried by climate activists and by former Obama adviser John Podesta, who stated that Manchin “single-handedly damned humanity”. But last Wednesday, Manchin changed his mind and agreed to a deal with Senate leader Chuck Schumer, which is dubiously dubbed the “Inflation Reduction Act of 2022.”
The Manchin-Schumer deal proves once again that the Washington Favor Factory never sleeps. The 700-plus-page bill is full of insanely expensive subsidies to the solar and wind sectors, and piques lollipops at almost every energy-related special interest in Washington. The legislation is so broad and so much good for business that it has been approved by – understand this – Exxon Mobil and the Natural Resources Defense Council.
Exxon CEO Darren Woods on Friday called the spending bill “a step in the right direction… We welcome the wider recognition that a more comprehensive set of solutions is needed.” A day earlier, Manish Bapna, president of NRDC released a statement saying, “This is the ultimate clean energy comeback – the strongest climate action yet at the time we need it most. Congress must approve it without delay. ”
Exxon applauds facilities that could expand domestic drilling. The NRDC applauds because the bill includes tax credits for many alternative energy programs, including, of course, more tax credits for wind and solar.
Related: Senator Joe Manchin Swears ‘Inflation Reduction Act’ Won’t Raise Taxes on Americans, Despite All Signs It Will
The energy-related parts of the bill are expected to cost $369 billion. That’s an increase of more than 20% from cost estimates published just a few weeks earlier. (Speaking of inflation!) And while the cost is set at $369 billion, the final bill for all the measures in the bill could be much higher. Which brings me to my first point: the bill reveals (again) how perverse the parliamentary process has become in Congress.
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This legislation costs hundreds of billions of dollars and has far-reaching consequences for the economy. A media outlet called it “the largest and most sweeping climate change bill ever passed by Congress”. But key provisions in the legislation — including incentives for solar energy through the investment tax credit that author and Substack writer Michael Shellenberger recently estimated could total $260 billion — were never discussed in Congress. That is remarkable. Why? The ITC is the most expensive energy-related provision in federal tax law. Last year, solar got 267 times more federal tax credits per unit of energy produced than the nuclear sector.
Also no discussion about another extension of the production discount, the subsidy that the wind industry uses. The PTC, the second most expensive energy-related provision in federal tax law, expired early this year. It was designed as a “temporary” grant, but it has been extended 13 times and has become the main financial incentive driving the growing land-use conflicts between the wind industry and cities and counties across the country. Despite these conflicts, as Shellenberger points out, if certain conditions for domestically produced content are met, the subsidy for wind energy could increase from the current 2.6 cents per kilowatt-hour to 3.1 cents per kilowatt-hour.
These solar and wind subsidies are obvious examples of corporate welfare being handed out in the name of climate change. Despite the staggering costs – and the damaging impact that wind and solar subsidies have on grid integrity – these allocations are not debated. Indeed, the total cost and potential impact of the legislation is barely mentioned by major media, perhaps because the language in the bill is so complicated that it takes an expert to understand what the legislation will do.
Congress does not discuss any of these facts. Instead of debate and deliberation, all of these measures are rushed through the reconciliation process, allowing legislation to be passed with just 51 votes in the Senate. Manchin-Schumer reminds me of the 5,593 page Covid Relief and Spending Act passed by Congress in late 2020. The legislation was the longest law ever passed by Congress. Joe Concha, a columnist for The hill, calling it the “swampiest thing ever.” Concha added that it was “exactly what you’d expect from a dysfunctional, tone-deaf congress: a pork-filled cluster…”
That’s the Inflation Act of 2022: a pork-filled cluster. Manchin and Schumer have delivered for the NGO business conference climate complex that wants to spend more money on weather dependent renewables, despite the ongoing energy crisis in Europe, where countries like Germany, Italy, Netherlands and others are rushing to buy and burn as much as possible coal.
Oh, and by the way, the Newcastle coal benchmark is now above $400 a tonne. Nineteen months ago, it sold for $50 a ton.
Related: Democrats Reach Deal to Raise Taxes by Nearly $750 Billion
Finally, be wary of claims about how world-changing and climate-saving the deal will be. A one-page summary of the deal published by Senate Democrats claimed it would “cut energy costs, increase cleaner production and cut carbon emissions by about 40 percent by 2030.” That last claim was dutifully reported by the New York Times without any context or skepticism. The Time said the deal “will put the United States on track to reduce its greenhouse gas emissions to about 40 percent below 2005 levels by 2030.”
Let’s look at the numbers. In 2005, emissions in the US amounted to approximately 5.9 billion tons. Between 2005 and 2021, those emissions dropped by about 20 percent, or about 1.2 billion tons. So to cut emissions by another 20 percent – and that in just eight years – will require a further 1.2 billion tons of emissions to be reduced. In perspective, that’s nearly equal to all energy-related emissions from U.S. industry in 2021. (According to the EPA, industrial emissions were 1.4 billion tons last year.) In other words, to cut that many emissions, domestic oil consumption would have to be reduced by more than half. (Last year, oil-related emissions were 2.2 billion tons.) Call me a skeptic, but that won’t happen.
In addition, as Shellenberger has reported, the Joint Taxation Committee has determined that the Manchin-Schumer Act will increase taxes “by $3 billion more for Americans earning less than $200,000 a year than for Americans earning between $200,000 and $200,000.” 500,000 a year.” In addition, Arizona Sen. Kyrsten Sinema reportedly made changes to the bill. The Wall Street Journal quoted an investment company that “estimated the chance of the deal going through at just 65 percent, saying that among other risks, progressives may disagree with allowing overhauls that help boost fossil fuel production.”
In short, this deal is far from becoming law. But whether it becomes law or not, it shows once again that the Washington Swamp will always supply special interests.
Syndicated with permission from Real Clear Wire.
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