What’s Next for Biden’s Green Agenda After Midterm Surprise?



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Control of Congress still hangs in the balance after the midterm elections. Americans voted just months after gasoline prices hit an all-time high and Democrats passed the biggest US climate bill ever, and amid an ongoing energy war with Russia. What are the implications for US energy and climate policy from here?

For answers, I connected over Zoom on Thursday with Kevin Book. He is the co-founder of ClearView Energy Partners, a Washington-based firm that dissects US energy trends and politics at the federal, state and international level. He is also a member of the National Petroleum Council and a senior associate with the Center for Strategic and International Studies. Here is a condensed and lightly edited transcript of our conversation.Liam Denning: In all likelihood, we’re shifting from unified government in Washington with a thin majority to divided government with even thinner majorities. What does that mean on the energy and climate fronts for the next couple of years?Kevin Book: The Wall Street nostrum that gridlock is good because divided governments can’t go after economic growth or industrial sectors probably applies here — but not entirely. There have been cases where Republicans will agree to raise energy sector taxes to reflect what appears to be popular discontent with high prices; even under Republican leadership. Also, when legislative gridlock intensifies, the executive can try to creatively use old laws for new purposes — and almost always gets into trouble. Our courts are well stocked with strict constructionist judges, who take a dim view of broad interpretations of statute, however, especially at the Supreme Court level.

There are a couple of questions to be asked. First: Where do folks get along? Maybe permitting reform, depending on the composition of Congress as well as the reform. Another, surprisingly, could be carbon border adjustment mechanisms. That’s something that speaks to the broader trend of protectionism as much as it does to climate activism.

The second question is to what degree oversight from Republicans limits the administration. There’s a lot of Inflation Reduction Act money to spend, and relatively quickly. There’s going to be questions about that, for sure. Also about what happened with the Strategic Petroleum Reserve. Onshore and offshore fossil-energy leasing is probably going to get another hard look. 

These interventions could slow the pace of regulatory progress. Anyone who’s served will tell you how disruptive it can be to answer questions for oversight hearings. Also, the answers will be read by appropriators with a lot of leverage via defunding. If they hear something they don’t like, they could propose riders to must-pass bills that would target a reduction or elimination of an agency function doing something they don’t like.

LD: Moving away from Congress, how do the states react to these midterm results vis-a-vis climate policy? 

KB: Blue states have been greening up more than red states in terms of mandates. Most of the states with renewable portfolio standards — 30 plus (Washington) DC — have Democratic governments in some form. Blue-state greening is something of a trend. You can see that after Colorado and New Mexico went blue three ways (with Democrats taking the governor’s mansion and both legislative chambers) and the greening that followed, including restrictive regulation of oil and gas production despite significant output in both states. In Virginia, you saw the greening of a legacy fossil-energy producing state with a three-way blue government when (former governor Terry) McAuliffe took office. Does it make a big difference in Maryland and Massachusetts to have Democratic governors when they already had pretty green Republican predecessors? Probably not. Maybe a bit more difference in Michigan.

The red, fossil-energy producing states have been the principle purveyors of Biden backlash. At a federal level, slightly more than half of the 51 (states plus DC) are red states; at a local level, it’s closer to 20. Local governments, where their economic franchise is threatened, have taken steps against financial-sector players perceived as putting those franchises at risk: Texas, West Virginia, Oklahoma. This is likely to continue. It’s been a resonant issue with local industry.

But there’s a longer-term story yet to play out. Fossil-energy production is highly concentrated: Of those 25 red states, seven are the biggest producers. For the rest of them, some are pretty sunny, windy places with other stakes in the game. About two thirds of wind capacity is in red states. For those red states that are not big fossil-energy producers, they may eventually find their economic constituencies — the folks electing them — want more support. This is where it could get interesting. Historically, the Republican brand was about lower factor costs for corporate players in terms of environmental expediency, labor terms, tax rates. This is something Republicans have to sell to green industry, just like they did to fossil-energy producers.

LD: What might we expect from the lame duck session?

