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    The Energy Transition Is Underway. Fossil Fuel Workers Could Be Left Behind.

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    The Biden administration is trying to increase renewable energy investments in distressed regions, but some are skeptical those measures would be enough to make up for job losses.Tiffany Berger spent more than a decade working at a coal-fired power plant in Coshocton County, Ohio, eventually becoming a unit operator making about $100,000 annually.But in 2020, American Electric Power shut down the plant, and Ms. Berger struggled to find a job nearby that offered a comparable salary. She sold her house, moved in with her parents and decided to help run their farm in Newcomerstown, Ohio, about 30 minutes away.They sell some of the corn, beans and beef they harvest, but it is only enough to keep the farm running. Ms. Berger, 39, started working part time at a local fertilizer and seed company last year, making just a third of what she used to earn. She said she had “never dreamed” the plant would close.“I thought I was set to retire from there,” Ms. Berger said. “It’s a power plant. I mean, everybody needs power.”The United States is undergoing a rapid shift away from fossil fuels as new battery factories, wind and solar projects, and other clean energy investments crop up across the country. An expansive climate law that Democrats passed last year could be even more effective than Biden administration officials had estimated at reducing fossil fuel emissions. While the transition is projected to create hundreds of thousands of clean energy jobs, it could be devastating for many workers and counties that have relied on coal, oil and gas for their economic stability. Estimates of the potential job losses in the coming years vary, but roughly 900,000 workers were directly employed by fossil fuel industries in 2022, according to data from the Bureau of Labor Statistics.The Biden administration is trying to mitigate the impact, mostly by providing additional tax advantages for renewable energy projects that are built in areas vulnerable to the energy transition. But some economists, climate researchers and union leaders said they are skeptical the initiatives will be enough. Beyond construction, wind and solar farms typically require few workers to operate, and new clean energy jobs might not necessarily offer comparable wages or align with the skills of laid-off workers.Coal plants have already been shutting down for years, and the nation’s coal production has fallen from its peak in the late 2000s. U.S. coal-fired generation capacity is projected to decline sharply to about 50 percent of current levels by 2030, according to the Energy Information Administration. About 41,000 workers remain in the coal mining industry, down from about 177,000 in the mid-1980s.The industry’s demise is a problem not just for its workers but also for the communities that have long relied on coal to power their tax revenue. The loss of revenue from mines, plants and workers can mean less money for schools, roads and law enforcement. A recent paper from the Aspen Institute found that from 1980 to 2019, regions exposed to the decline of coal saw long-run reductions in earnings and employment rates, greater uptake of Medicare and Medicaid benefits and substantial decreases in population, particularly among younger workers. That “leaves behind a population that is disproportionately old, sick and poor,” according to the paper.The Biden administration has promised to help those communities weather the impact, for both economic and political reasons. Failure to adequately help displaced workers could translate into the kind of populist backlash that hurt Democrats in the wake of globalization as companies shifted factories to China. Promises to restore coal jobs also helped Donald J. Trump clinch the 2016 election, securing him crucial votes in states like Pennsylvania.Federal officials have vowed to create jobs in hard-hit communities and ensure that displaced workers “benefit from the new clean energy economy” by offering developers billions in bonus tax credits to put renewable energy projects in regions dependent on fossil fuels.Tiffany Berger, who was laid off when the plant in Coshocton County was shut down, struggled to find work that offered a comparable salary. She moved in with her parents and decided to help run her family’s farm.Maddie McGarvey for The New York TimesIf new investments like solar farms or battery storage facilities are built in those regions, called “energy communities,” developers could get as much as 40 percent of a project’s cost covered. Businesses receiving credits for producing electricity from renewable sources could earn a 10 percent boost.The Inflation Reduction Act also set aside at least $4 billion in tax credits that could be used to build clean energy manufacturing facilities, among other projects, in regions with closed coal mines or plants, and it created a program that could guarantee up to $250 billion in loans to repurpose facilities like a shuttered power plant for clean energy uses.Brian Anderson, the executive director of the Biden administration’s interagency working group on energy communities, pointed to other federal initiatives, including increased funding for projects to reclaim abandoned mine lands and relief funds to revitalize coal communities.Still, he said that the efforts would not be enough, and that officials had limited funding to directly assist more communities.