American Climate Leadership: Future of the Inflation Reduction Act

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This transcript is from a CSIS podcast published on June 24, 2024. Listen to the podcast here.

Emily Domenech: I think we often have Republicans who have a set of goals on climate and energy that not, they don't sound like the goals I hear from folks on the other side of the aisle, but there's more overlap than people think, that we want to make sure we keep costs affordable here in the United States. We want to make sure we have a resilient electric grid. We want to make sure we're getting China and Russia out of our supply chain and we're supporting our allies. All of those things have a lot of overlap and they happen to often lead to reductions in global emissions.

Lisa Hyland: Hello and welcome to Energy 360, the podcast from the CSIS Energy Security and Climate Change Program. I'm your host, Lisa Highland. This week we look at the future of U.S. climate leadership, and I'm pleased to welcome three experts who have each worked directly on key pieces of legislation, including the bipartisan infrastructure law and the Inflation Reduction Act. My colleague, Quill Robinson joining the podcast for the first time leads the episode along with Emily Domenech of Boundary Stone Partners, Adrian Devany of Climate Vision and Peter Stahley of Cassidy and Associates. They talk about the leading U.S. climate and energy legislation and what's happened since these were passed, and then they turn to where Republicans and Democrats have shared and competing energy priorities, especially as the United States heads into its November election. I'll turn it over to Quill now. To kick off the conversation.

Quill Robinson: The last four years have been a transformative period for United States climate change and energy agenda. The COVID-19 pandemic revealed the fragility of global supply chains. Russia's invasion of Ukraine showed the power of energy as a geopolitical tool. The U.S. also emerged as the world's top exporter of liquified natural gas Here in Washington. Two major pieces of climate and energy legislation, the infrastructure investment in Jobs Act, also known as the bipartisan infrastructure law and the Inflation Reduction Act were signed into law. These bills are pouring trillions of dollars into the United States infrastructure and energy system. As November elections approach, the future of U.S. climate and energy policy is uncertain. Today we have three experts who have each worked directly on the bipartisan infrastructure law and the Inflation Reduction Act. To help us understand this crossroads that we are at. First off, we have Peter Staley. Peter is the Vice President of Cassidy and Associates, where he focuses on energy and natural resources policy.

Peter served as a key aid to Chairman Joe Manchin on the Senate Committee on Energy and Natural Resources. He's a civil engineer by training, and previously spent 11 years with the National Park Service primarily in Alaska. Next we have Emily Domini. Emily is the co-host of Political Climate Podcast and a senior Vice President at Boundary Zone Partners. She previously served as the senior policy advisor to Speaker of the House, Kevin McCarthy and Speaker Mike Johnson, managing energy science, climate, transportation, agriculture and permitting for House Republicans. Emily currently serves as a U.S. Navy Reserve officer. And finally we have Adrian Devany. Adrian is the founder of Climate Vision where he advises nonprofits and businesses to develop strategies for expertly designed decarbonization policy. Previously, Adrian spent 13 years working in the United States Senate most recently as the Director of Energy and Environmental Policy for Senate Majority Leader Charles Schumer. In that role, he led the climate and energy negotiations for the Inflation Reduction Act, the Infrastructure Investment and Jobs Act, the CHIPS Act and the Energy Act of 2020 among other legislation. So Adrian, I want to start with you. Can you just first of all explain the significance of the bipartisan infrastructure law as well as the Inflation Reduction Act to the United States Energy and climate goals?

Adrian Deveny: Sure. Well, first of all, thanks for having me on Quill. A real pleasure to join you and my former colleagues here for this podcast who I spent a lot of time with on the hill working on all kinds of really transformative legislation for the country. It was a real honor to be able to do that with these folks who are sitting next to me here. Well, let me start with some context on what the U.S. climate energy goals are and why. When President Biden first took office, he set a goal of reducing emissions by 50% by 2030 below 2005 levels. And 2005 was basically our peak greenhouse gas emissions. And he presented that target to the American people, to Congress and to the world to show the U.S. was going to step up and lead again on climate. And that leadership is really important. It's important both because the rest of the world looks at the United States and our historic contribution to climate change, and they say, well, why would we step up if you aren't doing your part?

