The Inflation Reduction “Climate” Bill passed the United States Senate by 51-50 with Vice President Kamala Harris casting the deciding voting and not one single Republican supporting the measure. It passed the House of Representative in a straight party vote despite unified Republican opposition and concern about its limitations from progressive Democrats. Because of the close vote in the Senate, Majority Leader Charles Schumer (D-NY) and President Joseph Biden were forced to drastically scale back the original Build Back Better bill and throw-in fossil fuel and tax break sweeteners to get voting support from Arizona Senator Kyrsten Sinema and West Virginia Senator Joe Manchin. Although the bill is supposed to help the United States meet its CO2 reduction pledge, Manchin is getting a natural gas pipeline connecting West Virginia and Virginia and an agreement by the federal government to open up parts of the Gulf of Mexico and the Cook Inlet in Alaska for oil and gas exploration. The law also mandates a quid pro quo pairing new wind or solar projects on federal lands with additional fossil fuel production. The new pipeline directly benefits major donors who contributed over $300,000 to Manchin’s campaign fund. NextEra Energy, a stakeholder in the Mountain Valley Pipeline and is also major donor to Senate Majority Leader Schumer who negotiated the compromise bill with Manchin.
After learning about Manchin’s deal, Sinema insisted that the law had to ensure tax breaks for private equity executives based in Arizona who manage investment portfolios and are also major contributors to her campaigns. Under current tax law, private equity executives pay taxes at a lower rate than ordinary wage earnings. Because Arizona is being hit hard by climate change with higher temperatures and worsening drought Sinema wants additional funds set aside for her state for climate resiliency funding to repair damage and adjust to climate changes. Her demand to secure her vote does seem contradictory. Less tax dollars coupled with more aid dollars for her constituents. By the way, Senator Schumer is the number one recipient of hedge fund campaign donations.
Arizona is notorious for wasting water despite its desert environment and a drought that stretches back to 2007. The average resident of metropolitan Phoenix uses more than 115 gallons of water every day compared to a United States average of 83 gallons per day.
Although Senate leaders have included plenty of favors for the fossil fuel industry in the big climate package, most analysts conclude these concessions amount to consolation prizes in a deal where clean energy is the clear winner. The nonpartisan think-tank Energy Innovation calculates that even with support for the expanded production of fossil fuels included in the bill, for every ton of new emissions produced, 24 tons of emissions will be avoided. The bill includes tax credits for individuals buying new or used electric vehicles and charges oil and gas companies when they leak methane into the atmosphere. Economist and New York Times columnist Paul Krugman dismisses critics of the bill as minimizing its crucial impact on climate. However, Krugman also points out that the best way to rein in fossil fuel emissions is a carbon tax, a tax on companies that extract oil, natural gas and coal or pump greenhouse gases into the atmosphere, but this is missing from the bill because of corporate opposition.
Longtime climate activist Bill McKibben calls the compromise bill a step in the right direction because it would reduce “U.S. carbon emissions 40% below 2005 levels in the next decade” and “would lay down the infrastructure — wind and solar production facilities, EV chargers, more efficient buildings — that'll make renewable energy the cheapest option going forward.” I wish I were as positive about the Manchin-Sinema-Schumer-Biden Inflation Reduction “Climate” Bill as Bill McKibben is. As President Biden acknowledges, the current law has a lot more carrots, tax cuts for businesses, than sticks, tax hikes and penalties for fossil fuel polluters.
Younger climate activists have been more critical of the bill. Varshini Prakash, a co-founder of the Sunrise Movement, argues “This bill is not the bill that my generation deserves and needs to fully avert climate catastrophe.” However, she accepted “it is the one that we can pass, given how much power we have at this moment.” Christina Ramirez, president of NextGen America, pointed out that the bill was written by legislative bodies dominated by old men. “Most of these congressional representatives will be dead by the time we face the consequences of their inaction.” Climate scientists agree with Prakash and Ramirez that the United States will have to do significantly more than this bill is designed to achieve. To effectively address climate change it needs to stop emitting carbon dioxide into the atmosphere by 2050. Robert McNally, president of Rapidan Energy Group, compared the bill to a diet that will help you lose 20 pounds, when what you really need to do is lose 100.
In a New York Times op-ed, Charles Harvey, a professor of environmental engineering at the Massachusetts Institute of Technology, and Kurt House, CEO of KoBold Metals, charge that the millions of dollars in tax breaks for fossil fuel companies to invest in carbon capture technology is self-defeating for the environment because it undermines investment in alternative energy sources. The subsidy to the fossil fuel industry allows them to extract even more fossil fuels that emit greenhouse gases into the atmosphere. In addition, current carbon capture projects have been expensive dramatic failures.
Mega-billionaire Bill “Microsoft” Gates called the Inflation Reduction Act of 2022 the “single most important piece of climate legislation in American history. It represents our best chance to build an energy future that is cleaner, cheaper and more secure.” But can the world trust people like Gates?
In March 2022, Microsoft released its annual Environmental Sustainability Report for 2021 In that year alone, the company was responsible for 11.2 million metric tons of carbon dioxide release into the atmosphere. That represented a 21% increase over the previous year. While greenhouse gas emissions rose, so did Microsoft’s profits. For the quarter ending in December 2021, Microsoft announced profits of $18.8 billion, also an increase of 21%.
American companies are notorious for evading tax penalties and taking advantage of unwarranted tax breaks. Amazon’s total federal corporate income tax rate from 2018-2020 was just 4.3% while the company earned $44.7 billion in profits. Tax manipulation allowed Amazon to receive a federal income tax rebate of $129 million in 2018 while the company was earning $11 billion. According to its own sustainability reports, Amazon released almost 72 million metric tons of carbon dioxide into the atmosphere 2021, 40% more than it did 2019. Based on past performance, we can expect American companies to hide “dirty” profits in off-shore tax havens while claiming maximum clean energy tax breaks in the United States. Representatives of both the Urban-Brookings Tax Policy Center and the Joint Committee on Taxation question how much tax policy impacts on corporate decision-making.
As human civilization faces a global climate catastrophe, I hope Paul Krugman and Bill McKibben are right about the impact of the legislation on climate. I just remain unconvinced.
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