Aug 12 • 58M

Some thoughts on the Inflation Reduction Act

A little history and context to help understand the bill's significance.

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In this episode, it’s just me by my lonesome, sharing some thoughts about the history and context of the Inflation Reduction Act, the most significant climate legislation ever passed by the US Congress.

Full transcript of Volts podcast featuring Dr. Volts, August 12, 2022

(PDF version)

David Roberts:

Volts listeners, hello. It's just me today; just David, talking to you solo. 

Let me explain why I'm trying something new today. As many regular listeners already know, I have recently been struck with a pretty bad case of tendinitis in my elbows and forearms and wrists, and typing has become extremely difficult for more than, say, 30 seconds at a time – just enough time to tweet. So I haven't been writing as much lately. 

I've been podcasting more, you've probably noticed. It's been working out pretty well; I enjoy podcasting. But I do miss writing. It is very frustrating not to be able to write, for many reasons, and especially frustrating this past week, when the US Senate finally passed a historic climate change bill, with all my many-decades-long hopes coming to fruition, and me unable to type anything about it. 

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So what I've decided to do is record an audio post that is just me, talking about some history, context, and ways to understand the Inflation Reduction Act. Lots of things that I would much prefer to write about, because these things, when not written in advance, tend to be long and rambling, as this one already is. But we do what we can with what we've got. So I'm just going to be talking at you today.

 Mabel wonders why I'm talking so much. (Photo: Jennifer Roberts)
Mabel wonders why I'm talking so much. (Photo: Jennifer Roberts)

First, let's think about the history of national climate legislation in the US. I think you have to date it back to when Bill Clinton attempted in 1997 to pass a small BTU tax – an energy tax – and was roundly and thoroughly spanked by Congress for doing so. The policy went down in flames and everyone learned their lesson. We also have to think about the Byrd-Hagel Resolution in the Senate, when the Senate voted unanimously not to join any international climate treaty that included binding emission reductions. 

Already in that ancient history you can see a couple of patterns that would define our situation for many years to come. One is that, in an extremely large, extremely fossil fuel rich, extremely diverse country like the United States, it is extremely difficult to get together national climate legislation that can get through our silly system’s many veto points. 

Second, the US Senate, curse its name, is where climate legislation goes to die. The Senate is the enemy and the primary barrier, has been from the beginning, and has been ever since. 

That was Clinton. Then there was Bush 2, who was a Republican so didn't care much. Actually, Bush himself probably cared more than the average Republican and reportedly was on the verge of regulating carbon dioxide through the EPA – as the Supreme Court said he could in Massachusetts vs. EPA in 2007 – but had his mind changed at the last minute by Haley Barbour, a slimy fossil fuel lobbyist. Anyway, we don't have to get into that history. Nothing much happened under Bush.

Then we come toward the end of the Bush years, which is just when a young climate reporter named Dave came onto the scene and started paying attention and following things. 

Around 2006 or so, Democrats won a big victory in the House and the notion that Democrats would win big in 2008 came on the horizon. Environmentalists started thinking “we need a big climate policy ready to go when that happens.” 

So development started. It was led very top-down by the national environmental organizations and was extremely focused on winning the support of business and economists. As we all know, economists’ favorite carbon-reduction strategy is pricing carbon. Most of them prefer a carbon tax, but what was in vogue at the time is cap and trade, which was thought to – and does, in theory – have the benefits of a carbon tax with more assurance of specific emission reductions.

Oh, we were all so young then. 

So cap and trade became the center of environmentalists’ plans as 2008 approached. Then Obama wins, the miseries of Bush 2 finally come to an end, it's a new day, Democrats have a majority in the House, 60 freakin votes in the Senate, can you believe that?! We're never going to see that again in our lifetime. 

It really came to seem like policy was going to matter, which to a young reporter like me at the time was very exciting. I was just getting into what they now call “explainer journalism,” policy journalism. I was very keen on reading about and understanding policy. And it seemed like after eight years of Bush 2, in which everything was theater, and stupid, and dishonest, finally policy was going to matter. 

As I said, I was very young then. 

I closely tracked the development of Waxman-Markey. I think I'm one of a relatively small group of people who actually dug into the details, talked to the people who were putting it together, read it, and was very excited to talk about it and write about it. 

There are a couple of things about Waxman-Markey that have kind of been lost to history that I’d like to emphasize, which you'll see are relevant later. 