They also look to the United States for leadership on innovation. The U.S. is historically the first mover on new technologies. Most other countries can't afford to invest in innovative climate technologies or any innovative technologies because the cost of capital is too high. There isn't a strong ecosystem of venture capital and private equity and the federal investments just don't exist in most of the developing world. So it's really important for the U.S. to lead in climate and really all significant global issues if we want the rest of the world to follow. So the IRA and infrastructure bill fundamentally changed our emissions trajectory. They were the most significant investment in climate collectively in US history and arguably in the world. If you look at what our trajectory was in 2021, before those bills passed, we were on track to get to around 26 to 28% reductions by 2030, far short of that 50% goal that the president set out. So we had to step up our game. And with the passage of the IRA in particular, we just fundamentally accelerated our emissions reduction trajectory. We're now on track for almost 40% reduction of emissions by 2030. And so we have more work to do. We'll need the private sector to step up and do more over the next six years. We'll need states and the federal government to do more over the next six years. But fundamentally, I think we are now on track to meet the president's goals, and that is a good thing.

Quill Robinson: So, a lot of people are wondering about the durability of these pieces of legislation now, and it is significant that the Inflation reduction Act passed through the reconciliation process, whereas the bipartisan infrastructure law, and that was on a completely party line vote, whereas the bipartisan infrastructure law as the name implies, it was passed on a bipartisan basis. So, Peter, I want to turn to you, your former boss, Senator Manchin, played a very important role in negotiating both of those bills. Could you talk to us a little bit about why that distinction matters and how that affects the durability of these two bills?

Peter Stahley: Sure. First off, thanks for having me here. So if we go in timeline order, the bipartisan infrastructure law, bipartisan it's in the name, given the political reality of the Senate at the time, it was a very member driven process. This theme might come up a few times. Part of the driving factor there sometimes to the frustration of my colleagues who work for leadership, whereas you ended up with gangs, you ended up with members coming together, having priorities across party lines, trading this priority, that priority. And yes, that means you end up with a more durable political consensus that goes forward. And in addition to the gangs, we had the committee driven process. EPW played a huge role environment and public works energy and natural resources with Chairman Manchin. And what was interesting there is, so we had the climate goals, we had the energy security goals, we had the broader infrastructure side, sort of the early rumblings of we need to do something on permitting, and then it comes together. We get that done. We, again, to the frustration of many people in the caucus flipping over to purely partisan lens, Senator Manchin sort of became the counterparty in these negotiations. He was representing everyone else in many aspects, especially in energy, like the world I live, I won't speak about broader medical topics and all those things that I know nothing about.

Quill Robinson: There's a lot of other pieces, a lot of other pieces that people forget about.

Peter Stahley: But in the energy world, we had Ukraine, I think fundamentally changed the world broadly, right? Geopolitics, the horrific invasion. But I think it changed how we were able to have some conversations within the Democratic Party, and it helped, I think Senator Manchin pivot and play this role of, okay, I want to do the climate part, but we need to bring energy security. We need to bring supply chain security into this. So yes, party line vote. Clearly it went through reconciliation. However, I would say one underappreciated fact is in the runup to the IRA, we did have long bipartisan member level conversations about what would go in an energy security bill, what would go in a permitting bill. Eventually the politics, the finances met, we went with reconciliation. But a lot of those ideas, a lot of things that are driving these manufacturing investments all over the country came from those conversations. And I'm sure we'll talk a little bit about permitting later, but I think it drove this literally trillions of dollars of investment now that is coming to the country, yes, from a party line bill. But if you look forward about what that means, transformative, whether it's batteries, chips, and science, we're bringing, I hesitate to use a reindustrialization but massive industrial investment in this country, which I think everyone can get behind.

Quill Robinson: So, it passed on a party line basis, but there is a lot of inertia now with all of that money that is going out the door into the economy.

Peter Stahley: And it's hard to forget also the China competition story, which that seems like one of the few bipartisan issues in DC right now.

Quill Robinson: Exactly. Yeah, absolutely. So Emily, I want to bring you in here. You were on the other side of these negotiations working with House Republican leadership. I guess before we dive into the bipartisan infrastructure law and the inflation reduction Act, can you just paint a picture for us of where congressional Republicans are generally on energy and climate issues? How did you enter these negotiations and what are the core stances and tenets of the Republican position on these issues?

Emily Domenech: Yeah, so I think I always say as the leadership staffer that oversaw standing up a conservative climate caucus and a Republican task force focused on climate, that Republicans sort of get a bad rap on this issue. They say, oh, you don't have any ideas, and you just say no to everything and you're not interested in really engaging. And I think that's really not true. I would say on energy and climate policy, we've been really, really consistent saying we support policies that lower costs, that address reliability, that reduce dependence on adversaries like China and Russia and that lower global emissions. But the kicker here is that we need to address all these issues. We can't be sacrificing our energy security or making things more expensive at home just to lower emissions here because we know that means that we're really just offshoring those emissions to China or someone else who doesn't care about environmental or even labor standards.