“We’re standing right at the cusp of potentially still leaving them behind again,” Mr. Anderson said.Phil Smith, the chief of staff at the United Mine Workers of America, said that the tax credits for manufacturers could help create more jobs but that $4 billion likely would not be enough to attract facilities to every region. He said he also hoped for more direct assistance for laid-off workers, but Congress did not fund those initiatives. “We think that’s still something that needs to be done,” Mr. Smith said.Gordon Hanson, the author of the Aspen Institute paper and a professor of urban policy at the Harvard Kennedy School, said he worried the federal government was relying too heavily on the tax credits, in part because companies would likely be more inclined to invest in growing areas. He urged federal officials to increase unemployment benefits to distressed regions and funding for work force development programs.Even with the bonus credit, clean energy investments might not reach the hardest-hit areas because a broad swath of regions meets the federal definition of an energy community, said Daniel Raimi, a fellow at Resources for the Future.“If the intention of that provision was to specifically provide an advantage to the hardest-hit fossil fuel communities, I don’t think it’s done that,” Mr. Raimi said.Local officials have had mixed reactions to the federal efforts. Steve Henry, the judge-executive of Webster County, Ky., said he believed they could bring renewable energy investments and help attract other industries to the region. The county experienced a significant drop in tax revenue after its last mine shut down in 2019, and it now employs fewer 911 dispatchers and deputy sheriffs because officials cannot offer more competitive wages.“I think we can recover,” he said. “But it’s going to be a long recovery.”Adam O’Nan, the judge-executive of Union County, Ky., which has one coal mine left, said he thought renewable energy would bring few jobs to the area, and he doubted that a manufacturing plant would be built because of the county’s inadequate infrastructure.“It’s kind of difficult to see how it reaches down into Union County at this point,” Mr. O’Nan said. “We’re best suited for coal at the moment.”Federal and state efforts so far have done little to help workers like James Ault, 42, who was employed at an oil refinery in Contra Costa County, Calif., for 14 years before he was laid off in 2020. To keep his family afloat, he depleted his pension and withdrew most of the money from his 401(k) early.In early 2022, he moved to Roseville, Calif., to work at a power plant, but he was laid off again after four months. He worked briefly as a meal delivery driver before landing a job in February at a nearby chemical manufacturer.He now makes $17 an hour less than he did at the refinery and is barely able to cover his mortgage. Still, he said he would not return to the oil industry.“With our push away from gasoline, I feel that I would be going into an industry that is kind of dying,” Mr. Ault said. More

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    Energy Tax Credits, Meant to Help U.S. Suppliers, May Be Hard to Get

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    The Inflation Reduction Act contains tax breaks for solar and wind companies to buy American equipment. Qualifying won’t be easy.In April, Vice President Kamala Harris visited Qcells, a solar panel manufacturing facility in Dalton, Ga., to announce an early triumph of the Inflation Reduction Act: Summit Ridge Energy, one of the nation’s largest developers of community solar projects, would purchase 2.5 million U.S.-made solar panels.Subsidies under the new law brought the price in line with that of imported panels, allowing the companies to fight climate change and promote American manufacturing in one fell swoop.A month later, the Treasury Department issued guidance that functionally would require the solar cells — not just the panels — to be made in the United States for Summit Ridge to have confidence that it will get its 10 percent tax credit on installations that use them. Qcells won’t be able to produce cells until late 2024, sending Summit Ridge scrambling to find cheaper components for projects currently in its pipeline.“There’s not a single solar manufacturer who fully qualifies for this at this moment in time, which makes it difficult and is actually starting to cool investment,” said Leslie Elder, Summit Ridge’s vice president of political and regulatory affairs. “Now we have to re-evaluate based on what can pencil.”On paper, the Inflation Reduction Act is transformative for electricity generation in the United States.The law offers tax credits that could cover up to 70 percent of a renewable energy project’s cost if it checks several boxes meant to support American workers and communities. A new analysis finds that those incentives more than offset the additional expense associated with using domestically produced goods and paying prevailing wages.But guidance rolling out from the Biden administration — presaging formal rules — has raised alarm among energy companies that some of the credits might be difficult if not impossible to use, at least in the near term. The resulting frustration is emblematic of the current stage of climate action: an eye-straining haze of technical rule-making that reflects a tension between urgency and ensuring that the benefits of the energy transition are widely shared.Wally Adeyemo, the deputy secretary of the Treasury, expressed confidence that in combination, the rules would strike that balance.