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Democrats’ new spending deal would be a ‘gamechanger’ for the climate, but not without setbacks

Senator Joe Manchin, a Democrat from West Virginia and chairman of the Senate Energy and Natural Resources Committee, speaks during a hearing in Washington, D.C., US, on Tuesday, July 19, 2022.Al Drago/Bloomberg

Build Back Better rose, zombie-like, from presumed death on Wednesday evening when Democratic Senator Joe Manchin of West Virginia issued a statement in support of a new compromise on a spending package, a stunning reversal of his position earlier this month.

Now called the Inflation Reduction Act of 2022, the 725-page bill earmarks $369 billion for climate and clean energy policies and would constitute the largest down payment on climate policy in American history.

“If enacted, this legislation will be historic,” President Biden said in a statement.

Yet the compromise would also mandate new fossil fuel lease sales and tie the future of renewable power to continued fossil fuel extraction. Such concessions may have been necessary to get Manchin on board, but they also bring the proposal out of step with top scientists’ guidance on how to avert climate catastrophe.


“It’s saying that we’re going to continue to support renewables and fossil fuels at the same time,” said Mark Paul, assistant professor of economics at Rutgers University, who has been in discussions about the bill with the White House and says he hopes Congress passes it. “That’s just downright climate denialism.”

Still, Democrats reacted to Wednesday’s news of Manchin’s turnabout with relief.

“I believe this proposal passes the climate test,” Massachusetts Senator Ed Markey said in an emailed statement.

The bill sets a goal of reducing carbon emissions by 40 percent by 2030, according to a one-page fact sheet. To do so, it designates $60 billion to boost domestic clean energy manufacturing.

That includes $30 billion in production tax credits to speed manufacturing of solar panels, wind turbines, batteries, and critical minerals processing, another $10 billion in investment tax credits to build manufacturing plants that produce clean energy technologies, and an additional $500 million for heat pumps and critical minerals which will provide funding for Biden’s invocation of the Defense Production Act to boost renewable energy manufacturing.


“We have not had that kind of focus on manufacturing investments before,” said Leah Stokes, a professor of clean energy policy at the University of California Santa Barbara, who has advised Democrats on the package and called the bill a “gamechanger.”

The proposal would also provide incentives to individuals, including up to $7,500 in tax credits for purchasing a new electric vehicle, as well the first-ever federal incentives for used EVs in the amount of $4,000 for low- and middle income Americans. It would also remove the current 200,000-vehicle per-manufacturer cap on the tax credit — a win for companies like Tesla and Toyota which have all sold more than 200,000 cars.

It would also provide incentives for consumers who invest in clean home upgrades, like energy-efficient heat pumps, rooftop solar panels, and water heaters. And it includes $9 billion in rebates for low-income consumers who make their homes more energy efficient and another $1 billion in grants for affordable housing energy upgrades.

“What the bill does is, it makes it cheaper to buy clean technologies up front,” said Stokes. “The difference between putting in another dirty gas service or getting another expensive gas car versus buying an EV or a heat pump? That difference is going to be pretty much nothing, or very small, with this bill.”

Another key climate measure: the Methane Emissions Reduction Program, which would provide grants to fossil fuel companies that monitor and cut their methane emissions and levy fees on those that keep emitting. To further boost environmental justice, the agreement would earmark funding to slash air pollution from trucks, ports, and schools, and set aside $3 billion in grants for frontline communities to monitor and cut pollution and boost climate resilience.


The deal has drawn ire from Republicans like Arkansas Senator Tom Cotton and Wyoming Senator John Barrasso. And Democratic Senator Krysten Sinema from Arizona has said she’s not sure she’ll support it, meaning it’s not yet clear Democrats will be able to pass the bill.

Climate hawks, meanwhile, note that the bill’s $369 billion in climate provisions adds up to considerably less than the $555 billion promised in Build Back Better.

Some climate measures — like $10 billion in grants to improve and decarbonize rail, $10 billion to improve access to green public transit in vulnerable neighborhoods, and another $9 billion to replace lead pipes — have been cut. Others are shadows of their former selves — while the November plan included $150 billion for housing initiatives, the new legislation would make just $1 billion available for efficiency in affordable housing.

Still, it would represent an unprecedented level of spending on climate, Stokes noted. That matters not only for the nation, but also for the rest of the world, since the U.S. is the largest emitter of greenhouse gases in history.


And the bill could kick off even more spending, said Paul, the economist. For instance, the bill would create a green bank that would set aside $27 billion to fund low- and zero-emission technologies and infrastructure, and that program would allow for almost $300 billion more to be invested in clean energy through loans to the private sector.

Paul noted the bill also includes a “massive down payment” for new research and development of clean energy technologies — including $2 billion for the Department of Energy’s national labs to accelerate energy research — which could help drive down clean technology costs.

But some of the legislation’s other provisions could lock in continued fossil fuel extraction — and the associated planet-heating emissions — for years to come.

The legislation would require the Interior Department to hold previously planned lease auctions in the Gulf of Mexico and in Alaska — sales the agency scrapped in May. It would also reinstate the sale of leases in the Gulf of Mexico that were auctioned off last November 2021 but invalidated by a federal judge in January who cited a lack of consideration of climate impacts.

The package would also mandate that more public lands be offered for oil and gas leasing before any new solar or wind energy projects can be built on public lands or waters.

In the 120 days before issuing federal land rights for renewable energy development, the Interior Department would have to offer up some federal lands to oil and gas companies. And in the year before leasing off federal waters for offshore wind development, the department would have to hold an auction of at least 60 million acres of federal waters for oil and gas.


These fossil fuel-boosting measures — apparent concessions to Manchin, who has made millions from the coal industry, reportedly regularly meets with fossil fuel lobbyists, and espouses a belief in an “all of the above” energy strategy — are hard for climate advocates to swallow. Top scientists have long warned that even currently planned fossil fuel expansion could usher in catastrophic levels of global warming.

Still Paul still urged lawmakers to pass the bill as fast as possible — and work to follow it with more climate legislation.

“The Inflation Reduction Act provides hundreds of billions of dollars in funding towards the transition, but we’re at a point in time where we need trillions,” he said. “This should be the fantastic first step.”

Dharna Noor can be reached at Follow her on Twitter @dharnanoor.