So I think we've got a nice long track record of supporting those kinds of resilient climate and energy policies that are cost effective and that sort of invest in the innovation and market led side of this discussion. I think we have concerns and we always have about the top down approaches that set us up for those price spikes and reliability challenges. I'll use the latest version of the EPAs Clean Power Plan as an example of one that I think we've seen a lot of pushback from industry because we're concerned that in the long term, that just ends up offshoring those emissions and to another part of the world on the IRA, I will say the common refrain that we hear from Republicans now is that given the opportunity to look at these policies again, we want to go after them with a scalpel and not a hammer.

I think there's plenty of areas, to your point, Peter, about how there were Republicans having conversations behind the scenes. There's plenty of things in the IRA particularly credits that are focused on onshoring manufacturing and critical minerals and in the nuclear and 45 Q space that had longstanding Republican support. So I think you could see particularly a more response not just from congressional Republicans but from a potential Trump presidency on that stuff. But I do think that when you have Senator Manchin who's obviously made the IRA happen to a great extent, expressing quite a bit of concern about how the administration is implementing different parts of the law, there have to be some concerns about long-term viability, especially as we go into a tax reform reauthorization next Congress.

Quill Robinson: Do you think that when the rubber meets the road here, if there is a potential Trump presidency and Republicans have either the House or the Senate or both that Republican members of Congress would actually defend those carbon capture nuclear related provisions on those sort of topics that they have traditionally supported?

Emily Domenech: So, but I also think there are some pieces of the IRA that I think will end up being a quick and easy target. Particularly I think in the EV space, I think some of the expanded PTC IDC numbers, we could see those reset to pre IRA levels, and I think even frankly, the 45 V hydrogen credits, depending on how they're implemented, could be something that people look at in the pile of offsets you need for the Trump tax cuts to be extended. I think people often forget that we have to think we in the energy world like to think about our little universe and the things that matter to our stakeholders, but we are going to be looking at the IRA, not just in the context of climate and energy, but also in the context of reauthorizing, say the small business tax cut or the corporate tax cut or the kinds of things that frankly, even say a moderate Democrat is going to have a hard time choosing between one IRA credit and the small business tax cut because of the way that these sort of stakeholder groups work. So I think if I was giving advice to the Biden administration, I would say you want your stakeholder base for every tax credit you implement to be as broad as possible because that's how you get people who want to work with you to defend them going into a really big tax year.

Quill Robinson: Right. So we started looking a little bit into the future here, but I think it's a really fascinating conversation. A lot of people are interested in what's going to happen with the IRA, but first I want to talk a little bit more about what worked and what hasn't. Adrian, I'll turn to you here. We're coming up on the two year anniversary of the passage of the Inflation Reduction Act. Can you talk about some of the provisions that you think have been very successful by whatever measure you would say and maybe some provisions that have not?

Adrian Deveny: Yeah, so the key there is whatever your metric for success is matters. My metric for success is three things. Really. It's emissions reductions. It's creating us leadership in clean energy technology, manufacturing, onshoring a lot of those jobs here in America and creating good jobs and making sure that a lot of the communities that have historically been left behind in this kind of economic transition are not left behind. So those to me are the three metrics for success that we were solving for when crafting the IRA and that we should measure success against When looking at how it's going, the workhorse of the IRA from an emissions reduction perspective without question is the clean energy tax credits for wind and solar projects and the fact that they were juiced up for domestic content bonuses to onshore, that supply chain solves for both emissions and it solves for onshoring the supply chain.

And we're seeing that pan out. Last year was a record year in clean energy deployment. Solar became the largest source of new energy coming online. It beat gas, it certainly beat coal. It beat nuclear. So solar was the number one source of new energy last year. So there is clear progress on those and when you look on the manufacturing side of the equation, we've also hit records since those bills have passed. There have been, I believe the latest numbers since the numbers have been updated with the first quarter numbers of this year is 265 billion of private and public sector investment in clean energy manufacturing in solar manufacturing facilities across the country, battery wind, critical minerals, the whole clean energy economy. There's a real industrial renaissance happening in this country that's blossoming in just about every state of the country and it's incredible to see. So if you care about those metrics, one thing I'll also say about the EV tax credit and the supporting battery manufacturing tax credit is again, the biggest manufacturing sub-sector is in batteries.

