- President-Elect Joe Biden's victory could reshape the U.S. energy sector in the years to come. However, a diminished Democratic majority in the U.S. House of Representatives and a narrowly divided Senate presents a challenging federal landscape that policymakers will need to navigate.
- Climate change will be a priority for the new administration. This is consistent with the Biden/Harris campaign's messaging and plans to achieve net-zero carbon emissions for the power sector by 2035 and economy-wide by 2050.
- This Holland & Knight alert explores what the regulatory and legislative energy and environment policy landscape could look like under a Biden Administration.
Pandemic response will be the top priority for President-Elect Joe Biden. This reality, however, does not preclude significant legislative and executive actions on energy, environment and climate policy during the first session of the 117th Congress.
Expect Executive Orders and Bipartisan Action Amid a Divided Congress
There has been growing bipartisan and bicameral consensus that the U.S. should chart a path to lower carbon emissions, with many legislators calling for a trajectory to reach net-zero by 2050. As a result, the notable amount of energy and climate-related legislative activity during the 116th Congress seems likely to pave the way for bipartisan action in the first part of 2021, including the likely passage of the first energy authorization bill in over a decade (if it is not signed into law before the end of 2020, as discussed below).
A key trend of the modern presidency has been the increased use of executive orders (EOs). This is likely to become the prevalent approach of the Biden Administration, particularly if Senate control remains in Republican hands following the runoffs for Georgia's two seats in January 2021. As the President-Elect seeks to set and attain ambitious clean-energy goals, expect the Biden White House to resume federal leadership in shaping energy and climate policy, strongly resembling the executive branch's role during the Obama Administration.
Biden Administration: Energy and Climate Governance
President-Elect Biden continues to place clean energy and tackling climate change at the forefront of his plans for economic recovery, emphasizing the interconnectivity between clean energy and the economy as the nation recovers from the COVID-19 pandemic.
The President-Elect has pledged to sign executive orders in the early days of his presidency "with unprecedented reach that go well beyond the Obama-Biden administration platform and put us on the right track" to tackle climate change.
President-Elect Biden's Sustainable Infrastructure and Clean Energy Plan released in July 2020 aims to achieve net-zero carbon emissions for the power sector by 2035, and economy-wide by 2050. The plan emphasizes the roles that a unionized American workforce, industry and innovation can play in helping the U.S. meet ambitious climate goals as a part of an economic recovery. (For more about President-Elect Biden's plan, see Holland & Knight's previous alert, "Biden Unveils Proposed Sustainable Infrastructure and Clean Energy Plan," July 20, 2020.)
Although many measures are likely to require some congressional action, others could be accomplished through executive action within the first 100 days of the Biden presidency.
- Biden has pledged to recommit the United States to rejoining the Paris Climate Agreement. Doing so requires only a letter to the United Nations and would take effect 30 days later. According to his campaign platform, Biden will take additional steps within his first 100 days to convene a climate world summit to directly engage leaders of the major carbon-emitting nations to persuade them to join the U.S. in making more ambitious climate pledges beyond those they have already made.
- The new administration is likely to roll back a large number of President Donald Trump's executive orders on energy and climate, replacing them with new, ambitious orders focused on reducing greenhouse gas emissions with an emphasis on environmental justice.
- Biden has also said he will sign an executive order requiring public companies to disclose climate change-related financial risks and greenhouse gas emissions in their operations.
Other promises include requiring steep methane curbs for new and existing oil and gas development, ending new oil and gas leases on federal lands, ending hydraulic fracturing on federal lands and making fuel economy standards for vehicles even stronger than those adopted during the Obama Administration.
The U.S. Environmental Protection Agency (EPA) and Department of the Interior under President-Elect Biden will have a range of tools at their disposal to start undoing some of President Trump's deregulatory actions on the environment. Although some reversals to guidance and policies may be achieved swiftly, such as reversing actions to restore protections for wildlife areas and national monuments, others may take more time due to the complexity of certain processes and a public appetite for moderate approaches to governing.
- Ensuring that environmental justice is considered in agency decision-making was part of the Biden/Harris campaign platform and will likely be achieved through early executive action and coordination led by the Council on Environmental Quality (CEQ).
- Resources will likely be dedicated to addressing the Trump Administration's reforms to the National Environmental Policy Act (NEPA), but these rollbacks would fall into the category of longer-term reversals.