KB: The uncertainty emanating from the Georgia runoff means that, for Majority Leader Chuck Schumer, time is running out to confirm federal judges and high-priority appointees, as well as pass a couple of critical bills. If Democrats win the Georgia race, the pressure to confirm judges will likely go away. Assuming that, there would be room for legislation. There could be an opportunity for permitting reform as an amendment to the National Defense Authorization Act. Senator Joe Manchin has already telegraphed his intent to do so, though that could be challenging. Likewise, the funding bill provides a second opportunity for that.

One interesting question concerns the No Oil Producing and Exporting Cartels, or NOPEC, bill. It turns out that December 6, Georgia’s runoff day, is one day after the European Union’s embargo of Russian crude kicks in, and also the onset of its maritime services ban for crude oil, likely to disrupt global supply. It’s also two days after the OPEC+ meeting. So we’re left with some questions about how the 4th, 5th and 6th of December turn out. If, on the 7th, Democrats find themselves with more time to run with Senate control, and OPEC has held or even cut output targets, and crude markets are tight, then NOPEC could start to get a hearing.

LD: While it seems less likely, let’s say Democrats somehow retained control of both chambers, could we expect anything energy or climate-related then?

KB: If Democrats retain the Senate, which is where a lot of power is for confirming nominees to the courts and federal agencies, then one of the big checks Republicans would have on executive action goes away. The oversight would be gone also on the House side and, with it, some of the risks that I described earlier.

The opportunity set might not get much bigger, though, especially if Democrats’ margin in the House got narrower still. But there would still theoretically be room for one more budget reconciliation act that could allow for additional party-line modifications.

Biden campaigned on modifying the 2017 tax act. He could still go after that. And if we look at what came out of the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, there were some unfinished agenda items that could show up in a bill like that. Doing so would still mean winning over the same chairman of the same energy committee: (Senator) Joe Manchin from West Virginia. In addition, there were two other fossil-state Democrats up for re-election: Martin Heinrich from New Mexico and John Tester from Montana. If you push too hard on Manchin, there’s the question of whether he might be willing to defect and give control to the Republicans.

LD: How successful has the administration been to date in using executive power in advancing its climate agenda?

KB:  The administration’s put out multiple pathways to move their climate agenda along. The first was, legislatively, to create new incentives and expand the existing ones. The second was a series of regulations which, unlike the incentives, are well behind pace and likely to require defense in court into the next presidency. That puts some of them at risk. The third is executive superpowers. They’ve started to use a lot of them: The power to control federal lands, trade, opportunities to use export finance for a climate agenda, that sort of thing. The fourth is the indirect financialization of climate risk; introducing climate risk as a cost of money rather than a cost of carbon, which ends up having a greater impact on the higher carbon-intensity players in an economy. The disclosure rule from the SEC is probably the most prominent example.

The most interesting outgrowth from the 2020 election was that the incredibly divisive politics produced a really strong partisan alignment to fuel and technology that doesn’t have much bearing on reality. So Republicans truly became the defenders of fossil fuels as a matter of policy and politics. And Democrats became ever more the green transition party. But the rocks don’t belong to political parties, the people above them do. Nor do the wind and the sun and the rain (to quote the Blue Oyster Cult).

This is a little bit unusual and created some surprising difficulties in just getting things done. One example: The Biden administration staffed-up for transition and found itself short of fossil-energy expertise during a conventional energy crisis. When conventional energy prices are rising, it’s hard to advance a green agenda. This wouldn’t be a bumper sticker I’d expect to see from the DNC, but fracking made greening a lot easier. Low energy prices allowed President Biden to campaign on and win with the greenest agenda in presidential history.

LD: You mentioned Manchin. He played a decisive role in the climate legislation that ultimately passed this summer. What’s next for him?

KB: If we end up with a 50/50 Senate, kingmaker status remains intact. Chairman Manchin will still have not only the purview of energy policy for extraction and production, federal lands and everything except environmental policy, essentially. He’ll also have a decisive vote on some of the things that come up and agenda-setting authority for the legislation that does get considered.

