Can Congress spend its way out of climate change? – Houston Chronicle

September 9, 2022 by No Comments

Could the federal government push the energy sector to reduce carbon emissions not through regulation — as it had done with other forms of air pollution — but through close to $370 billion in tax breaks and other incentives?

“No U.S. environmental regime based only on positive financial incentives has ever been tried at this scale,” wrote Michael Oppenheimer, an environmental scientist at Princeton University. “The Inflation Reduction Act is a big test of the proposition that incentives alone can do the job.”

At least in the early days, signs are positive.

On a recent call with investors — about two weeks after President Joe Biden signed the Inflation Reduction Act into law — analysts at the accounting firm Ernst and Young marveled at how much interest the legislation had generated in clean energy projects, from wind farms to low-carbon hydrogen fuels to electric car parts.

“I have been blown away over the last few weeks, in conversations with colleagues and clients, the breath of companies interested in understanding the (legislation) and how they can participate,” said Stephanie Chesnick, a Houston-based principal at Ernst and Young.

First Solar, the U.S. solar panel manufacturer, announced this week it was going to spend up to $1 billion building a new plant in the southeastern United States and expand an existing facility in Ohio.

Under the Inflation Reduction Act clean energy firms are entitled to a variety of financial incentives if they produce their technology in the United States, with the aim of reducing the nation’s reliance on Chinese made equipment. First Solar CEO Mark Widmar directly referenced the passage of the legislation in the announcement.

“Congress and the Biden-Harris Administration has entrusted our industry with the responsibility of enabling America’s clean energy future,” he said. “We must meet the moment in a manner that is both timely and sustainable.”

Whether this initial enthusiasm sustains itself remains to be seen.

The Biden administration is predicting the legislation will, by the end of the decade, help drive emissions down to 40 percent of what they were in 2005, putting the nation close to its target of cutting emissions in half over that time period.

But that’s presuming energy companies and the financial institutions that fund them decide the financial incentives Democrats are offering are worth their time.

That’s a big if. For instance, the federal government has tried for years to get power and industrial facilities to install carbon capture equipment through a tax credit program with little success, In 2020 NRG Energy announced it was shutting down its Petra Nova project outside Houston after demand for carbon dioxide in the oil industry collapsed.

Will things be different this time around?

At least for now, investors seem willing to do the math and see whether the returns on clean energy are worth the investment. Already, some companies are considering selling off existing asserts, such as oil fields and coal mines, to finance new clean energy investments, Chesnick said.

“There is competition for capital within any organization, and that is starting to result in interesting activity,” she said.

In the meantime, a healthy degree of skepticism remains that financial incentives alone, without a carbon fee or other restriction on emissions, are enough to achieve the greenhouse gas reductions Democrats are predicting.

Oppenheimer, the Princeton professor, said he’d looked at the models and …….



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