Actually it's more so than solar manufacturing facility or wind manufacturing facilities or critical minerals, though there are plenty of all of those batteries are beating them all. And the reason for it is that we created a manufacturing incentive for domestic manufacturing batteries, and the EV tax credit was structured to really force these companies to figure out how to source these component parts in the United States, and the proof is in the pudding. You're seeing enormous amount of investment in this country now in that supply chain. There's a lot of cause to be happy about that I think that hopefully will make for some durability. But as Emily just said, those are also the two tax credits that are probably in the cross hairs of Republicans. It's the clean energy tax credits and the EV tax credits. So I guess it depends on what you care about.

Quill Robinson: Right. Peter, I want to turn to you here. Can you just talk about from your perspective being our radical centrist here, what do you think has worked well? And I know Chairman Manchin has been, he's critiqued a number of pieces of the IRA. Could you just walk us through what's what has worked well and what has not from your perspective?

Peter Stahley: The dangerous centrist is a dangerous lane to be in because everyone's mad at you all the time. So I would echo a lot of what Adrian said, but then also a bit of Emily, he's been, Senator Manchin has been upset at, we can say some of the sourcing provisions, but at the same time, if you take a step back, the investment is coming here, whether it's a battery or actually if you go upstream a little bit to cathodes and then you go upstream from that to the mineral side. And I think that's where maybe some of it hasn't worked, I wouldn't say as well, I'd say maybe as quickly as we had hoped where the upstream side of this is a very long slow path to success. And I would add maybe a criteria to Adrian's, right? Again, geopolitical competition, China energy security.

That's one part where I think we've shifted the IRA has shifted, I mean globally, right? Look at what Europe's doing now, how people think about supply chains and energy security. But has it gone maybe as well as I or Senator Manchin would like? Maybe not. Some of those are policy decisions, but some of those are frankly just the reality of global finance right now. Changes in markets, again, permitting is going to keep coming up out of this. Right now we have both, I think left and right saying, Hey, we have to figure out how to deploy all of these things faster in an equitable way, but otherwise we will not compete. So I think that's the one. The part that hasn't maybe worked as well is we've got all this investment, we've got all this capital both from the states and global partners. They all are kind of recognizing this is a giant opportunity and then saying, okay, how do I make sure those dollars can get to work fast enough to A, get a return, make this worthwhile, and B, we'll use EVs again, that is a tax credit in the crosshairs at the same time, BYD with cattle batteries made in China are a real thing.

Europe's in a different spot than us. They're already getting cars showing up and having to deal with where's their manufacturing sector when it comes, automobiles going to live. I think here in the United States, we've made the decision that we can disagree about maybe the way to do it, but that's something worth protecting for not only economic reasons, but national security reasons.

Quill Robinson: And Peter, I'm curious, do you think there's something that could have been negotiated differently? I mean, obviously you get multiple bites of the apple here and things have evolved through guidance and so on and so forth. But was there something that could have been done differently when the bill was written and passed?

Peter Stahley: I struggle with that one because partly just to be a procedural nerd for a minute, reconciliation is a very difficult way to go about doing policy. So annoying, so annoying. You could go back to Tax Cuts and Jobs Act. You could look at the IRA, right? It's not the right way to do finely tuned policy. It's why permitting had a ride as sort of a sidecar.

Quill Robinson: And still has not arrived.

Peter Stahley: Still has not arrived. There are a few bits where if we looked back a couple of commas here and there and those sort of things, but it was such a broad, Adrian and I had many of these negotiations slash arguments when it came to oil and gas lease sales and a variety of more controversial provisions that I really think we pushed within the confines of that about as well as we could have. It's more this, how do we pivot now to what's next? Incremental progress, the centrist mode of like, let's keep taking little steps, little steps, sometimes really big steps, but keep moving forward. Don't let the perfect, the enemy of the good. And I think that's sort of the lens of what we do next.

Quill Robinson: Sure. So Emily, I want to turn to you now, but I heard something interesting here. Both Peter and Adrian were describing their metrics for success around driving down emissions industrializing and creating jobs here in the US and also de-risking from China and creating more secure supply chains. That sounds like a pretty similar framework or we're probably fairly aligned here when it comes to those sorts of outcomes. Can you apply that to the IRA and say what you think has worked well or has not?

