Midterm Outlook for Energy Innovation Policy
The 117th Congress passed historic legislation that should accelerate innovation across a host of critical energy technologies needed to meet U.S. and global greenhouse gas emissions reduction targets. The 118th Congress will be tasked with following through by fully funding energy innovation and RD&D programs, overseeing their implementation, and filling out the portfolio with investments in neglected areas. Congressional action will be particularly vital to support technologies that have not yet entered the market, such as advanced nuclear, hydrogen, carbon capture and storage, geothermal, and long-duration energy storage.
Democratic and Republican priorities differ dramatically in some key policy areas. For instance, Congress may seek to alleviate high energy costs and counteract global supply shortfalls due to sanctions on Russia. These geopolitical priorities create tension with the climate agenda. Democrats are wary of expanding domestic fossil fuel production and exports, while Republicans are eager to utilize these resources. Similarly, Democrats are likely to champion robust clean energy tax credits and big budgets for agencies working on emerging technologies, while Republicans prefer to let the private sector shoulder a larger share of technology risk. Democrats are less keen on nuclear power than Republicans, and both parties are divided internally on whether to increase nuclear exports for technology such as small modular reactors. Republicans will closely monitor federal spending and regulations favored by the Biden administration, and Democrats with an eye toward management and political failures, whereas Democrats will stress a portfolio-based approach to risk, rather than project-by-project scrutiny.
Despite these differences, there are important areas of bipartisan agreement. They include expanding RD&D spending and investing in national lab infrastructure. Congress is also relatively united on incentives to reshore and “friendshore” to reliable allies advanced industries and supply chains, such as for solar panels and electric vehicles, although Republicans are more concerned with cutting off China, whereas Democrats will be more concerned with keeping the supply of clean energy products robust and driving down costs to spur wider adoption. In addition, large segments in both parties support streamlining the permitting process for large energy projects, although they differ about the types of projects they would like to see move forward more quickly and exactly how much the process should be streamlined. Finally, issues linking trade and climate may bring the parties together as the European Union ramps up its carbon border adjustment mechanism, even though neither party supports putting a carbon price on domestic emissions.
The table below outlines the parties’ respective priorities on these issues in order to highlight areas where there is potential for bipartisan progress. This is not a comprehensive summary of the parties entire agendas on clean energy policy, so if a topic is not covered in a party’s column it is not meant to imply that the party has neglected the issue entirely, just that the issue is a lower priority.
Table 1: Democratic and Republican policy priorities to accelerate clean energy innovation
|
Issue |
Democratic Priorities |
Republican Priorities |
Bipartisan Support |
|
Energy RD&D and Congressional Oversight |
▪ Fully fund recently passed legislation expanding support for federal RD&D ▪ Approach Congressional oversight with a portfolio-based view of risk management |
▪ Encourage private sector innovation and RD&D through tax reform ▪ Focus on project-by-project Congressional oversight |
▪ Seek U.S. leadership, recognizing key role for private sector led innovation in domestic and global markets ▪ Grow and sustain federal RD&D funding for existing and authorized programs ▪ Support more RD&D spending for specific technologies particularly in hard-to-abate and industrial sectors |
|
Developing and Regulating Domestic Energy Resources |
▪Avoid investing in long-lived fossil fuel assets, with mixed support for expanding short-term domestic fossil fuel supplies to address price increases ▪Support stringent regulatory-based approaches to regulate GHGs including CO2 and methane |
▪Support legislation to enhance fossil fuel production on federal lands and offshore, as part of an ‘All of the Above’ energy strategy ▪Oppose EPA regulation of GHGs for stationary and mobile sources ▪Support voluntary methane emission reduction strategies |
▪Support legislative and executive actions enabling short-term increases in domestic fossil fuel production to address energy inflation and geopolitical concerns |
|