One is, it was a very big, very comprehensive bill. There were three major sections, and cap and trade was only one of those sections. Cap and trade was a third of the bill, at best. There was a section on standards, and a section on investments, industrial policy – there was all kinds of great stuff in that bill that we would recognize as great even now, lots of which has echoes in the inflation Reduction Act. 

However, for various reasons, everyone in journalism insisted on referring to it as a cap-and-trade bill. Even people in the movement started referring to it as a cap-and-trade bill. Cap and trade became the center, the locus, the focus of all this dispute and argument. 

The thing about cap and trade is, it's complicated. It takes a bit of explaining to understand why it works. The benefits are, let's say, somewhat roundabout to explain to an ordinary person. And as I think we now understand better than we did then, it's really difficult to explain complicated policy to a largely disengaged, ignorant public that is also being barraged by lies from right-wing media that go echoed and unchallenged in mainstream media. The coverage of the bill was absolutely abysmal. 

The thing is, since not many people actually understood cap and trade, it just became a symbol, a shibboleth for everyone. For the right, it basically became a carbon tax. Anyone who thought calling it “cap and trade” would avoid the right wing attacking it as a tax was daft and quickly proven wrong. For the left, it became a different kind of shibboleth: a symbol of corporate sellout, a way to buy your way out of pollution reductions, all these goofy stereotypes. 

No one particularly stepped forward to defend it except the authors of the bill itself. It had no constituency. This I think we also understand better now as a lamentable feature of carbon pricing – the political economy of it. It punishes everyone and benefits no one in particular. Of course there are aggregate benefits, there are ambient benefits, there are long-term benefits, there are lots of benefits that you can explain if you feel like explaining. But the upfront effect is prices going up. 

So there was just no constituency for it. There was no one to fight for it. It became a bill that no one understood and no one loved. And there I am, young policy journalist David Roberts, looking around at this in dismay, thinking “everyone's talking about shibboleths, everyone's asserting their identity, repeating their priors, no one is paying attention to what is actually in the bill itself. But” – I thought at the time – “that will pass. They've written the bill. It's on paper, people can go and read it, sooner or later discussion is going to focus in on what is actually in the bill and what it would do.” And boy, I just could not wait.

Of course I found that the bill was written, debated, passed the House, went to the Senate, got mangled, got mangled again, got mangled again, got substituted for some other lame bill which got mangled and then substituted for some other lame bill, etc., etc., – a comedy of errors and corruption and lies and the usual kind of stuff you see in the US Senate. And the bill just petered out, and never even got a vote in the Senate. 

During that entire time, from start to finish, at no point did the actual content of the bill become the focus of public discussion. Poor, lonely David, with all this technical knowledge about the ins and outs of the policies contained in this bill, and no one cared. No one wanted to know. No one was particularly interested. Everyone wanted to go to war for their political tribe, and there was no tribe behind cap and trade. 

It was a fiasco. It was terrible. Everyone hated it. Everyone hated everyone else at the end of it. It was a bad scene. 

Then Obama lost Congress, legislation became impossible, and Obama was confined to executive action for the remainder of his terms. And we know what ended up happening to his executive actions, i.e. Donald Trump won the presidency and set about lighting all of them on fire. 

After Waxman-Markey blew apart, so did the climate movement, basically. Everyone divided into factions, all of whom blamed each other for the whole mess and failure, all of whom blame one another for the whole mess and failure to this day. It is not clear that any faction, put back in the same situation, would behave differently today if the whole thing reran, which is another lesson one learns about politics if one follows it long enough – no one ever learns anything. 

So the movement fractured. Some of the climate activists went after supply-side stuff – that's when the pipeline and Keystone movement got rolling and grew in earnest. Some people decamped to states and cities to work on subnational policy; a lot of good stuff happened there in the intervening years. Some people went into the private sector to try to make a difference there. But for many years, there was fracture and, I would say, just a lack of unity, a lack of a single voice, a lot of frustration and drift. 

Then along comes Trump, which of course unites the entire left, unites the Democratic Party, unites the environmentalists, because everybody's scrambling frantically to defend what little progress has been made, defend what few authorities still exist, etc. We all remember that without any fondness at all. 

Let's cut a little bit closer to the present, then, let's say around 2017-2018. The thought came about – “hey, what if this hell ends someday?” It didn't seem plausible at the time, but time does march on, and the thought was “well, if Democrats win in 2020, what are we going to do about climate?” And people looked around and found no policy laying around ready to go – nothing ready to go. There was no unanimity about what measures to prioritize, what to target, etc. 

