The Crux Of Democrats’ Climate Hopes Is … GULP … A Grand Experiment

Power lines. TPM illustration/Getty image
September 8, 2021 11:46 a.m.

The beating heart of Democrats’ climate proposals is a program untested both on national and state levels. 

The Clean Electricity Payment Program (CEPP), slated for inclusion in the reconciliation package, is designed to slash power sector emissions while surviving the reconciliation gauntlet unscathed. 

Due to those unique hoops, the program is distinctly different from its cousins on the state level. Clean energy standards are fairly common in the states, but they’re largely regulatory. The CEPP urges utilities to cut emissions with monetary carrots and sticks, specially crafted to survive the Byrd Rule which governs what can be passed through reconciliation with a simple majority. It is, experts say, one-of-a-kind. 

And it’s the crux of Democrats’ climate plan, in their rare and fleeting moment to enact substantive change that’s never been realized before on a national scale. 

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Getting the details of the fledgling program right is absolutely critical, advocates say. Few specifics are known about it, as it’s being crafted behind closed doors.

Show Me The Money

The CEPP is the push that, if all goes according to plan, will cut power sector emissions by 80 percent by 2030. It uses monetary incentives and penalties to nudge utilities into upping the amount of electricity they sell from “clean” sources — wind, solar, hydropower, natural gas, fossil fuel plants with carbon capture — each year. 

And it’s not just the power sector; by greening the electrical grid, it primes other huge swaths of the economy, like transportation, to be powered by cleaner energy too. Democrats have gone all in on the “electrify everything” approach to yank the planet back from the dangerous precipice it’s teetering towards. 

CEPP’s carrots and sticks, a feature of a program necessary to make it reconciliation-friendly, will also determine how effectively it works. Experts warn that the taxes and incentives will have to be high enough to significantly alter utilities’ behavior. Only if they are compelled to substantially up the chunk of energy they’re getting from clean sources will the hoped-for knock-on effects — a huge build-out of renewable energy production and accompanying explosion of green jobs — happen. 

But getting the balance right is key.

“This is messaged like it’s a standard that will get us to an 80 percent cut in emissions,” Jim Bushnell, a professor at UC Davis specializing in energy and environmental economics, told TPM. “Really, it’s a tax with a subsidy component that is trying to provide a monetary incentive they think is sufficient to get us to 80 percent.”  

Some of the levels on the incentive side will be governed by overall investment in the program. The Senate Committee on Energy and Natural Resources was allocated $198 billion to fund CEPP along with a few other policies in the reconciliation package. Most, or $150 billion of that, will go towards funding the CEPP. 

That’s the lower end of the funding window most advocates say a strong CEPP needs: $150-$200 billion. 

But the overall price tag of the reconciliation package is in flux, thanks to 11th-hour squeamishness by Sen. Joe Manchin (D-WV) who first hinted last week that he may force it to be diminished. 

While the relatively cheap CEPP may survive any reconciliation package shrinkage, its pricier complementary program might not be so lucky.

Sam Ricketts, co-founder of Evergreen Action, is dubious about the $300 billion currently allotted to clean energy tax credits, which, though separate from the CEPP, work in concert: while the CEPP creates a larger desire for clean energy, the tax credits encourage a building out of clean energy production. 

“There may need to be more money for the tax credits,” Ricketts said.

In his opening bid, Manchin is reportedly trying to more-than halve the $3.5 trillion reconciliation package, dragging it down to $1 or $1.5 trillion. A whole host of powerful companies is simultaneously launching a lobbying effort to shrink the package, seeking to weasel out of increased corporate taxes Democrats want to use to help pay for it.  

A One-Of-A-Kind Program

There are also logistical questions about how exactly the policy will operate. 

Even the idea of a utility increasing its share of clean energy brings up thorny questions when put into practice. In some parts of the country, it will be easier and cheaper to build new sources of energy — say, wind turbines — than others. Will the utility company be limited to just buying clean energy from sources nearby that it can use directly? Or will there be some system where a utility in Massachusetts can buy wind power from Wyoming, and have it count towards upping its clean percentage? 

“How do you literally track whether the utility itself is consuming the electricity it’s supposedly buying?” Bushnell asked. “Let’s not get bent out of shape too much — let’s worry about the total amount of clean megawatt hours in the country, and not worry too much about where they are located.” 

The program is new and meant to inspire a significant shift in how we source our electricity. It’s not quite clear how that’ll affect electricity rates. Many companies already source some of their energy from clean sources — will that percentage be subsidized? If not, it could become more expensive as utilities across the board are suddenly eager to get their hands on cleanly sourced electricity. 

That rise in cost could trickle down to the electricity consumer. 

“I’m hearing very confident statements about how this won’t affect anyone’s electricity rates,” Bushnell said. “It reminds me of the Affordable Care Act’s ‘you can keep insurance no matter what.’” 

“I don’t know if they should be that confident, and I don’t think they need to make those kinds of promises!” Bushnell added. “Electricity prices go up and down all the time.” 

As they work through these outstanding questions, the policy makers will be able to take some guidance from the CEPP’s regulatory-style relatives in the states, and from modeling. But it’s a program meant to be the thrust of transformative, once-in-a-generation climate policy — and they’ve only got one shot to get it right. 

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