Congress Must Pass the Build Back Better Act with Strong Climate Ambition

Idaho wind farm

By Shannon Heyck-Williams

Two significant pieces of legislation are in play in Congress for rebuilding our nation and addressing climate — the bipartisan Infrastructure Investment and Jobs Act and the Build Back Better Act. Together — and if Congress increases its focus on addressing the climate crisis — these bills could rise to a historic moment and meet science-based goals to cut planet-altering climate pollution in half by 2030.

While the bipartisan infrastructure bill will provide welcome investments in important research and innovative clean technologies, most hope for immediate and deep U.S. emissions reductions come from the Build Back Better Act, which under budget rules will require only a simple majority for passage. Analysis shows the two bills together could reduce U.S. greenhouse gas emissions by 45 percent below 2005 levels by 2030.

Key provisions of the House bill are below. In its entirety, the bill would put the U.S. on the path to stabilizing the climate so that all wildlife and people — including workers and the most vulnerable communities — can survive and thrive.

Clean Energy Tax Incentives

  • Long-term Clean Energy Incentives: Clean electricity tax credits are extended for ten years at full value with the option for solar power to claim a production tax credit, and with an option for direct payment (which allows a taxpayer to benefit regardless of the amount of tax owed). Solar facilities that benefit and engage low-income communities receive an additional 10 percent investment tax credit. Plus, any project that fails to pay prevailing wages, employ qualified apprentices, and meet requirements for domestically sourced materials will lose credit value.
  • Transmission Investment Tax Credit: Renewable resources are often located far away from the urban centers that draw the most power, so lots of new transmission lines need to be built in the coming decade. An investment tax credit helps draw the capital to fund them. The House Build Back Better Act provides a 30 percent credit for qualified transmission projects.
  • Energy Storage Investment Tax Credit: Batteries and other types of energy storage will be needed to provide power when the wind isn’t blowing and the sun isn’t shining, so an investment tax credit for storage projects, too, is key.

Clean Manufacturing Tax Credits

  • Incentives for Manufacturing Jobs: Clean manufacturing is supported through $25 billion for the 48C advanced energy property tax credit, which provides up to a 30 percent credit for building or expanding manufacturing facilities that produce clean energy technologies. The legislation includes requirements that facilities meet labor standards and with a preference for job creation in historically underserved communities. A portion of funds is set aside for auto manufacturing areas.

Carbon Capture Tax Credits

  • Incentives to Increase Capture, Use, and Storage of Carbon: The House bill extended the 45Q tax credit, through 2031, offering a direct payment option. It also raised the tax credit value for projects pursuing direct air capture (pulling carbon directly out of ambient air), underground storage, and innovative new uses for captured carbon (such as in concrete). What’s missing, however, is a needed increased credit value for industrial facilities like in cement and steel manufacturing. Deployed responsibly, carbon capture can remove around 90 percent of carbon dioxide emissions from power plants and industrial facilities.

Transitioning to Clean Energy

  • Clean Electricity Performance Program: In the House’s Build Back Better Act, starting in 2023, electric utilities are required to increase their clean energy generation by 4 percent per year. If they do this, then they get a payment of $150 for every kilowatt-hour (KWH) of clean energy production exceeding the first 1.5 percent increase. Utilities who do better get bigger payments, and must use the grants exclusively for the benefit of their customers. If they do not meet the 4 percent target, then they are required to pay a penalty of $40 for every KWH below the target.

Environmental Justice Grants

  • Environmental and Climate Justice Block Grants: The House’s Build Back Better Act invests $5 billion in community-led projects that address environmental and public health harms related to pollution and climate change. This grant program provides direct funding to the communities most impacted by climate change and environmental injustice, funding local projects and solutions to decrease pollution and increase climate readiness.
  • More Efficient Buildings: More than $32.5 billion is invested in energy and water efficiency improvements and pollution reduction in schools, multi-family and rural housing, plus other residential clean energy and energy storage projects in low-income, disadvantaged, and climate-vulnerable neighborhoods.

A Methane Fee

  • Oil and Gas Industry Pollution Fee: The House bill also imposes a new fee on emissions of the climate super-pollutant, methane, when intentionally or unintentionally released from oil and gas facilities and infrastructure. Methane has 80 times the planet-altering potential of carbon dioxide in the short-term, and is emitted when natural gas is flared, vented, or leaked during normal operations.

…And Perhaps a Carbon Fee?

  • An Economy-Wide Price on Carbon: Though not in the House Build Back Better Act, the Senate Finance Committee is considering including a fee on carbon emissions associated with fossil fuel production, as a way to both increase climate ambition of the overall bill and generate significant revenues to help pay for other priorities as well as return benefits back to taxpayers in the form of rebates. Adding a carbon price to the legislative package would make transitioning to clean energy and fuels more financially appealing to industry and energy producers, which would be further supported by the other tax credits in the bill. New research by Resources for the Future shows that the full suite of clean energy, transportation, and manufacturing tax credits, Clean Electricity Performance Program, and a modest carbon fee of $15 per ton would result in approximately a 52 percent reduction in climate pollution levels below 2005 by 2030 — meeting the urgent call for rapid climate action made by the world’s scientists.

 

This is truly a historic moment for the climate. Our representatives in Congress must retain strong ambition in the Build Back Better Act to get the United States on track to a clean-energy economy that is equitable, inclusive, and repositions domestic industry as a leader in emerging global markets. Smart tax policy and strategic investments will not only drive down carbon emissions, it will spur innovation and job creation across the country. Falling short on our climate goals is not an option. The effects of climate change are already significant and felt across the country by everyday people and wildlife, including in worsening natural disasters and an estimated $99 billion per year in costs.

Please take action now. Contact your congressional delegation and urge them to prioritize climate action in the Build Back Better Act.