The movement was a mess. And lots of people at the same time had the thought “this is going to be a disaster if we win power in 2020 and we're all fractured like this and we don't have something ready to go. We need to have something ready to go.” 

I've told this story in some detail in an article in Vox. A lot went on in those few years. Everybody remembers the rise of the Sunrise Movement, the strengthening youth movement which united behind the notion of a Green New Deal – which, among other things, was the first climate policy that Democrats ever really got behind that targeted sufficient emission reductions, that actually targeted the goal we want (decarbonization by mid-century). Before that, there was just lots of talk about how to bend the curve or reduce emissions here or there. This was the first comprehensive package that says “here is our target, we want to prevent dangerous climate change, we want the US to do what is necessary, and that means rapid emission reductions, that means wartime footing, that means taking this seriously, getting started doing a bunch of things at once, really solving the problem rather than just futzing around at the margins of it.” 

The Green New Deal is very controversial now. It's been through a lot of history since then, there are many different versions of it, and everybody's got their own take on the different versions of it and the political valence of it. But at the time, it was quite bracing and important, because the youth movement and the Green New Deal helped thrust sufficient climate action to the top of the Democratic Party agenda. It captured the attention and the imagination of Democratic elites and policymakers and electeds. That's a good thing. It has proved resilient. And it is one of the main reasons that the Inflation Reduction Act passed, as I will return to in a minute.

Also going on during those years were a bunch of different processes in which different environmental groups and factions came together to start talking about what kind of policy they could all get behind. Those talks were quite productive, and involved several large coalitions and groups. Again, I tell the story of this process in some detail in my Vox story; I'm not going to go through it all again, but environmental justice, and the climate left, and the climate activists, and the mainstream climate groups, and the more conservative climate groups, and unions were a big piece of this – all these groups came together to try to hammer out some sort of policy they could all support. That process was incredibly fruitful, and underappreciated, and there are a couple of things to say about the results of that process because they echo through the bill that just passed. 

One background fact that I think everyone in the movement assumed as this process unfolded was that there would be no help from Republicans. There were a lot of illusions about that for a long time. There were reliable annual stories about “the right is starting to care about climate now, ooh look at this tiny handful of young conservatives who are saying the word ‘climate,’ oh look at this Republican who admitted that climate change is real.” Just Lucy and the football over and over and over again. 

But after the Tea Party madness that was unleashed by the sight of Obama in the Oval Office, it was pretty clear that Republicans were not going to help. You're never going to get Republican votes, you're never going to sand your bill down enough, make it weak enough that they would support it. Even the ones who said they would proved through the Waxman-Markey process that the slightest bit of political pressure from the right and they would go running, and that includes the coward John McCain. (Don’t @ me.) 

So the right is not going to help. And if that's true, then the only other path to success is unanimity among the left. That's what got Obamacare over the line; there was no Republican help at any stage, that was all Democratic unity. Which, as Obamacare also proved, is extremely difficult to generate, extremely difficult to hold together once it's generated, and constantly in danger of fracturing and flying apart. It's a very difficult strategy. 

Most political scientists will tell you big legislation only happens through bipartisan support. That's conventional wisdom, but the fact is, Republicans won't help. They won't. They haven't. They aren't going to. All you have to do is listen to what they say, and watch what they do, and that lesson is very clear. So however challenging it may be, and however long the odds of success, this has got to be a left thing. It’s got to bring everybody in the left together, and that's how we're going to push it over the line. That was background presumption number one.

Background presumption number two was that carbon pricing needed to be dethroned and decentered. I won't rehash all the reasons why – I've done several podcasts and interviews on it. Carbon pricing is just political poison, especially as the headline. It is the most punitive carbon policy on the table. It is the one for which the benefits are most difficult to explain. Yes, I don't care if you add the dividend, I don't want to get into that. 

Of course, the left of the party had come to loathe cap and trade, especially the environmental justice community. I happen to think the environmental justice community has gone a little overboard in its opposition to cap and trade – they say a lot of things about it now that are exaggerated or untrue – but they had valid complaints at the time, and regardless, they're part of the left. They hated cap and trade, they hated carbon taxes. So did voters, apparently, even in Washington, when they were asked on a referendum if they wanted to do it.

Carbon pricing is not a political winning strategy. It's not that everyone is against it; only probably a small faction on the far left are against it as such. But as a headline, as the center of policy, as what you go to voters with – it's crazy. Don't do that. So that's two background presumptions in forming this process. 