“We have a great deal of clarity about the strategic objectives, and we’re already seeing the impact of that in terms of the economy,” Mr. Adeyemo said. “It isn’t about any one rule. It’s about an ecosystem of rules that have been created under the I.R.A. that put us in a position to go from a country that had underinvested in the clean energy transition to being at the head of the pack.”The analysis, overseen by professors at Princeton and Dartmouth experienced in modeling climate policy’s effects, finds that the incentive aimed at U.S. manufacturers makes domestic solar panels more than 30 percent less costly to produce than imports. With incentives claimed by clean energy developers that meet labor standards and use domestic content, the total cost of generating utility-scale solar electricity could be lowered by 68 percent, and onshore wind energy by 77 percent.The study was funded by the BlueGreen Alliance, a partnership of unions and environmental groups. The organization has championed elements of the Biden administration’s climate agenda that support domestic manufacturing, particularly in places hurt by globalization, automation and the decline of fossil fuels.“Until now, the moral case and the business case did not always align,” said Ben Beachy, the organization’s vice president for industrial policy. “The I.R.A. changes that by offering developers an airtight business case for supporting high-paying jobs and a stronger and fairer U.S. manufacturing base.”The impact of the climate law is already evident, with announcements of 47 new plants to make batteries, solar panels and wind turbines since it was passed, according to American Clean Power, a trade association. Other analyses, including a paper by economists and engineers at the Electric Power Research Institute, the Federal Reserve Bank of Minneapolis and the University of California, Berkeley, found that the law would encourage more low-emissions projects eligible for uncapped tax credits than anticipated, potentially making the costs to the government substantially higher than earlier estimates.A recent study found that federal incentives could reduce the total cost of utility-scale onshore wind energy generation by 77 percent.Alisha Jucevic for The New York TimesBut the BlueGreen Alliance’s study shows significant uncertainty about the impact of rising material costs as demand for domestically sourced aluminum, steel and concrete increases, and doesn’t account for profits manufacturers might command before more competition enters the market. It also projects four million more jobs will be available in wind and solar energy by 2035 than if the I.R.A. hadn’t passed — more than eight times the current employment base — but does not model whether labor supply will measure up.“I find some of their key results to be highly optimistic, and that they likely underestimate some of the economywide costs associated with this scale of clean energy deployment,” said Daniel Raimi, a fellow at the think tank Resources for the Future who reviewed the analysis.At the same time, clean energy companies are digesting the administration’s guidance on how the tax credits will be allocated, and finding some unworkable in ways that may slow deployment.Take the bonus of up to 20 percent for developers that locate projects in low-income communities (which is separate from a bonus of 10 percent for locating in areas struggling with the transition away from fossil fuels). The Treasury Department, wanting to ensure that credits give rise to projects that wouldn’t otherwise happen, will award them only to projects not yet completed. Solar installers would have to sell the system and then wait to see if they got the credit before starting work.“I think we will lose some development in low-income communities this year because of the way that credit has been constructed,” said Sean Gallagher, a vice president for policy at the Solar Energy Industries Association. “Either the developer is going to absorb that difference, or they’ll have to go back to the customer to renegotiate the price, or the project’s not going to happen.”An even thornier issue is the extra 10 percent for using domestically manufactured components. Manufacturers are concerned that while effectively requiring solar cells to be made in the United States to qualify for the credit, the Treasury Department did not require their foundational component — the wafer, a thin slice of silicon that conducts energy — to be domestically produced. That could allow Chinese factories to continue to dominate a key part of the supply chain.“The prices they’re ultimately getting from the developers are undermined because the Chinese wafer manufacturers can crash the prices,” said Mike Carr, the executive director of the Solar Energy Manufacturers for America Coalition.Developers are upset because receiving the credit will, in most cases, require a complex calculation of the cost of each component to reach the threshold of 40 percent U.S.