By H. Sterling Burnett, Heartland Institute
The corporate media was effusive in its praise for the Schumer-Manchin green energy bill, grossly mislabeled the Inflation Reduction Act (IRA). As history attests and the last two years of profligate federal spending confirmed once again, government spending increases inflation instead of reducing it. When was the last time Congress increased spending while simultaneously reducing inflation? I’m waiting for your answer.
As implausible as the inflation reduction staging of the Democrats’ pork-filled bill of special-interest fodder is, the claims being made about its effect on greenhouse gas emissions are pure fantasy. The media keep parroting the claims by Senate Democrats and the White House that this bill will reduce U.S. carbon dioxide emissions by 40 percent by 2030, less than seven-and-a-half years from now (long after Biden and most of those passing it have left office). The media has called this this bill a “breakthrough,” “astonishing,” and the “[b]iggest US Climate Legislation Ever.”
I have well-known doubts about claims the United States must reduce its greenhouse gas emissions. My assessment of the evidence indicates continued fossil fuel use will not cause a planetary emergency or anything like it. The best evidence further shows the policies imposed to restrict fossil fuel use will unnecessarily restrict freedom and impose higher costs on the economy than the harms they are meant to prevent. Having said that, I’ll admit I could be wrong.
What I am almost certainly not wrong about is that to hit the 40 percent reduction target, every regulation resulting from the bill and every dollar spent on subsidies will have to have the effect its authors say it will. People and companies will have to do exactly what Democrat senators expect of them and produce perfect results. Every electric car the bill can possibly subsidize must be built, purchased, and operate perfectly although they never have in the past. Every carbon-capture and -storage project must reduce emissions by the amount projected at economically competitive costs, although they never have in the past. Every wind and solar installation and the thousands of miles of transmission lines must be built quickly and operate at full capacity, although they never have in the past. Every building upgrade and high-efficiency appliance subsidized must be undertaken, completed or purchased, and function just as envisioned, although they never have in the past.
In other words, for the first time in history, Congress will have to have written a bill that functions perfectly as designed, with no human error, no state or local resistance, no lobbying undercutting the bill’s effect, no delays in construction, and no unintended costs or consequences. No perfection, no 40 percent reduction.
When was the last time anything designed by human minds, much less any policy imposed by government, worked perfectly as intended? I’m waiting for your answer.
The inducements the government is giving people to encourage us to buy electric cars, for example, are obviously unlikely to work. Electric vehicles are substantially more expensive than the more-capable vehicles powered by internal combustion engines (which are also far less prone to combust spontaneously). Research shows the average annual household income for those purchasing electric vehicles is more than $200,000. Ninety percent of the federal tax credit money for electric vehicles thus far has gone to Americans in the top 20 percent of income earners. That’s making the rich richer through a government program that makes the poor poorer.
Of EV purchases, many are second vehicles—after all, the wealthy can afford to keep an extra vehicle for use when they want to virtue-signal their green attitudes. Even then, when it is time to purchase a new vehicle, more than 20 percent of EV buyers switch back to fossil fuel powered cars and trucks.
The evidence shows EV tax credits represent nothing more than a giant transfer of wealth from low- and middle-income working people to the wealthy.
In statements about the bill, its Democratic shills say things will be different this time and the EV credits will benefit average people, in part by limiting the tax credits to the purchase of lower-cost EVs and by setting income limits on the households that can claim the credits.
That doesn’t solve the fundamental problem. EV prices are rising faster than those of gasoline and diesel powered vehicles, because of inflation and supply chain problems. If a low- or middle-income family, say somewhere in the range of $30,000 to $50,000 annual household income, couldn’t afford an EV that cost $10,000 to $15,000 more than a comparable fossil fuel powered model under the old subsidy scheme, they certainly won’t be able to afford the even-higher-priced EV now. Prices overall are increasing and draining the budgets of lower-income people, and the $7,500 EV credit hasn’t changed. That won’t enable more people to buy more-expensive vehicles that are difficult to keep powered absent widespread availability of additional expensive charging equipment. It will in fact do the opposite.
The news is even worse for those hoping the bill will reduce greenhouse gas emissions by causing widespread adoption of EVs. The auto industry is warning that provisions in the bill intended to shore up labor’s support for it will cut or eliminate the subsidies for most people. The Associated Press writes,
The auto industry is warning that the vast majority of EV purchases won’t qualify for a tax credit that large.
That’s mainly because of the bill’s requirement that, to qualify for the credit, an electric vehicle must contain a battery built in North America with minerals mined or recycled on the continent.
And those rules become more stringent over time—to the point where, in a few years, it’s possible that no EVs would qualify for the tax credit, says John Bozzella, CEO of the Alliance of Automotive Innovation, a key industry trade group. As of now, the alliance estimates that about 50 of the 72 electric, hydrogen or plug-in hybrid models that are sold in the United States wouldn’t meet the requirements.
“The $7,500 credit might exist on paper,” Bozzella said in a statement, “but no vehicles will qualify for this purchase over the next few years.”
The AP notes, “the idea behind the requirement is to incentivize domestic manufacturing, build a robust battery supply chain in North America and lessen the industry’s dependence on overseas supply chains that could be subject to disruptions.” These are laudable goals that I have long endorsed. The critical minerals and rare earths necessary to make EVs are also critical for other technologies throughout modern society. Those supplies, however, are controlled by often-hostile economic and geopolitical rivals, primarily China and corrupt regimes such as those in Myanmar and the Congo, countries where their production is tied to horrible human rights abuses such as child and slave labor, and their mining and refining causes massive environmental destruction and harm to human health.