There was also a third – which in some ways was the most important and, I think, also under-heralded – which is that everyone agreed the US needed to go to net zero carbon emissions by 2050. The Green New Deal crowd wanted it to be earlier, because in theory, if you look at the models, rich, high-emitting countries like the US ought to decarbonize faster so that growing, developing nations have a little bit more breathing room, as they deserve since they didn't cause the problem. But it ended up being 2050. 

Some parts of the activist left view that as a sellout, but from my point of view, it is wild that the US is talking about going net zero carbon at all. It is super wild that old establishment Democratic politicians have adopted that goal, that that goal has become basically the de facto goal. Even Republicans now, when they do their periodic pantomime of caring about climate policy, will echo that net zero by 2050. Everybody agrees. 

Now, of course, getting there is a lot different than stating that that is your goal. Yes, probably lots of the old politicians saying that didn't really know what they were saying and what it implied. I think lots of people who echo that goal don't understand that it requires radicalism. There's no way the US is getting to net zero carbon by 2050 without radical action. 

But whether they realize it or not, the entire US elite establishment adopted this fairly radical goal, and it has stuck. Whether or not we're on track to meet it, or will be anytime in the next decade or two, it's a flag that's been planted. It's something to work backwards from. It's something to take strength from and make your arguments with. I always thought that went by without enough celebrating, because now that that's a ubiquitous goal, everybody takes it for granted. So that was the third background presumption of this whole process – we're all targeting net zero emissions. Not just emission reductions, but net zero. 

So what emerged out of that process was a three-legged stool of policy, which I described in this Vox article as SIJ: standards, investments, and justice. Let's go through that a little bit.

The standards piece reflected lessons learned from all the incredible progress in state policy. Turns out that what succeeds at the state level, what can pass, is things like renewable energy standards, fuel economy standards, basically standards on the three biggest sources of emissions in the US – electricity, cars, and buildings. 

The second piece is investments. The carrot of investing in clean energy, rather than the stick of trying to beat back carbon, was not new in 2018 and is not new in human history. It's just called industrial policy, and every major nation in all of history has done it. In the weird Reagan fever dream that the US entered in the 80s, this small government, laissez faire illusion convinced everybody that industrial policy is somehow outmoded or outdated or no longer respectable, but at no point did we stop doing it. The US does it. You have to do it. It's part of being a large, competent, functional country. 

Specifically in the climate area, you have to trace the industrial policy focus back to a lot of different currents in the movement. Remember the Van Jones green jobs hubbub, which focused on jobs and growth and investment and innovation, and Jay Inslee, and Bracken Hendricks wrote a book called Apollo's Fire which was all about that kind of stuff. I like to think of myself as a big person who forgives and forgets, so we have to give some credit to the Breakthrough Institute, which, whatever else you might think of it, focused early and quite eloquently on the need to make clean energy cheap through serious investment. And, of course, the Green New Deal that was proposed by the movement, among its many other aspects, included huge direct investments. 

Then there's justice. I think everybody understood in retrospect that for Waxman-Markey, there was justice stuff in there – more than people remember, I think – but it was an add-on. It was a sprinkle on top. It was not at the core of the policymaking process. And if you're going to get the whole left together in unanimity, you have to give environmental justice something. You can't take their votes for granted. They've got to see benefits in the bill, they've got to see themselves reflected from the beginning. That's one of the strengths of these processes I've been talking about – environmental justice was brought to the table from the beginning. 

Justice means that instead of just tossing in some favors for the environmental justice communities at the end, make it core to the policymaking. So, for instance, something like 40 percent of the investments in the Green New Deal as envisioned would be channeled to vulnerable communities, communities of color, fossil fuel-dependent communities, etc. So environmental justice became core as well.

SIJ: this was the three-legged policy stool that the left came together around. And what is remarkable, I think – and people still don't appreciate the miracle of it – is that it kind of worked. It brought everybody along. I mean, not everybody in all cases, it's not like all disagreement was eliminated. Even when I said “consensus,” people got their backs up a little bit and encouraged me to use the word “alignment.” So okay, miraculously, almost all factions of the left became aligned around this three-legged policy stool. 

That means not only the left and activists and the environmental justice community, but also the mainstream groups and also mainstream Democratic politicians. Everybody sees the benefits of standards, investments, and justice in a way that they just didn't with carbon pricing. Even if you're on the conservative end of the Democratic spectrum, you still like investing in companies, creating jobs, creating economic growth, the United States being competitive in growing global markets, etc. It's industrial policy. Again, it's as old as time.

