Energy Transformation and the Federal Budget

Happy New Year. I’m pleased 2024 is finally over. It was my annus horribilis. Between taking a tumble down a hill and experiencing an unscheduled rapid disassembly (aka a break) of two bones in my ankle, while simultaneously working into a new career, keeping up with personal writing here on polyvalent took the back seat. But it’s a new year, so time to dive back in.

The US presidential election is the elephant in the room and I think it would be an understatement to say the next four years will be anything less than turbulent. Regardless how anyone feels about the outcome, we’re going to face significant shifts in federal budget priorities that will have long-term effects on our ecosystems and climate, as well as how we manage the necessary transition to cleaner energy.

Let’s start with the immediate budget priorities. It’s no secret Republicans want to dismantle much of the Biden-era Inflation Reduction Act, which directed resources to subsidizing clean energy and a rekindling of American manufacturing. The game is afoot. Yesterday, Senator Ron Wyden’s staff managed to get their hands on a memo being circulated among Republican members of the budget committee. The memo detailed the areas Republicans plan on targeting.

There were two overriding categories — healthcare and energy. On the table are approximately $1.25 trillion in cuts to energy tax credits, and $704 billion in healthcare expenditures over a 10-year period.

I’m going to save details on healthcare for some other time given how problematic delivery and costs of care are in the USA. Citizens are angry about our health care system. Luigi Mangione’s assassination of UnitedHealthcare’s CEO and the swell of support for him afterwards is a good indicator of the level of anger bubbling over our medical/financial complex. Its utter dysfunction deserves a more detailed discussion than I want to get into now.

Focusing on the energy side of the equation, how do the proposed cuts break down? First, Republicans want to eliminate $796 billion in green energy tax credits.

Second, they want to repeal Title I of the Inflation Reduction Act. The plan here is to cut $407 billion from the budget. Ironically, they carved out exeptions for subsidizing carbon sequestration under Section 45Q of the IRA, subsidies for energy production from nuclear power plants under IRA Section 45U, and tax credits for production of “clean fuels” under IRA Section 45Z. Cuts aside, someone’s still planning on receiving tax breaks … I wonder who?

Finally, Republicans seek to change the rules on tax credits for electric vehicles to restrict their availability to only buyers of EVs. Under the current law, you can get a tax credit for leasing an EV. Republicans claim this change to the rules will save $50 billion.

There’s a lot to unpack here, but the cynic in me is inclined to believe that a certain oligarch is being rewarded through the preservation of government subsidies for one of his companies’ products. I also sense the hand of the powerful agribusiness lobby in keeping subsidies for so-called clean fuels. Corn-based ethanol, anyone? And when it comes to preserving subsidies for nuclear energy, it’s not much of a surprise that large technology companies investing in nuclear plants to serve the massive energy requirements for their AI platforms are likely to retain their subsidies. Given technology oligarchs’ willingness to prostrate themselves before the incoming adminstration and follow it through with significant political donations, what do we think will be the outcome?

The upshot is that by shifting budget priorities away from renewable energy sources such as wind and solar, the USA is likely to experience a significant setback in the much-needed transition to clean energy. Meanwhile, the same old swamp creatures continue to feed on government resources. Hopefully there will be some pushback, but with Republicans in control of all three branches of government, my expectation is we won’t see much more than a deepening of crony capitalism.

I hate to start the year on such a sour note, but here we are, and elections have consequences.