Even so, costs are not the primary factor limiting the production of the materials and finished products such as batteries and other parts for electric vehicles in the United States. Regulations are the big impediment, and under Biden they are getting more stringent, not less. It is nearly impossible to open a new mine in the United States, especially one that will involve the kind of environmental disruption necessary to tease out small particles of rare earths and critical minerals from the massive amount of overburden containing them. Even when the federal government approves a mine (rare in itself) with all necessary permits being granted, each mine faces dozens of lawsuits from environmental radicals and locals hoping to get it stopped. This delays mine projects for years and adds to the cost of bringing to market the minerals, much less the finished products using them. To hit the IRA’s targets, the mines would have to be open and operating now, not 10 years from now.
Environmental regulations also make it almost impossible to open a plant to refine rare minerals, even if they are mined here. Rare minerals mined outside of China almost always end up in China for refining. A July 2022 report from the Brookings Institution states,
China is the dominant player in global mineral processing. …
A best-case scenario would be characterized by geographic diversification of critical minerals supply chains, coupled with globally aligned statutory due diligence requirements to make these supply chains cleaner and greener. This would see the U.S. and Europe making considerable investments in and successfully building out their critical minerals supply chains, from mining to battery manufacturing. It would also entail China instituting mandatory due diligence requirements on critical minerals sourcing and global coordination among major players, including Beijing, Washington, and Brussels, to align these requirements. …
As things stand, this best-case scenario looks unlikely. Considerable investment would be needed to build out critical minerals supply chains in the U.S. and Europe. Current planning, including that undertaken by the Biden administration in the U.S., is a step in the right direction, but it is unclear whether it is commensurate with the scale of the challenge.
Indeed, contrary to Brookings’ assessment and Biden’s rhetoric, the Biden administration is imposing new climate regulations on infrastructure development that are likely to make getting federal permits for mining and for industrial facilities even more difficult and expensive. Former President Donald Trump set hard limits on the time agencies had to process permits, and he limited the scope of environmental reviews to direct impacts. Biden has rescinded these changes. There simply isn’t enough federal financial support in the Schumer-Manchin monstrosity to encourage companies even to try to overcome the regulatory hurdles, much less start production in time to hit the 2030 emission reduction targets.
Those are the complications impeding just one, small portion of the IRA’s numerous provisions that must be successful if the bill is to reduce greenhouse gas emissions by 40 percent by 2030 as advertised.
Time and space don’t permit me to go through all the subsidies for green energy and infrastructure schemes contained in the bill and explain thoroughly why they are as likely to fail as the EV tax credits. However, there is one little-discussed, almost-hidden provision in the bill that is exceedingly troubling and could result in a massive expansion of executive power.
As I discussed just a few short weeks ago, the U.S. Supreme Court delivered a huge victory for our constitutional republic form of government, climate sanity, and reliable energy this year in West Virginia v. EPA, when it barred the agency from using an obscure provision of the 1963 Clean Air Act to usurp states’ longstanding authority to manage their electric power grids, by limiting the allowable generating sources and thus ending the use of coal, to restrict greenhouse gas emissions. The court ruled only Congress could make such a consequential, or major, decision, not an executive agency, and it must do it explicitly.
As described by JD Supra, “The IRA includes EPA funding to pursue GHG reduction programs under nine different provisions of the CAA.” Senate Republicans, especially Sen. Ted Cruz (TX) and Sen. Shelly Moore Caputo (WV), saw these provisions and a $45 million dollar slush fund granted the EPA in the bill as an attempt at an end run around the court’s ruling. Cruz and Caputo offered amendments to remove the funding and explicitly uphold the Court’s restrictions against EPA forcing reductions of carbon dioxide emissions without an explicit grant of authority by Congress. Their amendments were defeated on party-line votes.
Our friends at the Competitive Enterprise Institute (CEI) warn that although these provisions do not “gut or significantly roll back West Virginia v. EPA, … [n]ot technically, as a matter of law,” they open a Pandora’s box of pathways to force reductions of CO2 emissions through the back door. As CEI’s Marlo Lewis writes (and he’s usually prescient on these matters),
In short, Section 60105(g) of the Schumer-Manchin bill would provide the first “clear statement” in U.S. statutory law that Congress intends for CAA Sections 111, 115, 165, 177, 202, 213, and 231 to regulate greenhouse gases.
Regulatory advocates could cite Schumer-Manchin Section 60105(g) as evidence Congress wants the EPA to put the squeeze on fossil fuels. That political opinion would in turn exert pressure on legal opinion—especially among judges who view climate change as a crisis demanding urgent action.
Game, set, and match in a victory for climate alarm?
Although the EPA will undoubtedly try to use the funding and indirect authority given it in the IRA to restrict carbon dioxide emissions to meet the 40 percent reduction goal, people are watching, an election is coming, and new funding bills will have to be passed, any of which could limit the EPA’s authority. In addition, if the EPA attempts to overreach on CO2 again, as happened in the past, numerous states and industries will file lawsuits to block the rules, likely tying up any action for years. That gives the U.S. Supreme Court and future Congresses and presidents some say over energy restrictions. And even if the CO2 restrictions the EPA comes up with pass legal muster, they will have no effect until long after 2030.
The 40 percent reduction claims are pure wish fulfillment for alarmists, a way to claim “we won.” They will prove at least as false as the bill’s name.
H. Sterling Burnett, Ph.D. is the director of The Heartland Institute’s Robinson Center on Climate and Environmental Policy and the managing editor of Environment & Climate News.