The original New Deal, Roosevelt, and everything else used to be very much at the heart of the left's ideology. The left's detour through neoliberalism – which is, I would say, not entirely over yet but falling apart – led it to disavow supposed command-and-control or tax-and-spend policies; basically Democrats’ usual habit of adopting their enemies’ frames and internalizing them. 

But I think in the last five years, industrial policy has really come back into vogue. And nobody's against justice. And everybody understands that standards work; they have a long, long history of working. So you have this policy around standards, investments, and justice, and you see that three-legged policy stool reflected in almost all the products that these processes came up with, inside and outside of Congress. 

The BlueGreen Alliance, a green union group, produced a climate platform; the US Climate Action Network (US-CAN) brought a lot of left and environmental justice groups together, they produced a climate platform. Everybody produced a climate platform. The House and the Senate both crafted their own climate candidate bills. There was the US House Select Committee on the Climate Crisis, which I continue to think are just undersung heroes of all this, who did the research, did the due diligence, and put together an incredible report on climate policy. Of course there were differences among all those platforms in their focus and their specifics, but to a pretty remarkable degree, there was alignment around standards, investments, and justice. 

The new alignment was evident, among other places, in the climate plans that all the many Democratic contenders put forward. A lot of attention goes to Biden's initial foray, which was not great, but not worth the F the Sunrise Movement graded it and that whole dumb controversy. But overall, it was remarkable that no matter the focus of their candidacy, no matter their pitch, no matter what sort of lane they were trying to capture, every candidate felt obligated to develop climate policy proposals that were, in the context of even a few years prior, wildly ambitious. They all varied a lot as well; they all had different focuses, they all had different proposals, but mostly were in the realm of standards, investments, and justice. 

I can't let this moment pass without giving a shout out to Jay Inslee, the climate candidate, who deserves all the awards, who deserves a victory lap now that this bill has passed, who is one of the more prominent fathers of this success. The climate policy that he and his staff developed for his candidacy was the most elaborate, complete, thoughtful, broad climate policy you're ever going to see – all focused around standards, investments, and justice, lots of which survived. Elizabeth Warren grabbed part of it, Biden ended up grabbing parts of it, you see a lot of that original Inslee work surviving in the Inflation Reduction Act. All praise to Inslee. 

That brings us to Biden winning, the whole process starting, and the time came to try to pass policy, to pass the Democratic agenda. Then we came face to face with the fact that Democrats did not have a supermajority of 60 votes in the Senate, so they simply couldn't pass laws over Republican filibusters. It was not always the case – not that long ago, it wasn't the case at all – but today, Republicans simply automatically filibuster every piece of Democratic legislation, full stop. You need 60 votes to overcome a filibuster; you don't have 60 votes, oh well.

(We should say here that in a 50/50 Senate, if all 50 Democratic senators voted to nuke the filibuster they could do that, but they are several votes short of that. We can get back to that topic later or just put it aside entirely since I don't need to rant about the filibuster again.)

To get around the filibuster you have to use a process called budget reconciliation. You can do roughly one budget reconciliation bill a year, and they can pass with a bare majority, with 50 votes. The trick is that budget reconciliation bills originally were designed to reconcile the budget, i.e. to get the numbers in order.  Due to the Byrd Rule (I'm not going to get into that either) the only thing that can get through the reconciliation process are measures that affect revenue – that raise revenue or spend revenue. Basically, taxing or spending. 

So the Democratic climate agenda had to squeeze through the keyhole of reconciliation, which meant, among other things, that the entire standards piece of the three-legged stool of standards, investments, and justice got chopped off. You can't do standards through reconciliation. There were some very clever and earnest efforts to recreate some standards in the form of taxing and spending – we all remember the Clean Electricity Payment Program, which would have tried to replicate a clean energy standard via a system of revenue-relevant penalties and payments. But as we know, Senator Joe Manchin, god bless him, did not like the Clean Energy Payment Program and whacked it. 

Point being, the Democratic agenda was reduced to basically investments and justice. In the original House-passed Build Back Better Act there were $5.5 billion of investments, some substantial portion of which were channeled to environmental justice communities. 

