Capitol Hill Update – June 2022

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The probability of Congress passing significant climate legislation before the midterms has decreased considerably since late last year. At that time, a Democrat-only reconciliation bill that contained many of the proposals President Biden campaigned on already seemed unlikely, but some observers were cautiously optimistic that Russia’s invasion of Ukraine could spur an otherwise gridlocked Congress to cooperate on legislation to improve U.S. energy security, including by decreasing the country’s reliance on fossil fuels.

Senators Manchin and Lisa Murkowski (Republican, Alaska) have been co-leading quiet talks in the Senate about a bipartisan climate and energy bill. Some of the lawmakers involved had made very positive comments to reporters about the talks, but so far, there is little evidence that the group is closing in on a deal, and some very recent reporting suggests the talks may have fallen apart and are unlikely to be revived before the November elections. This apparent lack of progress has been unsurprising to many observers, who tend to regard it as unlikely in any case that Congressional Republicans would cooperate with Democrats to pass meaningful climate legislation. This impression is only strengthened by the current electoral environment. Because Democrats are likely to struggle to retain power in Congress this November, Republicans have been especially reluctant to facilitate passage of legislation Democrats could tout on the campaign trail as proof that they have achieved their campaign promises and can cooperate with Republicans to get things done.

In the unlikely event that negotiators do reach a bipartisan compromise on climate and energy, it is likely to include at least some elements of the new Republican climate and energy plan released by House Minority Leader Kevin McCarthy (Republican, California) in early June. Among other things, the plan calls for streamlining the permitting process for large infrastructure projects, increasing domestic fossil fuel production, and boosting exports of U.S. LNG. Any deal is also likely to include tax credits for carbon capture technology, nuclear energy, and perhaps geothermal. Tax credits for electric vehicles and renewables, however, are unlikely. Some sort of carbon border adjustment mechanism is also possible, given past interest in such measures among Republicans, including Senator Murkowski.

In the meantime, some Democrats in Congress remain hopeful that Senate Democrats can come to an agreement on a bill to pass through budget reconciliation without Republican votes, not least because they believe that enacting some of their and President Biden’s legislative priorities would benefit them in elections in November. Senator Joe Manchin (Democrat, West Virginia), who in December dashed Democrats’ hopes that the Senate would pass the Build Back Better bill that made it through the House last fall, has long been the key holdout on any such measure. This continues to be the case.

Some observers have been encouraged by recent discussions between Senator Manchin and Senate Majority Leader Chuck Schumer (Democrat, New York) about a possible reconciliation bill, but others are skeptical. In part this is simply because of how little time there is left before the July recess (June 27 – July 8). Conventional Washington wisdom has it that little will happen in Congress after this period because so many members’ attention will be focused on campaigning for the midterm elections. Because there has not yet been any indication that Senators Manchin and Schumer have worked out a deal, there is a real question as to whether enough time remains to pass a bill.

In addition, after watching him first express interest in passing a reconciliation bill but then refuse to support any bill other Democrats put forward for a year and a half, many of Senator Manchin’s colleagues doubt that he is negotiating in good faith. In light of recent polling showing that Senator Manchin’s job approval ratings among West Virginians have increased more than those of any other Senator over the past year, some observers have even speculated that Senator Manchin is only pretending to be interested in passing a reconciliation bill. By feigning interest only to once again withdraw his support at the last second on the grounds that he cannot get on board with the proposals favored by other Democrats, some have suggested, Senator Manchin may simply be trying to further cultivate his image among voters as a sensible moderate in a party perceived as having become too extreme. Recent reporting on the significant conflicts of interest Senator Manchin faces as a result of his coal company holdings have also not inspired confidence in getting his support.

In any case, if Senators Manchin and Schumer do reach an agreement on a bill, it is likely to include some of the climate measures included in the Build Back Better bill, especially tax credits for wind and solar, as well as measures intended to fight inflation and reduce the national debt. In addition, one Senator—Sheldon Whitehouse (Democrat, Rhode Island)—has suggested a reconciliation bill could include a fee on methane emissions and border adjustment measures. (Senator Whitehouse recently introduced a stand-alone border adjustment bill with Senators Chris Coon, Brian Schatz, and Martin Heinrich of Delaware, Hawaii, and New Mexico, respectively, but it is not clear that the bill has sufficient Republican support to move forward on its own).

In terms of timing, Senator Manchin has said that, in his view, the only real deadline for a reconciliation bill is September 30, when Democrats’ ability to pass a reconciliation bill along party lines will expire due to Senate rules. However, due to rapidly approaching midterm elections, most seasoned observers of Congress regard it as unlikely that Congress will pass either a bipartisan climate and energy bill or a Democrat-only reconciliation bill after June and extremely unlikely that it will do so after July.

Why hasn’t the invasion of Ukraine spurred climate action as expected? There are several reasons for this. For one thing, Russia’s invasion of Ukraine does not threaten American energy security to anywhere near the degree it threatens energy security in Europe, so Putin’s war has not created the same sense of urgency around this issue in the United States that it has in the EU. In addition, while electric vehicles, other electrification measures, renewables, and other climate solutions would help to reduce American reliance on foreign oil and associated energy price volatility in the long run, they have little potential to do so in the short run, which is what matters most to politicians facing elections in November. At least in part for that reason, the extent to which President Biden and other Democrats have taken advantage of Putin’s war in Ukraine to advocate climate action has been rather limited. In fact, and again in large part because of political pressures, the Biden administration has expended more energy on measures that will increase emissions, such as asking domestic oil and gas producers to drill more and increasing LNG exports to European allies.