-produced content, and manufacturers are loath to disclose sensitive pricing information. Many also expected a more gradual phase-in process that would allow some of the current U.S. factory output to qualify for the credit, while planning for more stringent requirements.Brett Bouchy is the chief executive of Freedom Forever, a residential solar installation company that did more than $1 billion in business last year. He had planned to build a solar module and cell manufacturing plant in Arizona, which would cost $100 million and employ 1,000 people, to supply his own operations. After the guidance came out, he halted those plans — he couldn’t be confident his panels would qualify for the domestic content credit on top of the 7 cents per watt available to manufacturers.“We cannot make it work,” Mr. Bouchy said. “There is no benefit, because that 7 cents is eaten up with increased U.S. labor costs. Why would you invest $100 million when you really can’t get a return?”Those who support the administration’s approach emphasize that the bonus tax credits are just that: bonuses, not requirements, to offset costs associated with going the extra mile. Developers already get a 30 percent base incentive — and at least 10 years of certainty — for paying prevailing wages and employing apprentices, which most don’t consider very difficult.Todd Tucker, the director of industrial policy and trade at the Roosevelt Institute, said high standards were necessary to make investors confident that new U.S. factories would have enough orders to stay in business.“Once you start indicating that you’re going to allow some flexibility, that, by definition, softens the market signal,” he said.The Treasury Department is still taking comments on the rules for all of the credits, and industry trade associations are vying to change them. Even so, most companies say that the Inflation Reduction Act overall is a powerful force for decarbonization, and that companies have a strong incentive to seek every credit it allows.“It’s amazing how focusing this is for the mind, when people start throwing these kinds of dollars around,” said Sheldon Kimber, the chief executive of Intersect Power, a clean energy developer. “We’re being asked to do a hard thing, but there’s a lot of money in it for us.” More

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    G7 Countries Borrow China’s Economic Strategy

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    Wealthy democracies rev up an effort to spend trillions on a new climate-friendly energy economy, while stealing away some of China’s manufacturing power.Midway through his face-to-face meeting with President Biden in Indonesia last fall, the Chinese leader, Xi Jinping, offered an unsolicited warning.Mr. Biden had in the preceding months signed a series of laws aimed at supercharging America’s industrial capacity and imposed new limits on the export of technology to China, in hopes of dominating the race for advanced energy technologies that could help fight climate change. For months, he and his aides had worked to recruit allied countries to impose their own restrictions on sending technology to China.The effort echoed the sort of industrial policy that China had employed to become the world’s manufacturing leader. In Bali, Mr. Xi urged Mr. Biden to abandon it.The president was not persuaded. Mr. Xi’s protests only further convinced Mr. Biden that America’s new industrial approach was the right one, according to a person familiar with the exchange.As Mr. Biden and fellow leaders of the Group of 7 nations meet this weekend in Hiroshima, Japan, a centerpiece of their discussions will be how to rapidly accelerate what has become an internationally coordinated round of vast public investment. For these wealthy democracies, the goal is both to reduce their reliance on Chinese manufacturing and to help their own companies compete in a new energy economy.Mr. Biden’s legislative agenda, including bills focused on semiconductors, infrastructure and low-emission energy sources, has begun to spur what could be trillions of dollars in government and private investment in American industrial capacity. That includes subsidies for electric vehicles, batteries, wind farms, solar plants and much more.The spending — the United States’ most significant intervention in industrial policy in decades — has galvanized many of America’s top allies in Europe and Asia, including key leaders of the Group of 7. European nations, South Korea, Japan, Canada and others are pushing for increased access to America’s clean-energy subsidies, while launching companion efforts of their own.“This clean-tech race is an opportunity to go faster and further, together,” Ursula von der Leyen, the president of the European Commission, said after an economy-themed meeting at the Group of 7 summit on Friday.