It’s important to remember that the Build Back Better climate and energy package is a reflection of expert input and years of research and hashing things out. These are not things that legislators are putting together. These are things that expert staff are putting together. They're very deep, very detailed, super thoughtful, and smart. Great climate policy in the Build Back Better Act. 

We all remember what happened next. It wasn't that long ago. Build Back Better became quite controversial. You need 50 votes; Joe Manchin said he wasn't going to vote for it. Kyrsten Sinema of Arizona said she wasn't going to vote for it because she doesn't want to tax rich people. Why Manchin didn't want to do it, those explanations shifted and changed over time. It was mostly about inflation. He didn't want a bunch of upfront spending that would drive inflation. Or so he said, but if you followed his behavior, what sent him back and forth, in and out of negotiations, looked a lot more like pique and vanity than policy preferences. But let's not belabor that whole process.

So Build Back Better gets debated and debated and debated and debated, goes back and forth, dies, rises again, dies, rises again, on and on. About a week or two ago, Manchin pulled out yet again, for what looked like the final time; basically said “I'm not doing this, we're not going to pass it, I can't sign on to this bill.” 

I know a lot of political observers off in the cheap seats have a lot of conspiracy theories about this – he's the patsy, he's just the only one to say it, there's actually a bunch of senators who are against it, this is all an elaborate, scripted dance, whatever. I don't know everything, but I have talked to a lot of staffers in these offices and people involved, and as far as I can tell, nobody knew that Manchin was about to do that. Everyone was taken by surprise and devastated. There were lots of tears. It looked like the whole thing was dead. 

Let me say in the strongest possible terms: if the entirety of Build Back Better had died and Democrats had passed nothing, despite the things that Biden has accomplished, net-net, the Democrats would have been a failure on climate. The infrastructure bill’s effect on emission reductions, it was nothing. All the emission reductions are in this bill. On climate change, Democrats would have been a failure, and we would have seen a reprise of Obama, i.e. a flailing attempt to use executive authority to reduce emissions in the face of a radically conservative, openly hostile Supreme Court. There's really no way to exaggerate how grim that outcome would have been. It would have been devastating for everyone – not only politically, but for the climate. It would have been super bad. 

I don't know if it's too obvious to say, but Democrats are extremely likely to lose at least one house of Congress in 2022, and 50-50 odds they lose the presidency and the Senate in 2024. We could very well be facing a period of total Republican rule, but at the very least, if Republicans have one house of Congress, there's going to be no legislation, period. And Democrats are unlikely to have a trifecta of both houses of Congress and the presidency again for a long time because of all the structural features of American politics that work against them – the electoral college, gerrymandering, rural overrepresentation in the Senate, stupid voting laws, on and on and on. All of them are getting worse for Democrats. Democrats have to win by bigger and bigger margins just to break even. (That's a larger problem that maybe is outside the ambit of this podcast, lest I go into a despairing fugue.)

Point is, Democrats are unlikely to have a trifecta again for a while, call it 10 years. Could be well longer than that. Which would have meant that the US passed no national climate legislation of note during the entire crucial period wherein it was possible to get a handle on the worst damages of climate change. It would have just been awful. It would have been awful for international negotiations, it would have absolutely nuked US credibility in international climate talks, it would have weakened the will of everyone else involved in Paris to hit their targets. It would have been terrible. And that was the baseline expectation. We were staring in the face of nothing. 

So back comes Manchin, for reasons that remain mysterious to this day to everyone. No one knows quite why he did it. What I and I’m sure lots of listeners would love to believe is that the outcry from the environmental or climate community reached him somehow, but I think mostly it was just that every other senator was like, “That's it. He's out. Screw him. He's the one guy who's blocking our entire agenda,” and started saying so publicly. And Manchin has a very large ego, so he's like, “Ooh, I could reverse one final time. It'd be like hitting a homer in the ninth inning. I could be a hero.” That seems to be what brought it back. His vanity destroyed the bill, and his vanity probably saved it. On such quirks does history turn.

So he came back in with this pre-cooked, 700-page bill that he worked out with Schumer, and said, “Here we go, we got a bill. Let's do it.” 

Wild. Absolutely wild. Let me tell you, I've been following US politics for a long time, and there are not, at least in the 21st century, a lot of happy miracles in US politics. Gay marriage winning such huge victories was one, Obergefell was one, Mass vs. EPA was one, Obamacare if you count that – I'm not going to get into that argument, whatever. There's not a lot of positive miracles. And this was a miracle, that Manchin’s vanity led him back to the table. 

