Will Biden's green battles harm COP26?
US President Joe Biden is due to jet in to the COP26 climate talks in Glasgow in the next week.
US President Joe Biden is due to jet in to the COP26 climate talks in Glasgow in the next week. He wants to do so buoyed by warm feelings after getting his bold Build Back Better plan through US Congress. It’s a nice thought.
Back in the real world, Biden’s vision of a greener US has taken a hammering.
The value of the package has already been reduced from $3.5trn to $2trn. That plan still includes $500bn for climate measures, including renewable energy tax credits, but the cut to the headline figure is emblematic of the difficulties that Biden faces. This will cast doubt on whether the US can play the big-hitting role in COP26 that Biden wants.
This will no doubt be a talking point at our Financing Wind North America conference on 10th November. Click here now to register for your place.
This isn’t just about the headline cut. Some of the most ambitious policies in the bill have been watered down or removed as well.
For example, the Clean Electricity Performance Program, which would force firms to ditch fossil fuels in favour of renewables, will likely be cut following opposition from lawmakers including Democrat Joe Manchin. The plan for a carbon tax has also been nixed and that is forcing the White House to look for new ideas.
But a failure to deliver on Build Back Better’s huge ambition is one thing. Cutting and changing parts of the package are a simple reality of the process needed to pass the bill. The more damaging aspect of this process is that Build Back Better may now put in place policies that are actively harmful to investors in the renewables industry.
On Tuesday, the American Clean Power Association warned that one part of the ever-changing bill – a minimum tax on book income of renewable energy projects – would undermine “tax incentives and industry innovation [that] have supported a vast expansion of renewable energy in the United States”.
The ACP says that a new tax on renewables would increase credit costs and slow the deployment of clean energy.
The Edison Electric Institute, which represents investor-owned electricity companies in the US, shares the concern. It says that a book minimum tax could “impede strong clean energy and renewable development and cost billions in lost investment and thousands of jobs”, as well as causing a “significant reduction in the amount of new renewables built” and potentially negating the benefits of clean energy tax credits.
There is still a long way left to go in these negotiations, but it will be a major concern for investors in wind and solar if Build Back Better includes policies that are actively damaging to renewables. The removal of some supportive measures is all part of the process, but the Democrats must ensure they don’t bring in policies that do harm.
However, the EEI says it is encouraging that progress is being made on the bill and it hopes for a “robust clean energy tax package” when negotiations are done. But will it? And will Biden’s struggles at home undermine COP26?
We think it’s a yes to both.
On Build Back Better, we are optimistic that there will be agreement and that the bill will help renewables. But the chances of a deal before COP26 are tiny. This is why Biden’s battles at home could damage COP26.
Protracted arguments in the US shows that the country’s politicians are still deeply divided over renewables and their response to the climate crisis. This sends a message that there is no solid bipartisan support in the US to take strong action on the climate, and suggests any agreement at COP26 could suffer under a future Republican president.
Meanwhile, the lack of a signed-off Build Back Better bill means that Biden is going to COP26 without hard proof that the US will make deep cuts to carbon emissions. This will prompt other questions to question what they can commit to. COP26 is due to happen without Chinese President Xi Jinping, and the lack of an ambitious Build Back Better plan is a blow to US leadership at COP26.
We remain optimistic – but, as Biden knows, optimism can only take us so far.
You can discuss the latest on US policy and COP26 at our Financing Wind North America conference on 10th November. Click here for your ticket.