Emily Domenech: So I'll start with what I think has worked well and what I think we'll end up getting bipartisan support in the future. And I think that's that 45 x tax credit, the manufacturing tax credit is one that I think absolutely appeals to the populist side of the Republican party. I could see President Trump loving that if he's in office and I could see them leaning in on trying to maintain it. And I think it also shows to that issue that we talked about originally where we all kind of agree about this competitiveness with China and how we need to onshore or right shore our domestic supply chains, where I think we have challenges. And I think one of the big concern with this law from the start was that it was so focused on the last step of that supply chain that we didn't get to actually address the issues that are important for us to talk about as we look at the whole thing.

So we didn't talk about domestic mining. We have an administration now that in one event is saying, we want to onshore our supply chain and the next is rejecting a permit for a road for a really significant mine that would give us the critical minerals we need to build that supply chain. So there's this push and pull I think between what is the real goal that I think republicans often have some skepticism about. We say if you really wanted to on tour this stuff, then we wouldn't have Senator Manchin getting mad at the administration for all of the loopholes that are in the implementation of these tax credits. I totally agree that it's really hard to do business through reconciliation because it leaves so much up to the Department of Treasury, which frankly started hiring energy experts to implement this law. We're dealing with a situation where congressional intent is not always as clearly communicated as it could be.

And I think that opens us up for some criticism in the future on those sort of what are the big goals of the IRA? I would just push back slightly on the rosy picture of everything we're doing. Politico came out with a study saying that only 17% of the money has gone out the door. The IMF put out a paper saying the emissions reductions predicted by the lock could get a cut by a third if we don't have permitting reform. So there's some really big holes in this law. It is not the answer or the solution to everything, and there's quite a bit more to do if we're really serious about building up these industries.

Quill Robinson: So as you mentioned, this was a partisan bill is through reconciliation, but if knowing what you know now, if you were able to go back and make one tweak to it, change one provision, something like that, what would it be?

Emily Domenech: I mean, I think what's coming here, which is that if house Republicans had had an opportunity to be at the table here, I would've just shouting from the rooftops that we need to do permitting reform or we're never going to be able to build any of this stuff. And that's what we're seeing happening. You're not going to get the level of deployment you want. You're going to struggle to get money out the door, you're going to get these permitting delays and it's going to dampen the impact of what folks intended as they put this law together. And we're starting to see that. I mean, I think we're starting to see renewable companies who frankly are not used to getting sued, getting sued and not being able to get their money out the door. There's a reason that the folks who are getting money through the Chips and Science Act are all over the hill trying to get carve outs from NEPA because they know that they can't get through these permitting processes in a way that's time effective for them to raise private capital.

I don't think you can have any serious conversation about energy and climate without talking about permitting. And I think it has to be a bipartisan bicameral discussion. And we often make the mistake of only talking in our own chambers, and that leaves us to a place where we make a deal on one side and then it's tepidly received on the other. I think we saw that with IJA, for example, where senate republicans were pretty happy with where that law landed and house Republicans were like, nobody called us and actually house Democrats were mad about it too. So you ended up with this kind of funny divides that I think we need to kind of get past committee jurisdiction. How do we get senators and house members in the same room to have real discussions about this next Congress?

Adrian Deveny: If I could say just a word on permitting quickly, the way I think about that issue is it's a little bit of, it's the best of times and it's the worst of times because we are hitting records on clean energy deployment. That part is true. And also we are not on track to hit our 2030 climate goals, in part because we're not moving fast enough in the electricity sector, in part because permitting is in fact a real barrier to accelerated deployment of clean energy. There's no question about that. But one thing that I feel like I often don't hear in the discussion about permitting, there's a lot of focus on NEPA and that's not entirely misplaced, and I do understand that. However, when you talk to project developers, the two biggest constraints, permitting taken broadly constraints for them to get their projects built. Number one, it's local permits, it is county permits.

There are 15% of counties across the United States have outright bans on wind and solar, just full stop bans. I mean, that is a real permitting problem. Most county commissions, even if they don't have a ban, will face significant opposition in county commission hearings. And project developers will often see their permits revoked or blocked because of that local opposition. It's not a ban, but they still end up coming up against this local political opposition. And that is the number one barrier to deployment from a permitting standpoint for clean energy project developers. And I hear this constantly. And the other one, the other big barrier is just the lack of transmission available for these projects to connect to. There's a lot of congested transmission lines across the country. Permitting NEPA is a barrier actually to transmission build out, but so are FERC policies and state and local opposition to transmission as well. So I think that while we tend to focus on federal policy, our lens, the truth is that there's a lot of local permitting challenges and those are actually the biggest barriers that project developers are constantly communicating to me. So I think it's worth thinking about that even in the federal context, if there's a way that we could help resolve some of those barriers.