What I think I want to emphasize above all to people is that the core climate and energy provisions of the original magnificent Build Back Better bill survived remarkably intact. Manchin nuked everything else out of the bill – the child tax credit, the care provisions, health care paid leave. There was so much in that original bill; it would have been so transformative and amazing. All we needed was one or two more senators, and it's terrible to think about that. 

But the climate and energy parts, the bones that were developed and written by experts, are still in there. The total amount has declined from $550 billion to $370 billion, but that's still a very large number. And most of the stuff that was funded in the original bill is still funded, like the tax credits for wind and solar and hydrogen. The EV tax credits survived, I couldn't believe it, I was sure Manchin was going to axe those. He also let a methane fee survive, which is pretty remarkable. There was little bit of carbon pricing tucked away in there, still surviving.

He insisted that the EV credits be means tested, which is stupid. He insisted on a domestic content requirement, which is sort of unworkable and is going to exclude most EVs from the credits for at least a few years from now; it's still uncertain how that's exactly going to shake out. He stuck in a bunch of public leasing of oil and gas, which is obnoxious. He tied it to solar and wind leasing, which is extra obnoxious; that just seems like a deliberate thumb in the eye of the left. And they’re greenlighting several projects which had run into environmental review. There's some bad stuff that he put in. 

I understand the fury of some people over these oil and gas provisions, and I do not want to downplay the damage that some of these projects will do to vulnerable communities. There are communities that have been fighting these pipelines for a long time, and they're going to get steamrolled. It super sucks. 

That said, I do think there is reason to believe that the good parts of this bill are better than they look, and that the bad parts of this bill are not as bad as they look. 

Why do I say the good parts are better than they look? Because modeling has now been done by three separate modeling firms, and they all more or less agree that this gets around 40 percent emission reduction by 2030, per the US’s stated goal and what Schumer said he wanted. There's an enormous amount of emission reductions in the bill. But that number is probably understated, because there’s something like $27 billion in there for a green bank, which is going to make cheap capital available and draw in something like 5 times that much private capital or more.

I did a podcast on the green bank with Reed Hundt about a year ago, which I recommend everybody go back and listen to because green banks are super cool and do not get the hype they deserve. They're working quite effectively at the state level. And $27 billion, when you're leveraging $5 or $10 of private capital for every dollar you spend, is going to deploy a massive amount of projects. You can't model those because you don't know in advance where the money is going to go, but that's going to be a huge chunk of emission reductions that is not being captured.

Also, $350 billion dollars of loan authority for Jigar Shah’s Loan Programs Office. I did a pod with Jigar Shah about the Loan Programs Office a few months ago, and also recommend everybody go back and listen to that. The Loan Programs Office is amazing under his watch, and is going to be seeding lots of early-stage projects to the tune of tens of billions of dollars. None of those emissions reductions got modeled either, and that's another huge chunk. 

Another thing that can't really be modeled but that I think people underestimate is the degree to which these provisions are going to change the political landscape for the better. Every consumer who gets a big heat pump rebate becomes a constituent. Every business that gets a tax credit becomes a constituent. Every state where these industries take root and you get new manufacturing facilities and hundreds of thousands of new jobs manufacturing batteries or EVs or what have you – those are all moneyed constituents. 

The defense industry has learned this lesson quite well – don't concentrate your investments on one place, seed them all across the country, because then you have legislators from every state who will lie down on the railroad tracks to defend defense spending. It is horrible and repugnant in that case, but it's a smart strategy. And that's what this bill does. It's going to spread investments in clean energy technology and manufacturing all across the country, thereby creating constituents all across the country, which is going to make everything else easier. It’s going to be easier to pass city and state legislation now that these provisions are in place, it's going to be easier for the EPA to create tighter standards, and it's going to be easier, whenever it happens, to pass another climate bill when the time comes.

In terms of political economy, we've gone from carbon pricing, cap and trade, which costs literally everybody in the country, to a policy that basically dumps money on every state for all these new and nascent industries. It attempts rather audaciously to import an entire EV supply chain into the US, from the minerals to the batteries to the EVs themselves. It's going to create an enormous amount of economic activity, which is going to have an enormous effect on politics. I really don't think that can be understated. Even if you think this doesn't do enough, which of course it doesn't; even if you're looking ahead to what needs to happen next, passing this bill is going to make what needs to happen next easier on almost every political level. 

