The $369 billion climate and tax package Democrats in the Senate proposed this week could have far-reaching effects on the kinds of cars that Americans drive and how the country produces its energy. China holds on to battery supply chains.
The bill came back from the dead after Senator Joe Manchin III of West Virginia dropped his opposition. There is a proposal to fight climate change. The majority of the time, it would do so through tax breaks and other incentives, which is likely to go down easier in corporate boards and with voters.
Cash incentives for buyers of electric vehicles, along with billions of dollars for automakers, battery manufacturers and suppliers, are proposed by Democrats. There is money to help consumers pay for things like rooftop solar panels.
The proposal is filled with compromises and has something for everyone in the energy industry. There is a 10-year extension of tax credits for wind, solar and other renewable energy and tax credits for carbon capture technology. A new fee on methane emissions from oil and gas infrastructure would be included in the bill.
Policy analysts said there's more at stake than that. Industrial policy is included in the legislation. The companies that get their components and raw materials from the United States or its allies are favored.
According to an associate professor of political science at the University of California, Santa Barbara, who specializes in energy and climate change, the bill is a huge step forward. Meeting President Biden's goals will be made easier by it. Every American will pay less for energy.
Congress wants to protect the American economy from China. The Senate approved a $280 billion bill that included subsidies to spur U.S. chip manufacturing. Concerns about dependence on Taiwan for most advanced computer chips, as China continues to assert ownership of the island and tries to build its own chip sector was the driving force behind that bipartisan measure.
One of the most important provisions in the climate bill is to remove a cap on the number of cars that can be eligible for a tax credit for buying electric vehicles. The credits are phased out after a manufacturer sells 200,000 electric or plug-in hybrid vehicles.
It would be huge if the credits were restored, as well as companies like Ford Motor and Toyota that will lose access to the credits in the near future. The new tax credit would make vehicles from those companies more affordable and address criticism that only wealthy people can afford electric cars.
A lot of middle-class Americans will be able to get this credit that otherwise would have been blocked out because of the credit limit. That is a huge deal.
For the first time, used cars that are battery powered are eligible for a tax break. Most people buy used cars. The average price of a new electric car has risen above $60,000, out of reach for many buyers.
Incentives for new electric cars would not be available to people making more than $150,000 a year. The used-car incentive has an income limit for individuals and couples. The credits would not apply to cars that sell for more than $55,000.
It is a good thing that they are trying to drive adoption among middle-class and lower-class buyers. The majority of the market is located there.
The bill is more than 700 pages long. Several provisions appear designed to undermine that country's hold over the electric vehicle supply chain while making it harder for up-and-coming Chinese carmakers to export cars to the US.
The 200,000-vehicle cap on tax credits would give a competitive advantage to new entrants to the U.S. market like BYD of China that are expected to use electric vehicles. The Texas-based company could not take advantage of the credit that was given to them.
The legislation from the Democrats would change that. Cars not made in North America are not eligible for the credit. Imported cars made by foreign companies would not be eligible for the qualification.
If a car's batteries are made with materials and components from the United States and countries with which it has a trade agreement, it will be eligible for the full credit. Over time, the percentage of components that have to meet those restrictions will increase. The provision is meant to encourage domestic development of businesses.
According to John DeMaio, the chief executive of Graphex Group, the federal funds that are part of the legislation will allow the company to increase the scale of operations at a factory planned for Warren, Mich. Mr. DeMaio said the company wanted to move production closer to the U.S.
The legislation would be beneficial to a company like ours.
The bill aims to speed up efforts by most utilities to switch to cleaner sources of power and develop new technologies within the United States while easing the burden of high prices on consumers.
41 percent of overall inflation is related to a jump in fossil fuel prices according to an analysis done by Rewiring America. 103 million families would save money every month, a total of $37 billion a year, if they switched to electric furnace and water heating, which would be eligible for new tax breaks under the Democrats' climate bill.
One of the cheapest ways to reduce carbon emissions is through tax credits. According to the Energy Policy Institute at the University of Chicago, the benefits are four times their cost.
The United States will be in a strong position to meet international commitments on climate and industry if we can get this.
$60 billion for programs to help disadvantaged communities is included in the measure. People who live in poorer communities don't have enough money to buy cleaner technologies.
Any bill that expands is going to have opposition. The oil and gas business doesn't like a provision that aims to reduce the amount of methane leaking from wells. The main component of natural gas, methane, warms the planet more than carbon dioxide.
Climate experts have long called for policymakers to do more to rein in methane leaks, but the industry has opposed new regulations and laws. Businesses would have to pay a penalty of $900 per metric ton of methane emissions if the bill is passed.
The American Petroleum Institute, which represents oil and gas companies, is opposed to policies that increase taxes and discourage investment in America's oil and gas.
Environmentalists are upset by a few provisions, including subsidies for efforts to capture carbon dioxide emissions, which they argue is wasteful and would prolong the use of oil, gas and other fossil fuels. They don't like a measure in the bill that would prevent wind and solar projects on public land if oil and gas drilling is not allowed first.
Mr. Reicher, who was an assistant energy secretary in the Clinton administration, said that compromises were necessary to get the bill through the Senate.
Mr. Reicher said there is support for fossil fuels and decarbonization. The jury is trying to decide if those technologies will work. This is what it takes to get a package of this size across the finish line.
Don Clark and Elena Shao worked on the report.
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