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Biden’s climate bill victory was hard won. Now, the real battle starts

Source image: https://www.theguardian.com/global-development/2022/nov/06/inflation-reduction-act-climate-crisis-congress

The bitter fight to deliver a climate change bill to Joe Biden’s desk this summer pitted the White House and its Democratic allies against some of America’s most powerful industry lobbies and every Republican in Congress. It may prove to have been the easy part.

At the heart of the hard-won Inflation Reduction Act (IRA) is a $369bn package of climate investments that Biden called the “most significant legislation in history” to tackle the climate crisis. Estimates suggest it could cut US greenhouse gas emissions by 40% by 2030.

That monumental potential, however, comes with a monumental to-do list and a series of tight deadlines – not to mention high-stakes political decisions in an election season when Democrats are fighting to keep control of Congress.

Implementing the IRA “is a more complex policy challenge and management challenge than any that I’ve seen in my political lifetime”, Felicia Wong, the president and CEO of the Roosevelt Institute, told the Guardian.

One of the first tasks facing the Biden administration is the design and execution of $270bn worth of tax incentives affecting huge swaths of the US economy. At the same time, it must begin distributing close to $100bn in grants and other federal funds to cites, states, tribal nations, companies, non-profits and local communities. It must do so quickly since many programs created or supplemented by the IRA include rigorous timelines, such as a new $27bn greenhouse gas reduction fund, for which money must start going out the door no later than next February and be spent within two years.

And the administration must distribute all of this money and roll out all of this policy while simultaneously:

  • Coordinating across dozens of different departments and agencies.

  • Minimizing waste and fraud.

  • Investing in risky and uncertain technologies.

  • Smoothing diplomatic wrinkles with international allies who object to the law’s manufacturing and sourcing requirements.

  • Meeting the expectations of climate organizations and advocacy groups whose support for the IRA was contingent on promoting environmental justice and protecting workers.

  • Seeking to head off the inevitable attacks and investigations of congressional Republicans.

“It is a massive undertaking,” said Alden Meyer, a senior associate at the climate thinktank E3G. “It’s a very complex, detailed law. There are so many moving pieces to it.”

The person Biden named to take charge of this massive task is the longtime Democratic official John Podesta, one of Washington’s most connected players.

“This is just what [Podesta] was made for,” said E3G’s Meyer. “He knows what he’s getting into because he’s been involved in these kinds of things before, so he doesn’t have to learn on the job. He comes in knowing how to move the levers and make things happen and having the relationships with the cabinet secretaries and others that he needs to have.”

John Podesta
‘This is what Podesta was made for.’ Photograph: Patrick Semansky/AP

While often seen as a quintessential insider, Podesta also has a less-remarked-on track record as an outside agitator on climate issues. In May, the New Republic described Podesta as “quietly nurturing the climate movement’s next generation of leaders”, including members of the progressive Sunrise Movement. Ali Zaidi, who is now serving as Biden’s national climate adviser and working closely with Podesta on IRA implementation, said Podesta was “on the cutting edge of connecting the dots between climate action and other critical progressive objectives”.

Sam Ricketts, a climate policy advocate and longtime senior adviser to the Washington governor, Jay Inslee, said that Podesta’s outside efforts will be “just as important” in preparing him for his current role. Podesta has been “working in partnership with others throughout the climate community and the public sphere in designing and advocating for these policies he’s now charged with implementing”, Ricketts said. “He now gets a chance to climb inside the government and execute to make it a reality.”

‘Like going to the World Series’

The gears of government have already begun to turn. Podesta is managing a “core team” in the White House that “is designed to be fairly lean”, a senior administration official told the Guardian. Most of the staff working on the law are part of the agencies, though Podesta’s team includes “a small number of senior policy advisers with really specialized skills”, the official said. One team member who will start soon, for instance, is a marketing specialist hired to help the administration drive awareness of the “consumer-facing provisions in this law”, such as a new tax credit that encourages homeowners to install heat pumps.