Emily Domenech: Yeah, I couldn't agree with you more. I mean, I think I was talking to someone yesterday about carbon capture and we sort of said it's really great to see direct air capture and some of these other technologies growing because of these tax credits, but it's going to be really challenging when we can't build any new pipelines in huge parts of the United States because they have outright bans on pipelines. What are we supposed to do with the CO2 if we can't build a pipeline through your state? So there's this dissonance, I think between, I often refer to it as the sort of climate focused environmentalists who want to build things in America. We want to build new investments, we want to build innovative technologies and the, for lack of a better phrase, old school environmentalists who like to sue over endangered species or roads being built or wildfires being put out or any kind of human intervention in the landscape. And there's a real divide between those groups and it ends up with some really strange bedfellows opposing development, which you're laughing because I'm thinking about offshore wind and where we end up with these weird groups of super liberal environmentalists and super conservative people who are concerned about X, Y or Z. Now they're all friends and it makes it hard for us to get things done.

Quill Robinson: So we know that permitting is an issue. It's been a topic of conversation for years now. You all are quite plugged in on the hill. What are the odds that we see some movement on this? Or is the conversation evolving, focusing on that local issue that you pointed out, Adrian, that gives you hope that something on permitting will happen and is there a bipartisan appetite to actually get something done?

Adrian Deveny: Well, none of the federal bills that have been negotiated so far do anything to address that local permitting problem. And I think that is a missed opportunity honestly, because again, as I said, that is actually the number one barrier to the project developers are facing from a permitting perspective. So in general, I think it's going to be tough to get a permanent reform bill through in this Congress. The negotiations are tough right now, and whenever you're in an election year, it becomes even more difficult. So Peter might have better insight into this since his former boss is a lead negotiator.

Peter Stahley: So it's hard to move legislation ever, right? That should be everyone's baseline. That said, there is still hope, I think pre IRA, there was starting to be some consensus here. What exactly permitting reform means to various people? That's always the devil's in the details. I would say one maybe nuance here is while renewable developers, project developers are having major local problems, a lot of my focus was mining critical minerals and federal lands. And so there are project types with geothermal comes to mind. Mining in particular, just by the nature of where these resources are, they're on federal lands and in those spots they're looking at federal problems. There are state and local, but the driver really is the federal policy. And Emily brought up a recent example up in Alaska. There are numerous other projects that the optimist in me, so I'm like a short-term cynic, but a long-term optimist.

This is still America. We do in the end usually figure out a way to get it done, to get things built. And I think industry of all types, Emily, you mentioned renewable developers are getting sued and they're not used to it now. So what that means though is they're coming to the hill and saying, Hey, I'm trying to help you meet the states' clean energy goals and I'm stuck. And just because the deployment wasn't at these record setting levels, that pressure wasn't there before. And then on the other side, there's sort of been a constant drumbeat, we'll say in the oil and gas world, make permitting work better. Interestingly, if you look at the data on it, it's almost like dangerous to say it, but FERC actually does a pretty good job permitting pipelines. There are major litigation issues, but if you look at timelines and professionalism and all that, that's an agency that knows how to move those.

Then you start looking at courts, and I think that's something that's growing bipartisan consensus. When you explain to a member how long a project took to get to know, they might be happy that it got to know, but they're like, did this really? No, it couldn't have been six years to finally find out you can't build it. And I think that's where I think there's hope, right? Sadly, it may take a lot of projects continuing to hit that wall, and maybe it's this congress, maybe it's next, but I think the ball's moving forward in terms of recognition here.

Quill Robinson: I want to look forward to November and next Congress and a potential change in who's in the White House. So Emily, it's January, 2025, President Trump is returning to the White House is one potential scenario. There's been a lot of talk about a full repeal of the IRA. I think that recent campaign speeches Donald Trump has gone after the i A and President Biden's climate agenda broadly, are we actually looking at a scenario where there would be a full repeal of the IRA or is it a bit more of a nuanced situation than that?

Emily Domenech: So I think with Trump, we often let the rhetoric overshadow the policy. And I always remind folks about the policy changes that happened under the last Trump administration that ended up being quite good for clean energy NEPA reform. We saw U.S. emissions decline, and I always point out that we were seeing U.S. emissions decline before the pandemic, so I'm not cheating. We were moving the trajectory in the right direction, and I think we should expect to see policies like that under a second Trump administration. They'll actually end up helping clean energy investment. I think frankly, reauthorizing tax reform is one of those things. I think permitting reform that immediately starts in the White House with a real willing partner, which I think to go back to your last question a little bit, I think one of the things that's poisoned the well for moving permitting on the hill forward is that people don't feel like the White House really fairly implemented what was passed in the FRA.

