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In the coming weeks, Congress may pass one of the most important climate policies in US history.

The $3.5 trillion budget plan includes a provision known as the Clean Electricity Payment Program, which uses payments and penalties to encourage them to increase their share of carbon-free electricity in the total they sell each year. If the legislation works as hoped, it will enable the electricity sector to generate 80% of its electricity from sources such as wind, solar and nuclear power plants by 2030, and reduce greenhouse gas emissions of more than one billion tons per year.

The measure will mark a fundamental step in President Joe Biden’s plan. ambitious climate planIt aims to push the country forward towards eliminating climate pollution from electricity generation by 2035 and achieving economy-wide net zero emissions by the middle of the century.

But there are real questions about whether the program will meet its aggressive goals. According to some economists, how the country’s complex electricity sector will actually respond will depend heavily on how the implementing agency designs the program, and specifically where it sets the payments and penalties.

In addition, it is not yet clear whether the measure will pass in a similar way to its current form or not at all.

How would it work?

The Clean Electricity Payment Program is a twist on the clean electricity standard, a regulation enforced by multiple states that require utilities to reach certain levels of clean electricity by certain years. The proposal mainly favors payments and penalties over binding mandates, as this can get it to go through a legislative process known as the legislative process. budget reconciliationIt requires only a simple majority of the votes in the Senate.

When companies increase their share of clean electricity above the annual target, they will be paid for every additional megawatt-hour of electricity they sell from carbon-neutral sources. an analysis by the Clean Air Task Force. Those who do not reach this threshold will have to pay a fee.

The program will not require all electricity suppliers to reach the same levels at the same time; will set the annual targets based on the point where each one starts. However, the overall goal will be for the US electricity sector to produce, on average, 80% of its electricity from clean sources over the next nine years.

US Senator Tina Smith from Minnesota defended the measure, which the Department of Energy would likely oversee.

The budget bill also includes federal tax incentives for cleaner electricity generation. With these loans, the program would be financed between approximately $150 billion and $200 billion. According to the Third WayA centre-left think tank in Washington DC.

Added together, the measures in the package will amount to “the largest, most ambitious climate and clean energy policies the United States has ever enacted,” says Josh Freed, the organization’s climate and energy program head.

What would the program do?

If the measures reach the 80% clean electricity target by 2030, this will more than double the share of carbon-free electricity in the US and significantly accelerate the pace of the clean energy transition.

Currently, approximately 38% of electricity produced in the USA It comes from carbon-free sources: 18% from renewable sources and 20% from nuclear energy.

According to an analysis by the Natural Resources Defense Council in the Evergreen Collective report, pushing the energy sector to 80% would reduce carbon dioxide emissions by 86% from 2005 levels. published this month.

This would eliminate more than one billion tons of annual climate pollution over the next nine years. By comparison, the energy sector annual emissions 800 million tons In the 14 years to 2019, it was almost entirely driven by the shift from coal to natural gas and the rise in renewable energy.

How else does it help?

This deals a huge blow to one of the biggest sources of US climate pollution. The electricity industry produces a quarter of the country’s total greenhouse gasesIt ranks second after the transportation sector with 29%.

Cleaning up the energy sector also makes it easier to address other major sources of emissions. For example, it ensures that much more of the electricity used to charge electric cars, trucks and buses is carbon-neutral. The same is true for things like heating and cooking as regulations require more homes and businesses to switch to electric stoves, heat pumps and other cleaner technologies.

“If we want to get real, deep cuts in emissions, we have to do it with clean electricity,” says Leah Stokes, an assistant professor of political science and policy adviser at the University of California, Santa Barbara. .

Meanwhile, other studies have found a transition to about 80% carbon-neutral electricity. would encourage 1.5 trillion dollar investment in clean energy, hundreds of thousands of jobs, and save hundreds of thousands of lives By reducing air pollution in the coming decades.

But will it really enable us to achieve 80% clean electricity by 2030?

“Who knows?” says James Bushnell, an environmental and energy economist at the University of California, Davis.

The downside to going with incentives on tight mandates is that you can’t guarantee the end result. Bushnell says the government will need to make some imperfect estimates or continually evaluate and improve how big and plentiful the bars need to be to deliver the desired changes.

Also, the industry will need to carefully design the program to prevent gaming. He sees scenarios where utilities can combine large volumes of clean electricity in certain years and narrow misses in others, minimizing penalties, maximizing payments, and slowing program progress.

Another problem is that much of the data on US electricity generation and sales is self-reported, although the “cleanness” of electricity purchased in real-time markets is not always clear. Thus, the government will likely need to establish strict processes for monitoring and verification and develop reliable ways to document or trace where carbon-free electricity comes from and where it ends.

What does it mean for electricity prices?

Most reviews of the Clean Electricity Payment Program conclude that it will drive down consumer prices. This is because it is funded by the federal government and utilities must use payments to benefit customers.

“Traditionally [clean electricity standard], the cost is borne in electricity prices and thus by utility customers,” noted Stokes’ co-authored Evergreen report. By contrast, the payment program would protect Americans from rising electricity bills, the report said.

But Bushnell says that even if these performance payments are used to lower prices, they can increase in some cases. This is because utilities will compete for limited sources of clean electricity, both old and new, which will drive up prices. Dirty electricity prices can fall for the same reasons as market demand and supply. He says real results from market to market remain to be seen.

So why don’t we just enforce powers?

While mandating utilities to only sell certain levels of clean electricity at certain times offers a clearer path to the desired outcome, the proposed payment scheme has one strong advantage: it is politically feasible.

Specifically, it could enable legislators to include the proposal in the budget reconciliation process. This allows Congress to pass laws on certain issues related to taxes and spending by 51 votes in the Senate – exactly the number Democrats have if Vice President Kamala Harris votes to break the tie.

A regulatory rule would be uncompromising and required him to secure 60 votes to overcome a rogue threat.

So does that mean it will definitely pass?

Not at all.

Under what’s known as the Byrd rule, there are strict restrictions on what kinds of measures can be included in the reconciliation process. The Senate cannot consider “unnecessary” provisions that require any proposal to change federal spending or taxes for more than other policy purposes. among other tests.

Therefore, there is always a chance that Senate parliamentarians decide certain measures are unsuitable and remove them completely from the final bill.