But before they can take effect, many parts of the IRA require the administration to publish detailed guidance outlining how they will actually work. The administration appears especially focused on rolling out the $270bn worth of clean-energy tax incentives created or expanded by the law. Implementing these provisions, which will be led by the treasury department but require input and expertise from across the federal government, is “a mountain of work that needs to get done fast, and it needs to get done right, and it needs to have the appropriate guardrails so that the money is well spent and not wasted”, Podesta said at a 7 October event hosted by the Roosevelt Institute.

In recent weeks Podesta and his team have been “doing calls, looking for feedback, [and] looking for community input on how to design and execute on these tax credits”, Sam Ricketts, the climate policy advocate, said.

The treasury department has also issued six formal requests for public comment covering a range of tax incentives for consumers and businesses. Last week, the department announced that it would hold a number of meetings and roundtable discussions to share updates and gather external input.

“They have a lot of guidance to put out, and they need to put it out quickly to maximize the impact” of the tax provisions, Sarah Ladislaw, who heads the US program at the climate thinktank RMI, said. The fact that the treasury department set a 4 November deadline for submitting comments “shows that they’re moving quite expeditiously and trying to provide guidance as quickly as possible”, Ladislaw said.

Behind the scenes in the treasury department, Biden administration appointees and non-partisan civil servants are working around the clock. Shelley Leonard, a deputy tax legislative counsel, described the rollout as a “sprint” made particularly complex “because of the number of other agencies involved and because of the high-profile nature of everything that we’re trying to do all at once”.

The internal complexity is matched by external interest in how the guidance will take shape. Leonard recounted leading a recent webinar on some of the new law’s tax rules. She expected an audience of 40 people; in the end, some 1,600 people signed up.

“For tax nerds like us at treasury, implementing something as far-reaching and impactful as the IRA is like going to the World Series,” Lily Batchelder, the treasury’s assistant secretary for tax policy, said in a statement.

Overseeing this frenzy of activity alongside Podesta’s team are agency inspectors general, who are responsible for investigating waste, fraud and misconduct in federal agencies, and the White House Office of Management and Budget (OMB). Together, they are taking what the senior administration official described as a “three-legged stool approach” to executive branch oversight.

Podesta’s implementation team is responsible for setting a tone for accountability and “send[ing] a very clear signal to the agencies” that they are expected to coordinate closely with their inspectors general “at the front end”, the official said. Meanwhile, OMB “will be the one supporting the tracking of resources and conducting oversight to make sure the agencies are both in shape to execute according to plan, and then delivering on that plan over time”, Jason Miller, OMB’s deputy director for management, said.

Asked how the White House was approaching oversight of IRA funding, Miller said that while the administration will watch where money goes – information agencies are already required to report publicly – it is particularly focused on tracking how the money is actually used. Oversight “is not just, ‘I’ve handed the dollars to somebody’”, Miller explained. “How are they spending those dollars? When are they spending those dollars? What are the outcomes that they’re getting?”

The administration wants to embed detailed reporting requirements into IRA programs and formalize those requirements before money is distributed. Miller said that this approach, outlined in two recent OMB memos centered on the rollout of the American Rescue Plan and the infrastructure law, reflects a lesson that the Biden team learned from the first Covid-19 package approved under the Trump administration: “It is very hard once those dollars go out the door to ask recipients to implement reporting requirements and provide data that you did not ask for upfront.”

‘An endless educational curve’

Successful implementation will require Podesta and the Biden team to balance spending the money quickly while also spending it effectively and equitably.

“One of the biggest tensions here is actually going to be speed because there’ll be many incentives to get the money out the door quickly,” said the Roosevelt Institute’s Felicia Wong. But “if speed is your only criteria, then you’re going to end up probably deeply shortchanging the democracy element of all of this because speed and input are often at odds”, Wong said.

Joe Biden and Kamala Harris speak outside the White House.
Joe Biden and Kamala Harris celebrate passing the Inflation Reduction Act on the South Lawn of the White House in Washington. Photograph: Andrew Harnik/AP

“It is an uncomfortable tension to sit in,” Dana Johnson, the senior director of strategy and federal policy of We Act for Environmental Justice, said. “And in some ways it’s not really aligned with environmental justice, which says that … we move at the speed of trust” in communities. Because of the aggressive timelines included in the law, “the time that it takes to build trust is not there.”