So if you don't feel like you have a good partner, you don't move those legislative solutions forward too. I think we could also see some things like we talked a little bit about that local opposition to projects. I think Endangered Species Act reform is something that they could work through the administrative process or looking at litigation reform or looking at some of those other pieces outside of NEPA that often catch up these projects and slow them down. So I think those are positive. On the IRA, again, I would say I think the policies that are really focused on onshoring U.S. capabilities are the ones that are going to survive. I think 45 x has a really good chance of survival. I think the tax credits that are focused on the biofuels industry have really broad Republican stakeholders, and they're likely to be well protected. We even saw that in the limit save grow discussion, like when Republicans are passing their big messaging bill.

We still didn't touch some of those things like 45 Q and the CO2 pipeline related credits. And then I think a lot of the rest of it depends on how this administration implements things going into November. I'll go back to the hydrogen credit as an example of one that I think if they were smart, they would implement it in a way that brought them in a bunch of oil and gas stakeholders to defend this tax credit. The way they are trending looks like they're trying to cut out oil and gas, which means nobody's going to either have the capital to build anything or have any desire to defend it on the hill when we're in a tax reform discussion. So I think, again, a lot of it depends on implementation, but I do think the things that are focused on the U.S. supply chain side are much better suited to have sort of that long-term viability regardless of who's in the White House.

Quill Robinson: So Adrian, can you tell us a little bit more about procedurally the challenges of repealing the IRA, sort of the difference between legislation versus what the White House could actually do and how different election scenarios might influence that?

Adrian Deveny: Yeah, it's pretty simple. If there is unified Republican control of the White House and both chambers of Congress, then you can use the same tool that was used to pass it, to undo it, which is budget reconciliation. Because in the Senate, while almost all legislation requires 60 votes to pass in the case of budget reconciliation, it only requires a simple majority. And so in the same way that Republicans passed TCJA as well on a party line vote, TCJ is now expiring next year. And so there's going to be negotiations on that anyway. If there's unified Republican control, then it might just be extended through budget reconciliation, and that would be the vehicle to undo parts of the IRA, if not all of it. I agree with Emily's analysis about what are the more obvious provisions that are likely to be salvageable and what are the ones that are going to be more vulnerable to repeal.

I do think it's not going to be full repeal because you do see significant, especially the oil and gas industry has come out in support for some provisions of the IRA, by the way, the oil and gas industry, some of these other early actions on the executive actions on the part of the administration, ESA reform, NEPA reform, those disproportionately benefit oil and gas pipeline construction. And so it's certainly motivating for Trump to do those things that that industry is asking for. Those types of actions though, because of that, will actually set us back from an emissions perspective. If that's what you are solving for, there is no question that those actions will set us back. If you're repealing the workhorses of emissions reductions in the IRA, we're going to be moving backwards, not forwards on climate.

Quill Robinson: So if President Trump does come into the White House next year, we will probably see some sort of effort to push back on President Biden's climate agenda. It's a complicated scenario. But Peter, I want to turn to you now struck by your point around short-term pessimist, long-term optimist. One of the things that I find interesting about, there's a strong contrast between President Trump and President Biden when it comes to climate change certainly, but a lot of the other outcomes that we were discussing earlier, de-risking from China, revitalizing American manufacturing, but also some of the tools that they both seem willing to use tariffs like putting a lot of money into specific industries, but some are terming industrial policy. It actually seems like there is sort of a growing consensus between the parties when it comes to this concept to sort of economic nationalism and industrial policy. Peter, I'm wondering, are you seeing something similar and what are the implications of that over the coming years?

Peter Stahley: So I hesitate to use the word Washington consensus when talking about anything that President Trump or a future President Trump or Republicans might like because that could poison the well there. But I think you're right. If you look at the populist wings, there's sort of always been a willingness to engage in industrial policy discussions that I would argue the, we'll call it the free trade leaning, somewhat endangered species folks just would not have done in the past. And then on the Democrat side, there's always been an interest in, okay, how do we use the tools of the government to make our country more competitive? And it is lining up, obviously, the rhetoric, the politics makes things very complicated. But you already see, I won't name names, but you see members at a variety of events focused on manufacturing from the Republican side, happily touting what's changing in their state.

