Democrats may struggle to revamp President Joe Biden’s signature climate policy to comply with strict budget rules that govern the reconciliation process, the legislative maneuver they are using to bypass the filibuster.
The Biden administration asserted this week it is committed to passing a clean electricity standard, its signature climate policy, in a Democratic-only infrastructure bill.
The policy is central to achieving Biden’s goal of generating 100% carbon-free power by 2035 and reducing economywide emissions by 50% by 2030.
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But Senate procedural experts interviewed by the Washington Examiner are skeptical a clean electricity standard as typically defined could fit the “Byrd rule” that prohibits “extraneous matters” unrelated to the budget to be considered in reconciliation.
A clean electricity standard sets mandated targets for utilities to purchase a certain amount of low-carbon power. The policy ratchets up those targets each year until utilities are buying carbon-free power by a certain date.
“The term ‘clean energy standard’ suggests a regulatory activity, and quite frankly, if it’s purely a regulation requirement that utility companies meet a certain standard, I don’t see how that can possibly be considered under a reconciliation instruction,” said Bill Hoagland, former staff director of the Senate Budget Committee who is now senior vice president at the Bipartisan Policy Center.
Hoagland compared the challenge facing Democrats to the party’s failure to pass a minimum wage hike through reconciliation earlier this year. In February, Senate parliamentarian Elizabeth MacDonough, who would also rule on the fate of a clean electricity standard, rejected Democrats’ attempt to push a minimum wage increase through that process.
“These are starting to stretch the purpose of what reconciliation and the budget process was supposed to do,” Hoagland said.
Indeed, the Byrd rule was approved by the Senate in 1985 to prevent the majority party from ramming through non-budgetary policy that could not otherwise advance normally under regular order.
The Byrd rule’s prohibition on extraneous policy language outlines six possible violations, including having no budgetary impact; having a “merely incidental” budget impact; or being outside the reporting committee’s jurisdiction.
Environmental groups working with Democrats in Congress have spent months researching ways to shape a clean electricity standard that would satisfy the Byrd rule and qualify for inclusion in a reconciliation bill.
Democrats are coalescing around an idea to pitch a clean electricity standard as a straightforward investment program, according to sources close to discussions on Capitol Hill.
It would be different than the clean electricity standards or more narrow renewable portfolio standards that have been enacted in more than 30 states.
These state-level policies generally use a credit system with trading. They allow utilities to earn credits for the clean electricity they produce from eligible resources such as wind, solar, and nuclear.
Companies can buy and sell those credits among themselves, or they can choose to pay alternative compliance payments in lieu of earning credits if they don’t have enough clean power or credits to satisfy the requirements.
In the federal approach, however, Democrats would likely propose setting up annual targets for each utility to hit on growing their share of clean energy. If utilities hit these targets, they would get financial support from the federal government. If they do not, they would face penalties.
The utility sector as a whole would have to hit 80% clean power by 2030, which would fit the 10-year budgetary window of reconciliation and keep pace with Biden’s campaign promise of 100% carbon-free power by 2035.
Utilities would be assigned different targets based on their starting level for zero-carbon power, enabling utilities in carbon-intensive states more time to wean off fossil fuels.
If they hit their targets, utilities would get money from the federal government that they could use for a variety of purposes, such as paying for the transition to clean power, reducing customer power bills, or providing benefits to workers at fossil fuel plants. If a utility doesn’t reach its target, the federal government would penalize the company.
“The way to get a CES done is to turn it into an investment program,” said Leah Stokes, associate professor at the University of Santa Barbara. “It’s not merely incidental to the budget. We are talking about significant federal investments.”
“Of course, you can put an investment program through reconciliation,” added Stokes, who is also an adviser to Evergreen Action, an environmental group that has pitched ideas to Democrats on designing a clean electricity standard.
The office of Sen. Tina Smith of Minnesota, a Democrat who is working on clean electricity standard legislation, told the Washington Examiner that her goal is to create a 10-year investment program that would reward utilities transitioning to clean electricity with incentives and impose fees to prevent backsliding.
Joseph Majkut, director of climate policy at the Niskanen Center, questioned whether even a quasi-clean electricity standard would pass muster.
“It’s an open question whether you can design something that becomes principally a budgetary instrument but has properties of CES,” Majkut said. “The designs I have seen are plausible but challenging to fit into reconciliation.”
Sasha Mackler, director of the energy project at Bipartisan Policy Center, said that whatever policy Democrats produce won’t closely resemble a clean electricity standard.
“It’s not accurate to call whatever policy is developed through this process a standard,” Mackler said. “It would be some sort of power sector decarbonization program.”
But Mackler said he is skeptical Democrats can design something that isn’t perceived by the parliamentarian as a policy initiative, given other goals the party wants to achieve, such as promoting “environmental justice” or providing job training.
“It’s hard to design complicated policy through reconciliation, and if you have a number of variables you are trying to solve for, you don’t have that latitude through this process,” Mackler said.
Mackler suggested Democrats could revisit passing a clean electricity standard on a bipartisan basis through regular order if it doesn’t survive the reconciliation process, noting that Republican-led states have implemented such policies. Republican Rep. David McKinley of West Virginia has introduced a bipartisan clean electricity standard bill, albeit with more modest targets than what Democrats are conceiving.
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But Stokes argued Democrats must try to pass something more aggressive without Republicans if they want to meet Biden’s climate goals.
“If we are serious about tackling the climate crisis, we have to be serious about getting this through reconciliation,” Stokes said.
