By Richard Rubin and Andrew Duehren
President Biden’s climate-change plan, particularly enhanced tax incentives for renewable energy, is very much alive in Congress—even as other important pieces of his economic-policy agenda appear dead.
Democrats will soon try to reconstruct legislation from the ashes of the roughly $2 trillion Build Back Better bill that passed the House in November but collapsed in the Senate after opposition from Sen. Joe Manchin (D., W.Va.).
The climate-focused tax incentives, worth more than $300 billion over a decade, enjoy broad consensus among Democrats, including Mr. Manchin, though details remain to be ironed out. Many Democrats see fighting climate change as a singularly important and time-sensitive policy endeavor, making them willing to sacrifice other party goals in talks with Mr. Manchin.
Sen. Sheldon Whitehouse (D., R.I.) said many Democrats feel they need to pass a climate package while the party still controls Congress and while emissions-reductions measures could prevent some of the worst consequences of climate change.
“You can’t necessarily come back to it later,” he said. “There are tipping points that are points of no return and there are few other public policy issues that are characterized by that kind of point-of-no-return problem.”
Indeed, the tax credits aren’t an economywide carbon tax of the kind that many economists say would be most effective in curbing emissions. A broad price on carbon, baked into every product, would violate Mr. Biden’s promise to prevent tax increases on households making under $400,000 in annual income.
The tax credits can still be extraordinarily effective, said Michael Greenstone, a University of Chicago economist and former Obama administration official who co-wrote a study of the plan’s tax incentives for electricity production that estimated the plan would reduce projected emissions by 13% to 22% compared with doing nothing and would generate benefits of more than three times their costs.
“What we really want to do is unleash the ingenuity of the American economy for the cheapest ton of CO2 to abate wherever it can occur,” said Mr. Greenstone, who added that the plan benefits from recent improvements in clean-energy technology. “Five or 10 years ago, these numbers would not look so good.”