Johnson’s comments reflect the fact that the greater existence of federal resources does not automatically translate into greater on-the-ground impact. Ozawa Bineshi Albert, a co-executive director of the Climate Justice Alliance, pointed to IRA provisions that invest in rural electricity and provide support for coal miners with black lung disease as examples of the types of programs that need to be locally targeted to achieve their potential.

“There’s some implementation that can happen uniformly, and then there’s some implementation that needs to happen very specific to the needs of certain communities,” Albert said. “Indigenous communities have a much different way of engaging with the government. What does that look like? What does it look like for communities who are experiencing land loss and displacement because of sea level rise? They can’t afford to not be consulted or have their experience shape the solution.”

The outreach challenge is exacerbated by the fact that significant portions of IRA money, such as $5bn in new grants to reduce climate pollution, will end up at the disposal of state governments. Some are controlled by Republican governors who might choose to reject the funding “instead of redistributing it to communities of color or low-income communities”, as Maria Lopez-Nuñez, deputy director of the New Jersey-based Ironbound Community Corporation, put it.

Moreover, discovering funding opportunities, applying for them and meeting their reporting requirements – the same requirements that help the government track whether money is being used as intended – can be complicated and resource-intensive. Working to take advantage of these opportunities “is almost an endless educational curve”, Lopez-Nuñez said. There is a risk that “programs don’t become dispersed based on need, they become dispersed on who … can afford the most skillful consultant to write the grant for them.”

In that case, the IRA could end up reinforcing, rather than disrupting, existing economic and racial disparities. Underlying this fear are the provisions of the law that extend federal support for fossil fuels, including provisions that offer new oil and gas leasing opportunities on public lands.

“Much of what is being built” through oil and gas permitting, or even through investments in new technologies like carbon capture and storage, “could be built on top of existing fossil-fuel infrastructure”, explained Roosevelt’s Felicia Wong. “The argument is that if environmental justice groups and if communities of color are always the ones who are harmed the worst by existing fossil-fuel infrastructure, this does nothing to change that power dynamic.”

‘You’ve got a product that is going to impact … millions of people’

Despite the complexity of the task ahead, for many in the climate movement the IRA’s passage has sparked an all-too-rare feeling: hope.

“I’ve been doing this for 20 years, and I have never seen more energy policy in one piece of legislation,” said RMI’s Sarah Ladislaw. “If you take the Inflation Reduction Act, the Bipartisan Infrastructure Law and the Chips and Science Act, it is the most comprehensive energy policy delivered in legislative form that I’ve ever seen.”

The law “could really transform the politics of climate change over the next several years as these huge programs roll out across the economy”, said Alden Meyer of E3G. “These programs are going to be so popular and so supported by both Republicans and Democrats that it will be hard to take them away.”

This enthusiasm is reflected within the ranks of the Biden administration. “You’re putting in a lot of hard, long nights,” said Krishna Vallabhaneni, the treasury department’s tax legislative counsel, who recently found himself sending an email about IRA tax provisions at 3.13 am. “It can be draining at times. But at the end of the day, you’ve got a product that is going to impact – and, you hope, in a positive way – [the] lives of millions of people.”

Source: https://www.theguardian.com/global-development/2022/nov/06/inflation-reduction-act-climate-crisis-congress

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Fed announces smallest interest hike in a year as inflation ‘eases somewhat’

The US Federal Reserve signaled a slowdown in its fight against soaring inflation on Wednesday, announcing its smallest hike in interest rates in almost a year.

After its latest meeting, the Fed announced a quarter-point increase in its benchmark interest rate to a range of 4.5% to 4.75%, the smallest increase since March last year. “Inflation has eased somewhat but remains elevated,” the Fed said in a statement adding that “ongoing increases” will be appropriate as it seeks to bring prices down.

“We covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do,” said Fed chair Jerome Powell.

Inflation in the US has been running at levels unseen since the 1980s, triggering a cost of living crisis as the price of everything from eggs to gas and rent has shot up.