It’s worth considering that the Energy Act of 2020 happened when Manchin was working from the other side of the power structure. You had a Republican president and you could say with some certainty that the bipartisan compromise did happen then and could happen still. And it’s probably not a bad thing to have a Democrat with strong economic allegiance to conventional fuels. In a world where there’s a Republican House that does prioritize a fossil-fuel agenda, having Manchin as a bridgehead in the Senate Energy Committee could be a way to get some bargains done. Eventually.

LD: President Biden held an occasionally feisty press conference Wednesday evening. He had some disparaging comments about the domestic oil industry. With the elections out of the way, does Biden ease off that or, given the Democrats’ outperformance, feel emboldened?

KB: We will have to see what Democrats conclude about their strategy in this election. But looking at how it went, one might conclude that the green agenda and targeting conventional fuel producers with critical rhetoric was successful. Blame shifting is easier than adding new energy supply.

The election isn’t entirely over, of course — even after the Georgia runoff. One thing that came up during that press conference was whether or not the president would run again. The Biden administration, more than perhaps most, is relying on some degree of continuity, particularly for its energy and climate policy. A future president could abandon the defense of some of the pending regulation, work to reverse some of those rules and also implement the IRA in a very different way. So the continuity side of this, staying with the green agenda and trying to win on it, could also be a way to preserve it.

There are a lot of popular perceptions of oil and gas production that aren’t entirely flattering. But this is a period where one of the agents of economic stability for Western democracies is likely to be the oil industry. And it raises the question of whether cooperation could produce a different result. We’re in a structural shortage, so the time for getting more out of the ground is now and it may not be such a good time to try to run the industry into the ground. Plus, a lot of the companies that will likely be players in carbon reduction and capture technologies are the ones in the president’s political crosshairs. Still, that may well continue if Democrats conclude this was a successful way to win.

LD: As much as Democrats did well elsewhere, Florida seems to have transitioned from a swing state to a red state. How does that impact US energy and climate politics? Start with how the administration now deals with Venezuela.

KB: The Venezuela relationship has resonance not only with the diaspora that has formed during the (former Venezuelan President Hugo) Chavez era and now under (President Nicolas) Maduro, but also with the Cuban communities who associate Maduro with the kind of communism they fled. And so the question is whether there’s an opportunity for Democrats to vie for that constituency, which could be decisive in a close race. In this election, (Representative) Maria Salazar’s district in Florida was likely to run Republican anyway, but it was also a potential target of opportunity for Democrats. It really would have been a bad time to be making nice with Maduro when trying to convince those voters to go blue.

But the time has come and gone and, maybe, if you’re already losing, why wait? I’ve been thinking of the negotiation that seems to have started in March when two administration envoys went to meet with Maduro representatives. It looks like that’s going to unstick some sanctions so that US companies can increase production at a time when the world needs more oil. That will likely hinge on talks in Mexico City between the Maduro regime and the opposition, expected to be announced any day. The administration could presumably endorse those, though they might be cautious because there’s still the Georgia race to consider. But they may have decided that the ship has sailed and they need to worry more about barrels now than trying to look tough on communism.

LD: What’s the significance of Florida now being virtually a given on the Republican side of the ledger in a 2024 election? 

KB: In the sense that at least one, and possibly two, Florida residents could be competing for the presidency, it’s going to have outsize influence depending on how the eventual winner of the Republican nomination performs in the 2024 elections. In terms of Florida itself, it’s not a big producer of conventional fuels. It’s a fairly significant producer and consumer of power, but also heavily reliant on fuel imports. Hurricanes can create some very significant disruptions in supply.

An interesting aspect of Hurricane Ian was that President Biden and Governor Ron DeSantis got along. There was a brief truce in an increasingly partisan standoff over other issues like immigration. And it was a pragmatic one: Florida, because of its import dependence and climate-change exposure, needs the federal government. Florida may be an outpost for Republicans, but not necessarily a place that can afford to make an enemy of Washington.

LD: About those two Florida residents, DeSantis and Trump. It now seems likely we’re going to see big divisions within the Republican Party. What might that contest mean for climate and energy politics over the next couple of years and maybe even beyond?