“Now that the G7 are in this race together, our competition should create additional manufacturing capacity and not come at each other’s expense,” she said.Mr. Biden touring a semiconductor manufacturer in Durham, N.C., in March.Al Drago for The New York TimesMr. Biden and his Group of 7 counterparts have embarked on a project with two ambitious goals: to accelerate demand, even by decades, for the technologies needed to reduce emissions and fight climate change, and to give workers in the United States and in allied countries an advantage over Chinese workers in meeting that demand.Much of that project has roared to life since the G7 leaders met last year in the German Alps. The wave of recent Group of 7 actions on supply chains, semiconductors and other measures to counter China is based on “economic security, national security and energy security,” Rahm Emanuel, the U.S. ambassador to Japan, told reporters this week in Tokyo.He added: “This is an inflection point for a new and more relevant G7.”Mr. Emanuel said the effort reflected a growing impatience among Group of 7 leaders with what they call Beijing’s use of economic measures to punish and deter behavior by foreign governments and companies that China’s officials do not like.But more than anything, the shift has been fueled by urgency over climate action and by two laws Mr. Biden signed last summer: a bipartisan bill to shower the semiconductor industry with tens of billions of dollars in government subsidies, and the climate provisions of the so-called Inflation Reduction Act, which companies have jumped to cash in on.Those bills have spurred a wave of newly announced battery plants, solar panel factories and other projects. They have also set off an international subsidy race, which has evolved after being deeply contentious in the immediate aftermath of the signing of the climate law.The lucrative U.S. supports for clean energy and semiconductors — along with stricter requirements for companies and government agencies to buy U.S.-made steel, vehicles and equipment — have put unwelcome pressure on competing industries in allied countries.Workers at a solar energy parts and batteries factory in Suqian, China, in February.Alex Plavevski/EPA, via ShutterstockSome of those concerns have been quelled in recent months. The United States signed a deal with Japan in March that will allow battery materials made in Japan to qualify for the benefits of the Inflation Reduction Act. The European Union is pursuing a similar agreement, and has proposed its own $270 billion program to subsidize green industries. Canada has passed its own version of the Biden climate law, and Britain, Indonesia and other countries are angling for their own critical mineral deals.Administration officials say once-rankled allies have bought into the potential benefits of a concerted wealthy-democracy industrial strategy.At the Group of 7 meeting, “you will see a degree of convergence on this that, from our perspective, can continue the conversion of the Inflation Reduction Act from a source of friction into a source of cooperation and strength between the United States and our G7 partners,” Jake Sullivan, the national security adviser, told reporters on Air Force One as Mr. Biden flew to Japan.Some Group of 7 officials say the alliance has much more work to do to ensure that fast-growing economies like India benefit from the increased investments in a new energy economy. “It is important that the acceleration that is going to be created by this doesn’t disincentivize investment around the world,” Kirsten Hillman, the Canadian ambassador to the United States, said in an interview.One country they don’t want to see benefit is China. The United States has issued sweeping restrictions on China’s ability to access American technology, namely advanced chips and the machinery used to make them. And it has leaned on its allies as it tries to enforce global restrictions on sharing technology with Russia, as well as China. All of those efforts are meant to hinder China’s continued development in advanced manufacturing.Biden officials have urged allied countries not to step in to supply China with chips and other products it can no longer get from the United States. The United States is also weighing further restrictions on certain kinds of Chinese chip technology, including a likely ban on venture capital investments that U.S. officials are expected to discuss with their counterparts in Hiroshima.Although many of the Group of 7 governments agree that China poses an increasing economic and security threat, there is little consensus about what to do about it.Mr. Biden with Xi Jinping, China’s leader, in Bali, Indonesia, in November.Doug Mills/The New York TimesJapanese officials have been relatively eager to discuss coordinated responses to economic coercion from China, following Beijing’s move to cut Japan off from a supply of rare earth minerals during a clash more than a decade ago.European officials, by contrast, have been more divided on whether to risk close and lucrative business ties with China. Some, like the French president, Emmanuel Macron, have pushed back on U.S. plans to decouple supply chains with China.Ms. von der Leyen, the European Commission president, has been pushing for a “de-risking” of relations with China that involves recognizing China’s growing economic and security ambitions while reducing, in targeted ways, European dependence on China for its industrial and defense base. European officials said in Hiroshima that they had been pleased to see American leaders moving more toward their approach, at least rhetorically.Still, the allies’ industrial policy push threatens to complicate already difficult relations with China. Consulting and advisory firms with foreign ties have been subject to raids, detainments and arrests in China in recent months. Chinese officials have made clear that they see export controls as a threat. Adopting the phase American officials use to criticize Beijing, the Chinese Embassy in Washington warned the Group of 7 this week against what it called “economic coercion.”Mr. Xi issued a similar rebuke to Mr. Biden in Bali last fall. He pointed to the late 1950s, when the Soviet Union withdrew support for the Chinese nuclear program.China’s nuclear research continued, Mr. Xi said, and four years later, it detonated its first atomic bomb. More