As for why the bad isn't as bad as it looks, I'm going to do another pod with Jesse Jenkins where we're going to get into this in some detail, but I just think the oil and gas industry is not that interested in the leases that are currently on offer to it. Even in terms of historical leasing patterns, it's going to be a fraction of the land that's offered that's actually leased, and only a fraction of the land that's leased that's actually developed. In terms of the total amount of land that the US oil and gas industry is operating on, these leases are a tiny, marginal amount of land and are going to be a tiny, marginal amount of its total domestic production, which will be determined by the economics of oil and gas far more than these policies. 

What we know about the economics of oil and gas is that they get worse as clean energy grows and gets cheaper. Spending a bunch of money, $370 billion-plus, to make clean energy cheaper is going to hammer the economics of oil and gas, and that will do more to reduce the amount of leasing and exploration it does than any prohibition that was likely to get through this administration or that Biden was likely to support. These provisions suck, but even the current modeling shows that for every new ton of greenhouse gas these new leases produce, 24 tons are eliminated by other provisions. So on net, I think it's a very obvious win. 

A lot of people are saying “so you're tossing environmental justice over to get this through.” I don't think that's quite right. Most of the justice stuff survived. I was shocked. There’s still huge chunks of money devoted to vulnerable communities. Still 40 percent of most of the investments there, $60 billion, are dropped in on low-income housing and insulation and on and on. Most of the justice provisions survived. 

More to the point, we all know that air pollution and climate pollution disproportionately impact vulnerable communities. But the flip side of that fact is reductions in air pollution and climate pollution disproportionately benefit vulnerable communities. So just because a provision is not labeled an environmental justice provision doesn't mean that it will not serve environmental justice. Anything that reduces air pollution or climate pollution serves the cause of environmental justice. All these provisions that are going to make clean energy cheap and reduce emissions are serving environmental justice. I think that's a piece of context that gets lost here somewhat, so I think the bill is entirely defensible even purely through the lens of environmental justice. I think vulnerable communities are going to be way, way, way better off with this bill than with nothing, which was what we were looking at a few weeks ago. 

That's a long ramble, you guys. Not totally focused, not clear that I have a neat lesson to take away from it. But I think understanding some of the history and context casts some light on why this bill has climate and energy nerds and wonks so excited. It's very good, very thoughtful policy that was developed by earnest Democratic congressional staff and informed by these processes that brought all of the left factions together. Unions, environmental justice, mainstream groups informed this process, produced this alignment, produced this thoughtful, rich, hugely ambitious policy, and through all of the madness of the intervening two years, somehow most of It survived. So much of the rest of the Democratic agenda fell away, but this survived.

I think that is worth celebrating and particularly worth taking a victory lap. It is a big deal that out of the entire array of policies that the Democrats wanted to pass this session, it's the climate and energy stuff that more or less made it to the finish line almost by itself. That's a testament to how well the movement and advocates and activists and scientists and etc. have pushed this issue to the front of the line. That was always the goal. That was always what they wanted. And they did it. 

So I find myself out on the internet, out on Twitter, begging people to be happy about this, which is not a role I customarily find myself in. I'm usually on the other end of that, explaining to people why they should be miserable. But the movement came together in the waning years of the Trump administration. It came together, it did a lot of work – a lot of physical work, a lot of emotional work, overcoming differences, coming into an alignment around broad, ambitious policy, pushing it to the front of the line for Democrats, and then, in the end, miraculously getting it passed to become law. 

Finally, the US is passing ambitious national climate policy through the Senate. That is a friggin miracle. It would be worth celebrating anything passing. But instead, what passed is $370 billion, an absolutely historic investment that is going to transform the US domestic clean energy industry and transform US politics. 

So take your victory lap, people! Of course we're not done. Of course it's not enough. Of course the fight goes on. Of course we'll be fighting on this for the rest of our lives, etc., etc. But this is a very big, very unlikely, very unexpected victory. There's no shame at all in giving yourselves some time to just sit with the happiness and the gratitude that we made this happen. 

I guess that's it. If I were writing a post, I would spend hours writing the perfect closing paragraph that would leave you on a poignant note. But I'm rambling off the top of my head, and you're probably sick of hearing me by now, so I'm just going to end it there. 

Let me know what you think of this. Let me know if you would like me to do more of these solo rambles or if you'd rather me just interview experts, I would understand that as well. In the meantime, as always, thank you for listening. Thank you for supporting Volts. Thank you for fighting this fight for so long. Thank you for getting this g-d bill passed. Thank you, and goodbye.