In order to tamp down inflation the Fed has aggressively hiked rates as it seeks to cool the economy and bring prices back under control.

A year ago the Fed rate – which affects the interest rates on everything from business and personal loans to mortgages and credit card rates – was close to zero. After the most rapid series of rises since the 1980s, it is now at a level last seen in 2007.

There are signs that prices are coming down. In December, the annual rate of inflation fell to 6.5% from 7.1% in the previous month, the sixth straight month of yearly declines and well below the peak of 9.1% it hit in June, its highest rate since 1982.

Consumer spending – the largest driver of the economy – fell 0.2% from November to December. The housing market has slowed and many of the major tech companies have announced large job cuts as they have moved to rein in spending.

But inflation remains well above the Fed’s annual target rate of 2% and the central bank has said it will keep rates high until price stability is achieved. The Fed also continues to worry about the jobs market. The unemployment rate was 3.5% in December, a 50-year low and on Wednesday the labor department announced there were 11m job openings in the US in December – almost two available jobs for every person looking for one and an increase from November.

The tight labor market has driven up wages and Powell, has made clear that the central bank believes rising wages threaten to spur on inflation – a so-called wage-price spiral. “You don’t see that yet, but the whole point is, once you see it, you have a serious problem. That means that effectively in people’s decision-making, inflation has become a real salient issue,” said Powell. “That is what we can’t allow to happen.”

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Bank of England raises UK interest rates to 4%

The Bank of England has blamed the inflationary impact of higher than expected wage rises for an increase in interest rates from 3.5% to 4%, piling more pressure on mortgage payers and businesses struggling to pay off their loans.

Amid calls from unions for higher wages to protect against the worst falls in living standards for 100 years, a majority of the Bank’s monetary policy committee (MPC) said the 0.5 percentage point rise was needed after a jump in private sector wages above the central bank’s previous forecasts.

Marking its 10th consecutive rate increase, the Bank said the economy would enter a shorter and shallower recession than it predicted last year – with output falling by 1% from peak to trough compared with a 3% drop it said in November.

Bank staff now expected GDP to have grown by 0.1% in the final quarter of 2022, stronger than predicted in November. That would mean the UK did not enter a technical recession in 2022, as previously thought after the economy shank by 0.3% in the third quarter.

The UK economy is forecast to shrink in each quarter of 2023 and the first quarter of 2024 before staging a modest recovery.

The Bank said the hit to trade from Britain was being felt sooner than previously expected. “The effects of Brexit on trade are now estimated to be emerging more quickly than previously assumed, and that lowers productivity somewhat,” it said.

The 0.5-point increase was forecast by City analysts, who expect the Bank to raise interest rates again to 4.5% in the spring before a series of cuts next year brings Bank rate back to 3.5%.

More than 1.5 million mortgage payers are expected to suffer an average £3,000-a-year increase in interest payments when they refinance their loans this year as well as the hundreds of thousands of households that refinanced at higher rates in 2022.

Monthly bills for households in the rental sector have rocketed, with landlords blaming higher borrowing costs for the rises.

Two members of the nine-member MPC voted to keep rates at 3.5%, arguing that the effects of previous rates rises had yet to feed through into the wider economy.

Silvana Tenreyro and Swati Dhingra, both seconded from the London School of Economics to the MPC, have repeatedly warned that the central bank underestimates the impact of previous interest rate rises and should pause to judge the effects on mortgage holders, renters and small businesses before taking further action.

The MPC’s majority view was that it would “continue to monitor closely indications of persistent inflationary pressures, including the tightness of labour market conditions and the behaviour of wage growth and services inflation”.

In a warning to workers, it said if there was evidence of “more persistent pressures, then further tightening in monetary policy would be required”.

The Bank expects the headline rate of inflation to fall rapidly this year from December’s 10.5% to 3.5% by the end of the year, and then 1% in 2024. The Bank has an inflation target of 2%.

The MPC said GDP would only reach its previous peak in 2019 by 2026, indicating that a combination of staff shortages fuelled by the Covid-19 pandemic and Brexit combined with high energy prices had reduced the economy’s capacity to grow.

