Analysis-Biden’s softer climate regulation shows big US bet on subsidies to decarbonize

By Valerie Volcovici

WASHINGTON (Reuters) – The Biden administration says its recent decision to scale back new climate regulations meant to force emissions cuts from cars and power plants will have a negligible impact on its overarching goal to halve greenhouse gas pollution this decade.

But whether that is true hinges on whether the U.S. succeeds in its parallel strategy – to use lucrative taxpayer subsidies to fuel a massive deployment of solar, wind and other renewable energy installations that Biden hopes will ultimately power America’s fleet of electric vehicles, along with its homes and businesses, according to researchers.

“I think it will require an extraordinary, coordinated effort to meet the clean energy share that is necessary to hit the (U.S. target),” said Mike O’Boyle, senior director for electricity at research firm Energy Innovation.

The United States is the world’s biggest historical emitter of carbon dioxide and President Joe Biden has promised the international community that it will push hard to decarbonize as part of global efforts to fight climate change, using a combination of regulation and subsidies.

But the recent decisions by his administration to ease auto emissions standards and to remove existing natural gas-fired power plants from CO2 curbs show how Biden’s administration is under industry pressure over the plans ahead of the November election. The transport and power sectors together account for half of the country’s greenhouse gas emissions, but the perception of heavy-handed regulation of those industries risks hurting Biden’s reelection bid against rival and former President Donald Trump.

Climate researchers told Reuters they agree with official projections from the Environmental Protection Agency (EPA) that the changes to the rules may not have much impact on the U.S. goal to halve national emissions by 2030 from 2005 levels.

Amanda Levin, director of policy analysis at the Natural Resources Defense Council, said the weakening of the EPA vehicle rule, for example, would still achieve at least 90% of the emissions reductions of the more stringent initial proposal, while the removal of existing gas plants from the EPA power plant rule would deliver 80% of the initial proposal.

More important to the US decarbonization target, however, is how fast developers can build zero-emissions power generation and hook it up to the grid – efforts crucial to supporting the EV fleet and which would render the power plant regulation moot. Biden is attempting to spur those industries along by using lucrative subsidies for wind, solar and electric vehicles embedded in the roughly $400 billion Inflation Reduction Act.

“The EPA rules serve more as the as a backstop (to the IRA),” said O’Boyle.

Before the IRA passed in 2022, the U.S. was only on track to reduce its emissions 25%-28% by 2030, according to NRDC’s Levin.

Both NRDC and energy consultancy the Rhodium Group found in separate analyses that the U.S. is now on track to reduce its greenhouse gas emissions by 42% by 2030.

Still, filling the remaining gap could be tricky.

Both the U.S. solar and offshore wind manufacturing industries are pushing the Biden administration for more support, in addition to what is included in the IRA, to ensure they have the financing and economics needed to follow through with their investment plants.

O’Boyle and others said additional challenges include permitting and constructing transmission lines required to connect new power generation to consumers.

Around 2,000 GW of mainly renewable generation and energy storage are in regional grid interconnection queues across the United States, with recent announced projects – many incentivized by the IRA’s tax credits – taking upwards of five years to connect.

The Federal Energy Regulatory Commission and the Energy Department are working on reforms aimed at speeding up the interconnection backlog and expanding transmission.

Levin of the NRDC said states can also help fill the gap with strengthened renewable energy targets and EV policies, especially as IRA-driven investments hit the ground from California to Texas to Pennsylvania.

“That is a huge piece of the puzzle,” she said.