And some of these are not, they would probably happen slower without the IRA, but they would probably be happening anyway. And I don't necessarily think because it's an EV factory that has a thousand jobs and again, is displacing, I don't know, we'll say BYD again, A BYD vehicle either imported from China or made in Mexico and shipped across the border, which I know will be a very, very large issue in a future Republican administration. I don't see a world where everyone says, great, that Chinese vehicle is what I want in my country. And you can go across the gamut. And then when you start looking at the defense industrial base, I think that's always been a bipartisan concern. National security, the NDAA continues to pass regularly. Let's hope that keeps going. And over the last four or five years, the sourcing provisions in there have been across the board bipartisan, how do we pivot? And as we build manufacturing capacity for civilian side, there are knock-on effects that we need to use to better compete and God forbid, but if things get worse geopolitically, these are the steps that are preparing us. And I think when that gets explained or when frankly, there are members who are going around explaining this to other members, I think that has a lot of resonance.

Quill Robinson: Emily, do you see an emerging consensus around green industrial policy if we say green quietly?

Emily Domenech: Yeah, I mean, I think this is sort of to go back to where I started, I think we often have Republicans who have a set of goals on climate and energy that not, they don't sound like the goals I hear from folks on the other side of the aisle, but there's more overlap than people think that we want to make sure we keep costs affordable here in the United States. We want to make sure we have a resilient electric grid. We want to make sure we're getting China and Russia out of our supply chain and we're supporting our allies. All of those things have a lot of overlap, and they happen to often lead to reductions in global emissions. I always tell people, don't discount a partner on the Republican side of the aisle because admissions isn't the top thing on their list. We have to be looking at how there's overlap in these various policies.

I also think there's a real opportunity here where, to your point about the Republican party shifting on trade, we have a real split between populace and free traders and the Republican party. And that leads to some opportunities, particularly when it comes to investments in domestic manufacturing and in things like tariff policy, which President Trump and President Biden essentially took the Trump tariffs and was like, well, okay, we'll expand them to some other industries and do some other things because they were under so much pressure on the sort of domestic content side of things. So I think there's places where we could see an even more robust focus on domestic manufacturing from a Trump presidency. And a lot of that will depend on what these industries look like and how they're growing and where the stakeholder base is. And one of the things you mentioned about they might not care about this EV factory or whatever.

I was watching the Energy and Commerce Committee about two weeks ago when Congressman Buddy Carter, who just took over the environment and Climate subcommittee Gavel, gave an opening statement about one of the EPAs, I believe it was the PM 2.5 rule. So this is a completely separate regulatory action by the EPA, but the example he used was, there's an EV battery factory in my district that already has its air permits. Thank goodness they're going to get built, but under this new standard would not be able to meet this regulatory burden set by the EPA. So I think that's where, again, we can end up some of these opportunities for growth because frankly, a Trump administration isn't implementing that rule. They're not implementing a rule that could potentially push manufacturing to Mexico or to China or somewhere else in the world where again, we all know the emissions will be higher. So I think there's opportunities for some of those things that, again, the secondary effect is lower global emissions, and that's just as good.

Quill Robinson: Adrian, do you see inertia with green industrial policy that would continue on even a second Trump administration?

Adrian Deveny: I sure hope so. I mean, look, as I said, that was one of our core objectives in the IRA, and I think it's important substantively to create a lot of good jobs in this country. But it's also important for the geopolitics and just the pure politics of this issue of climate in this country where I think you can cut through some of the partisanship that has built up over the years on this issue when you have a real strong economic base for American made clean energy manufacturing. Every member cares about a manufacturing facility if it's in their state or their district. It's very, very motivating. So a lot of these facilities are at various stages of development. Some of them are just announced. They're not a lot more than a press announcement, but some of them have secured financing. Some of them are under construction, so that may matter too. But as time goes on, I think that more and more you're going to see a shift in how all members elected, members of Congress are going to talk about this issue. If we can really sustain growth in manufacturing of this industry, I really think it's going to lead to some positive change.

Quill Robinson: And as we're having these conversations about the Inflation reduction Act, the bipartisan infrastructure law, climate policy, I think what stands out to me here is we need to look at the longer term trajectory and also not view these exclusively as climate bills alone. Well, thank you all so much for stopping by CSIS. This has been a really enlightening conversation. Appreciate you all taking the time to break down these really important topics.

Emily Domenech: Thanks for having us.

Lisa Hyland: Thanks to Emily, Adrian, Peter, and Quill for their insights. The CSIS Energy and Climate Team will continue to look at these issues throughout the summer and fall. You can find more episodes of Energy 360 on our website, or wherever you listen to podcasts. Follow us on social media for updates from our team. And as always, thanks for listening.