After the turmoil in financial markets that followed Liz Truss’s mini-budget, investors forecast interest rates peaking at 5.25%, but the highest they expected before today’s meeting was 4.5%.

Private sector wages increased by 7.2% in the three months to November, according to official figures that show the highest rises going to workers in the financial services sector and business services such as accountancy and the legal industry. Most negotiated wage rises are about 4%, according to industry surveys.

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Shell’s actual spending on renewables is fraction of what it claims, group alleges

Shell has misleadingly overstated how much it is spending on renewable energy and should be investigated and potentially fined by the US financial regulator, according to a non-profit group which has lodged a complaint against the oil giant.

The US Securities and Exchange Commission (SEC) has been urged to act over Shell’s most recent annual report in which it stated 12% of its capital expenditure was funneled into a division called Renewables and Energy Solutions in 2021. The division’s webpage, which is adorned with pictures of wind turbines and solar panels, says it is working to invest in “wind, solar, electric vehicle charging, hydrogen, and more”.

However, Global Witness, the activist group that has lodged the new complaint with the SEC, argues that just 1.5% of Shell’s capital expenditure has been used to develop genuine renewables, such as wind and solar, with much of the rest of the division’s resources devoted to gas, which is a fossil fuel.

“What Shell has said about the energy transition is not reflected in what they are doing,” said Zorka Milin, senior adviser at Global Witness. “This business unit is fundamentally mislabeled, it has very little in the way of renewables and investors could be lulled into thinking Shell is doing far more on renewables than it is.

“This is greenwashing. Gas, whatever it may be, is not renewable, it’s part of the problem. I hope the SEC opens an investigation and imposes appropriate penalties to stop this greenwashing.”

Shell does not have a full breakdown of its renewable energy activity in its annual reports but Global Witness said that by examining the document they could find $288m in wind and solar investment in 2021, which is equivalent to 1.5% of Shell’s capital expenditure. Much of the spending by the Renewables and Energy Solutions division appears to be on the trading and marketing of gas.

Should the SEC act over the issue, it will mark the most aggressive regulatory foray yet by the US federal government against a fossil fuel sector that is facing multiple lawsuits in several states for misleading investors and the public over what they knew about the climate crisis.

Shell, which is headquartered in London but is listed on the New York stock exchange, has denied misleading investors. “We’re confident Shell’s financial disclosures are fully compliant with all SEC and other reporting requirements,” said a company spokeswoman.

The Shell spokeswoman said the company budgeted $20bn for “energy transition activities” in 2022, which is a third of its total operational and capital expenditure spending. This investment went towards renewable energy, hydrogen fuels, capturing carbon at the source of pollution and research and development, she said.

Most of the world’s largest oil companies now accept that burning their product is causing global heating and have committed to the goals of the Paris climate agreement. But their shift away from fossil fuels has been ponderous – only about 5% of oil and gas company capital expenditure went to wind, solar and other renewables in 2022, according to the International Energy Agency. This was up from just 1% in 2019.

Last year was a particularly lucrative one for oil companies’ traditional business model, with soaring fossil fuel costs in the wake of Russia’s invasion of Ukraine prompting record profits for some of the wealthiest businesses in the world. Exxon made a record annual profit of nearly $56bn last year, while Chevron has reported a $36.5bn profit for 2022.

Milin said she hoped the SEC, which is separately mulling new requirements for companies to disclose their greenhouse gases, would act to deter other oil companies. “No more will we allow big polluters to pull the wool over our eyes while the world burns,” she said. The SEC did not respond to a request for comment.

Bruce Huber, an expert in environmental law at Notre Dame University, said the new complaint highlights the external pressure that environmentalists are now placing upon fossil fuel companies.

“What we’re seeing now is climate activists poring over the disclosures of energy firms with a fine-tooth comb, looking for any misstatements that could be the basis for liability or penalty,” he said.

“Whether these tactics will actually induce Shell or its competitors to decarbonize is unclear, but even if not, those firms won’t be able to sneeze without someone looking for a securities violation.”

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