Clean Energy Manufacturing and Supply Chains |
▪ Support reshoring supply chains and domestic manufacturing for solar, wind, EVs and batteries ▪ Expand domestic clean energy manufacturing through tiered tax credits for manufacturing with domestic content and labor/wage requirements |
▪ Reform permitting for processing and mining facilities along critical mineral supply chains ▪ Limit China’s role in clean energy transition, due to human rights abuses, IP theft, and U.S. dependence |
▪ Support legislation to strengthen EV battery supply chains and reduce foreign dependence for critical minerals ▪ Respond to concerns over Russian control of vital nuclear fuel resources ▪ Support limiting or excluding Chinese clean energy products made with forced labor |
|
Permitting Reform |
▪ Reform federal permitting and NEPA to make it easier to build clean energy projects, but tempered by concern about environmental justice ▪Support expanding FERC transmission sitting authority |
▪ Reduce federal permitting and oversight of energy projects, primarily pipelines, LNG terminals and offshore drilling by reforming or limiting NEPA review ▪Oppose expanding FERC authority over interstate transmission given federalism and oversight concerns |
▪ Support NEPA streamlining to speed approvals of critically necessary energy infrastructure and resource development |
|
Climate, Trade, and International Negotiations |
▪ Set up carbon border adjustments to protect manufacturers and encourage greater efficiency, with possible export fee for domestic producers above the benchmark ▪ Support policies that tax emissions of imports and exports ▪ Favor robust international climate engagement |
▪ Support a carbon border adjustment with focus on protecting American manufacturers, without export fee for domestic manufacturers ▪ Counter reciprocal border adjustments from EU and elsewhere ▪ Discourage international climate engagement |
▪ Create a U.S. carbon border adjustment system based on industrial emissions-intensity that accounts for non-pricing domestic climate and energy policies |
|
Industrial Decarbonization |
▪Frame decarbonization of domestic industry as opportunity to create jobs and improve American competitiveness ▪Support federal clean procurement policies |
▪Promote voluntary emissions targets for U.S. manufacturing ▪Oppose mandatory emissions regulation and clean procurement policies |
▪Support continued investment in manufacturing energy RD&D, DOE industrial assessment offices and technical assistance ▪Endorse industrial policies that strengthen U.S. manufacturing and reduce costs |
|
Next Generation Energy Technologies |
▪ Support with caveats RD&D funding for advanced nuclear, CCS, and hydrogen ▪ Support continued deployment of long-duration storage, offshore wind, smart grids, and building efficiency ▪ Support strong environmental justice protections in federal spending and regulatory programs |
▪ Strongly support advanced nuclear, CCS, and carbon utilization, LNG, expanded hydropower, and hydrogen technologies |
▪ Support federal RD&D spending for advanced nuclear, CCS, and hydrogen, alongside long-duration battery storage, battery recycling, and industrial decarbonization technologies |
|
Transportation Innovation |
▪Support federal regulations and tax credits to push demand for EVs ▪Adopt policies to develop EV supply chains increase, domestic production, and expand infrastructure ▪Support efforts to drive down gasoline prices by limiting price gouging and windfall profits |
▪ Strongly oppose EV mandates and combustion engine bans ▪Favor technology neutral tax credits for lower carbon transportation alternatives while limiting EV tax credits for higher income consumers ▪Support efforts to drive down gasoline prices by increasing domestic oil and refinery production |
▪Support legislation that would increase U.S. ability to supply both raw materials and EV components and vehicles ▪Support permitting and regulatory reforms to develop domestic EV battery supply chain ▪Support policies to drive down domestic gasoline prices |
|
Export Policies |
▪ Support policies to develop and export clean energy technologies ▪ Support low-carbon development through national and international financing mechanisms |
▪ Robust support for exporting domestic fossil fuel, particularly LNG, including through regulatory reform, increased market access, and limits on Russian fossil exports |
▪ Support legislation to speed global access to domestic energy exports ▪ Support policies that limit Russian fossil fuel exports ▪ Support legislative measures to expand energy export market opportunities to serve developing countries ▪ Support with caveats expanding list of countries eligible for export of civilian nuclear technologies |