Near-Term Legislative Outlook
Pre-conference committee activity is underway to reach agreement on a bicameral compromise of the House-passed Clean Economy Jobs and Innovation Act (H.R. 4447) and Sens. Lisa Murkowski (R-Alaska) and Joe Manchin's (D-W.Va.) American Energy and Innovation Act (S. 2657). However, with a limited number of days remaining in the lame-duck session of the 116th Congress, as well as must-pass pieces of legislation such as annual appropriations and the National Defense Authorization Act still pending, it is unclear if there will be an opportunity to include an energy package as a standalone bill or part of a funding package.
The fate of much of Biden's legislative agenda for the first 100 days and beyond will hinge on whether Biden and Senate Majority Leader Mitch McConnell (R-Ky.) can negotiate compromises on issues such as energy and environment. Other leading priorities, including the economy, healthcare and taxes, are likely to take precedence over sweeping legislative action to curtail greenhouse gas emissions and combat climate change.
The majority of what has been included in energy legislation passed in the House and out of committee in the Senate could be funded through a significant economic relief and recovery package, and committee staff are already working on bills that committee members are planning to introduce next year.
The need for collaboration and bipartisanship in the 117th Congress will be even greater due to the narrow majorities in the House and Senate. Expectations for sweeping reforms to energy, environment and climate policy have been tempered, but history has shown that incremental change often leads to the most sustainable policies.
COVID-19 Economic Relief Package
A subsequent coronavirus stimulus bill that advances on Capitol Hill after long-awaited COVID-19 "Phase 4" legislation could make some investments in green recovery, including federal spending on electric vehicle infrastructure, grid modernization, batteries, carbon capture utilization and storage, and energy efficiency. The Fiscal Year 2021 appropriations bill passed by the House includes $7.78 billion to the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy, $1.25 billion to the Office of Fossil Energy and $3.35 billion to the Office of Electricity to support such activities when authorized in a relief and recovery package.
It is possible that existing and expired tax incentives for clean energy technology deployment would be extended in a stimulus bill, including the Production Tax Credit, Investment Tax Credit, Section 45Q Carbon Capture Utilization and Storage tax credit, Section 48C-style manufacturing tax credit or potentially a direct pay tax credit.
Tax extenders continue to be a congressional priority for members on both sides of the aisle, but the legislative vehicle and opportunity remains uncertain. In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions.
- Fourteen temporary energy tax provisions are scheduled to expire at the end of 2020.
- Five other temporary business tax provisions are scheduled to expire in 2021, 2022 or 2023.
- Most recently, energy tax extenders were extended in the Taxpayer Certainty and Disaster Tax Relief Act of 2019, enacted as Division Q of the Further Consolidated Appropriations Act, 2020 (P.L. 116-94). Most of the energy tax provisions extended in this legislation had expired at the end of 2017 before being retroactively extended through 2020.
Surface Transportation Reauthorization
Despite the Senate Environment and Public Works Committee unanimously advancing the America's Transportation Infrastructure Act of 2019 (ATIA), the House Transportation and Infrastructure Committee was unable to achieve agreement on its version of a surface transportation reauthorization bill. As a result, Congress passed a one-year extension of the highway bill at the end of September 2020 as part of the Continuing Resolution. Expectations are that the bipartisan ATIA, which authorizes $287 billion over five years, will be reintroduced in the 117th Congress and supported by the Biden Administration due to the inclusion of climate provisions related to electric vehicle adoption and infrastructure as well as climate adaptation, among others. Further detail on infrastructure policy and legislation will be covered in future Holland & Knight alerts.
Carbon Pricing Proposals and Clean Energy Standard
In addition to the expanding bipartisan and bicameral support for energy innovation, proposals for a federal Clean Energy Standard (CES) for the power sector have been gaining momentum. CES policies have been introduced mostly by Democratic House members, but in September 2020, a draft bipartisan CES bill was released by Reps. David McKinley (R-W.Va.) and Kurt Schrader (D-Ore.).
Addressing climate change through market-based approaches such as cap-and-trade or a carbon tax tend to be seen as complementary to these other policy proposals and have not been at the forefront of the debate recently. Carbon pricing has been implemented by more than 50 jurisdictions worldwide, and businesses increasingly point to carbon pricing as a means to reduce emissions efficiently and cost effectively while driving investment into cleaner options.
However, given Republicans' likely retention of their majority in the U.S. Senate, options for wide-ranging energy and climate policies have narrowed significantly, diminishing near-term openings for market-based incentives.
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