The Fuse

Georgia Elections Open Up Possibility for Energy and Climate Action

by Nick Cunningham | January 13, 2021

The upset victories in two U.S. Senate elections in Georgia on January 5 flipped control of the Senate to the Democrats. The results upend the outlook for President-elect Biden’s first two years in office, opening up a long list of opportunities on energy and climate-related issues.

Since President-elect Biden’s victory in November, which coincided with a disappointing showing in down-ballot contests, speculation on what his agenda might be in 2021 focused on relatively modest initiatives. Lacking a majority in the Senate, attention largely concentrated on executive action, such as rolling back deregulatory actions taken during the Trump administration at the EPA, rejoining the Paris Climate Agreement, and challenging high-profile pipeline projects, such as Keystone XL. Much of Biden’s proposed $2 trillion clean energy spending package was put on the shelf.

All of those executive actions remain likely options, but the Georgia Senate elections mean that the Biden administration can now dust off previously abandoned plans and start to seriously think about how ambitious he wants his first two years to be.

Wall Street apparently anticipates much more action after the Senate elections.

Wall Street apparently anticipates much more action after the Senate elections. Shares of solar and wind companies shot up after the results – Vestas, one of the world’s largest wind turbine manufacturers, gained 8 percent. Roughly $1 billion of capital flowed into clean energy exchange-traded funds immediately following the Georgia vote.

With Democrats in control, a number of possibilities are within reach. First, the Democrats in the Senate can use the Congressional Review Act to repeal last-minute rules finalized by the Trump administration. The obscure law allows lawmakers to scrap rules that have been implemented within the last 60 legislative days. For example, the EPA has rushed a rule at the 11th-hour to restrict the type of scientific studies that can be sued to formulate new air and water protections. The effect would be to tie the hands of future administrations.

Another immediate impact of Democratic control would presumably be swifter confirmation of Biden’s cabinet. Republicans had suggested they would oppose certain nominees; now the Democrats have the upper hand.

However, a much more significant opportunity would be the potential for a massive new stimulus package. The Democrats can use an arcane piece of budget procedure called reconciliation, allowing them to pass major budget bills with a simple majority. However, it can only be used sparingly, per congressional rules, and only on matters related to the budget, so the Democrats will need to weigh when and how they want to go down that path.

According to ClearView Energy Partners, the 50-50 Senate split in favor of the Democrats could lead to, broadly speaking, three big legislative initiatives. First, a “recovery-focused stimulus package that includes robust incentives for green energy and transition technologies.” The second would be “corporate tax rate hikes that could also potentially include some rescissions of fossil energy tax treatment. And third, as mentioned above, rolling back late-stage regulations via the Congressional Review Act.

A tax overhaul appears less likely to be on the agenda in the first few weeks and months. Instead, the stimulus is set to be the most likely train to leave the station at the outset. The pandemic and the urgent need to accelerate vaccinations, along with the associated economic crisis, dictate that a major stimulus goes first. But tucked into a new stimulus could be an array of energy and climate provisions that have previously been proposed. ClearView Energy Partners listed several, including an increase in investment in advanced manufacturing, and a “cash for clunkers” program for electric vehicles.

President-elect Joe Biden said that the stimulus will be “in the trillions of dollars.”

But the Democrats could be vastly more ambitious if they can keep their entire caucus on board. President-elect Joe Biden said that the stimulus will be “in the trillions of dollars,” and while much of it may focus on direct cash checks, state and local aid, and vaccine distribution, other pieces could include infrastructure spending. Conceivably, the package could include billions of dollars in new investment in renewables, batteries, EVs, infrastructure, grid upgrades, etc. As of now, the details have not been hammered out.

To be sure, it won’t be smooth sailing, even with Democrats officially in control. Senator Bernie Sanders (VT) will chair the powerful Budget Committee and Senator Joe Manchin (WV) will chair the Energy and Natural Resources Committee. There is a vast gulf between the two when it comes to climate change and issues pertaining to the oil and gas industry. Assuming few, if any, Republicans join the effort, there is no margin for error with a 50-seat caucus that includes the Vice President as the tie-breaker.

The oil and gas industry has been cautious, stating its willingness to work with the Biden administration. The American Petroleum Institute specifically named federal methane regulations as something that it would support. But the industry would oppose action a much longer list of issues, such as drilling on federal lands and the potential recission of tax benefits to extractive industries.

Ultimately, the Georgia Senate elections grant the Democrats and the incoming Biden administration a freer hand to pursue a variety of options. It won’t be easy, but the window of opportunity for action is much wider than it would have been with Republican control of the Senate.