On December 21, 2020, Congress voted to pass the Consolidated Appropriations Act, 2021, which includes major climate change initiatives among broader measures aimed at providing a second round of relief due to the ongoing COVID-19 pandemic. The 5,593-page economic package contains provisions for both spending and infrastructure improvements targeting the energy industry as well as to combat climate change. The provisions were supported by both political parties and are being hailed as the most significant piece of climate change legislation in a decade. The bill comes less than one month before the inauguration of President-elect Joseph Biden, who has pledged to aggressively combat climate change by spending $2 trillion in his first term to start the United States on a path to achieve a “100 percent clean energy economy” as well as net-zero emissions by 2050.
The $900 billion bill authorizes $35 billion in existing government funding to be spent on clean energy programs over the next five years. This would include $1 billion for energy storage technology, $1.5 billion for new solar technology, $2.1 billion for advanced nuclear energy technology, and $450 million for “carbon capture” technology. Carbon capture is the process of sequestering carbon dioxide emissions ordinarily released into the atmosphere.
The bill promotes wind and solar electric-generation projects through tax credits. The existing 26 percent investment tax credit (ITC), currently available for solar power projects that commence construction before the end of 2020, would be extended by two years, to the end of 2022. The amount of the credit would be reduced to 22 percent for projects that start construction before the end of 2023, with further reductions and a phase-out to zero thereafter. As for wind projects, the production tax credit (PTC) was also extended an additional year, with an extension through 2025 for offshore projects. Offshore wind farms may still elect to claim either the PTC or the ITC. In addition, the interior secretary is directed to set national goals for wind, solar, and geothermal energy generation on federal land by September 2022 and ensure the federal government has issued permits for at least 25 gigawatts of capacity from those sources by 2025. President-elect Biden announced his intention to nominate New Mexico Representative Deb Haaland for the role on December 17, and, if confirmed, she would be the person responsible for executing this directive.
For energy storage, the bill reduces the cost of short-term, long-term, seasonal, and transportation energy storage technologies with a billion dollar investment spread over the next five years. An additional $2 billion in spending is allocated for investments in smart grid technology.
The bill also contains measures directly aimed at significantly reducing greenhouse gas (GHG) emissions, including the creation of a new Environmental Protection Agency (EPA) program charged with reducing hydrofluorocarbons (HFCs), which are heat-trapping substances and considered a major contributor of climate change. The bill makes available $50 million to “estimate the economic, climate, and environmental impacts” of a pipeline system for carbon dioxide, which could be used to support development of carbon capture, storage, and utilization technology. Carbon capture technology, including these pipeline systems, would be eligible for tax credits if a project’s construction commences by the end of 2023.
Lastly, the bill contains significant spending increases to promote research and efforts related to climate adaptation. The National Oceanic and Atmospheric Administration (NOAA) and National Aeronautics and Space Administration (NASA), among other national and regional climate adaptation science centers throughout the country, are the beneficiaries of this provision and are set to receive millions in increases to their current budgets.
Having passed both houses on December 21, the next step is for President Trump to sign the bill into law. President Trump has indicated he has reservations concerning other provisions of the bill (unrelated to the aforementioned energy and climate initiatives); however the House and Senate passed each version with a vote of 359-53 and 92-6, respectively, meaning the bill should have the votes to override the president’s veto should he decide to take that step.
If you have any questions regarding the content of this alert, please contact Yvonne Hennessey, Environmental Practice Area chair, at yhennessey@barclaydamon.com; Brenda Colella, Regulatory Practice Group co-leader, at bcolella@barclaydamon.com; David Solimeno, associate, at dsolimeno@barclaydamon.com; or Emma Marshall, law clerk, at emarshall@barclaydamon.com.