KB: So we’re talking about the Ron-Don runoff and maybe the dawn of Ron and the sunset of Don? This isn’t the first Florida governor to stoke hopes for a traditionalist Republican as a presidential candidate. But in 2016, Jeb Bush was bested by Trump. DeSantis is maybe closer to Trumpist territory but still very much considered by many to be a traditionalist.

Both are executives in terms of having run political units — one, the country, the other, a state — and both know how to win votes. Neither is what I would call an energy policy theorist. Both have energy and environmental stances that reflect political affiliation. President Trump was fairly laissez faire on energy production. Not because New York real-estate developers are born with a drill-bit in their hands, but because that was the policy of the party for which he won the nomination. And what we don’t know about DeSantis on energy could be filled in by the simple fact that he would be running for the Republican nomination.

I would make one distinction. The Floridian by birth is a person who understands climate risk experientially, even if he doesn’t use that phrase. A Floridian by residence might have the same challenges, but shorter direct experience. The words you get from Republicans on the Gulf Coast to describe climate risk are different from the words you get from, say, Democrats in California. But they’re both talking about the same infrastructure challenges, the same need for resilience and adaptation.

So the question would be: To the extent that any president brings the place they’re from with them to the White House — and I think a lot of them do — what might it mean to have a Republican from Florida potentially as president compared to a Republican of demonstrably malleable ideology from New York? It might mean some degree of pragmatism on climate that could be a different, and surprising, result.

LD: Meanwhile, Biden said he plans on running in 2024. If so, how prominent would the green agenda be on his platform compared to 2020?

KB: The 2020 pitch was an aspirational one. The 2024 pitch would probably be more a triumphalist recounting of successes. Incumbent presidents get to run on their record. But they also have to provide reasons for the people originally excited about the opportunity to explain away their dissatisfaction with the eventual reality. Compromise is an innate part of our process. And it means that anybody with a record falls short of somebody without one. That’s one of the challenges for senators with long tenures. And yet we have one in the Oval Office today.

He might need a fluid explanation of where the agenda has gone to date and why it would go further. To draw left-of-center, youthful constituents, the president will probably have to do more than just say we passed a bill and we’re in the process of implementing it. He’ll have to outline next steps.

Biden laid out a 2030 target of reducing emissions by between 50% and 52% below 2005 levels. Demonstrating progress toward that in the next couple of years is going to be very difficult. Not only would it almost certainly be back-end loaded, we’re in the middle of an energy war in Europe. That has created some challenges in terms of conventional energy prices that potentially fuel a backlash against the green agenda in some places. Plus, that war and other de-globalizing influences are driving up the cost of deploying green energy in this country, even with government money.

I expect the IRA and progress to date would feature prominently. There’s another reason why he’s probably going to want to rush those dollars out; not just because he’s campaigning on it but because unobligated balances could be a target for rescission by a future Republican government. The folks in Biden’s administration know that not only do they have a maximum of 10 years for a lot of the IRA disbursements; they might have little more than two years.

Besides his record, he’s going to need to tell the next story. That is probably going to have to be one of not just renewed global leadership but demonstrable progress towards global outcomes. That’s where the rift with China could be problematic, as could bifurcation vis-a-vis Russia and other competitor nations. If he’s going to tell a global story, in addition to the next step of meeting our own climate commitments, he needs to be able to show some global successes. You have to tell a big story, and there’s steps you have to take to get ready for that. Agitating for big change could have the effect of mobilizing young voters, and that could be a key to victory.More From Bloomberg Opinion:

• Republicans Can’t Stop a New 2023 Spending Wave: Conor Sen

• Republicans Were Wrong About Abortion: Sarah Green Carmichael

• The Most Surprising Thing About the Midterms: Jonathan Bernstein 

Want more from Bloomberg Opinion? {OPIN }.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Liam Denning is a Bloomberg Opinion columnist covering energy and commodities. A former investment banker, he was editor of the Wall Street Journal’s Heard on the Street column and a reporter for the Financial Times’s Lex column.

More stories like this are available on bloomberg.com/opinion



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