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    The Debt Ceiling Debate Is About More Than Debt

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    Republicans’ opening bid to avert economic catastrophe by raising the nation’s borrowing limit focuses more on energy policy than reducing debt.WASHINGTON — Speaker Kevin McCarthy of California has repeatedly said that he and his fellow House Republicans are refusing to raise the nation’s borrowing limit, and risking economic catastrophe, to force a reckoning on America’s $31 trillion national debt.“Without exaggeration, America’s debt is a ticking time bomb that will detonate unless we take serious, responsible action,” he said this week.But the bill Mr. McCarthy introduced on Wednesday would only modestly change the nation’s debt trajectory. It also carries a second big objective that has little to do with debt: undercutting President Biden’s climate and clean energy agenda and increasing American production of fossil fuels.The legislation, which Republicans plan to vote on next week, is meant to force Mr. Biden to negotiate over raising the debt limit, which is currently capped at $31.4 trillion. Unless the cap is lifted, the federal government — which borrows huge sums of money to pay its bills — is expected to run out of cash as early as June. The House Rules Committee said on Friday that it will meet on Tuesday to consider the bill and possibly advance it to a floor vote.More than half the 320 pages of legislative text are a rehash of an energy bill that Republicans passed this year and that aimed to speed up leasing and permitting for oil and gas drilling. Republicans claim the bill would boost economic growth and bring in more revenue for the federal government, though the Congressional Budget Office projected it would slightly lose revenue.The Republican plan also gives priority to removing clean energy incentives that were included in Mr. Biden’s signature climate, health and tax law. That legislation, known as the Inflation Reduction Act, included tax credits and other provisions meant to encourage electric vehicle sales, advanced battery production, utility upgrades and a variety of energy efficiency efforts.The proposal does include provisions that would meaningfully reduce government spending and deficits, most notably by limiting total growth in certain types of federal spending from 2022 levels.The bill would claw back some unspent Covid relief money and impose new work requirements that could reduce federal spending on Medicaid and food assistance. It would block Mr. Biden’s proposal to forgive hundreds of billions of dollars in student loan debt and a related plan to reduce loan payments for low-income college graduates.As a result, it would reduce deficits by as much as $4.5 trillion over those 10 years, according to calculations by the Committee for a Responsible Federal Budget in Washington. The actual number could be much smaller; lawmakers could vote in the future to ignore spending caps, as they have in the past.Even if the entire estimated savings from the plan came to pass, it would still leave the nation a decade from now with total debt that was larger than the annual output of the economy — a level that Mr. McCarthy and other Republicans have frequently labeled a crisis.The Republican plan is estimated to reduce that ratio — known as debt-to-G.D.P. — in 2033 by about nine percentage points if fully enacted. By contrast, Mr. Biden’s latest budget, which raises trillions of dollars in new taxes from corporations and high earners and includes new spending on child care and education, would reduce the ratio by about six percentage points.Those reductions are a far cry from Republicans’ promises, after they won control of the House in November, to balance the budget in 10 years. That lowering of ambitions is partly the product of Republican leaders’ ruling out any cuts to the fast-rising costs of Social Security or Medicare, bowing to an onslaught of political attacks from Mr. Biden.The lower ambitions are also the result of party leaders’ unwillingness or inability to repeal most of the new spending programs Mr. Biden signed into law over the first two years of his presidency, often with bipartisan support.At the New York Stock Exchange on Monday, Mr. McCarthy accused the president and his party of already adding “$6 trillion to our nation’s debt burden,” ignoring the bipartisan support enjoyed by most of the spending Mr. Biden has signed into law.The speaker’s plan would effectively roll back one big bipartisan spending bill, which Mr. Biden signed at the end of 2022 to fund the government through this year. But the other big drivers of debt approved under Mr. Biden that are not singled out for repeal in the Republican bill include trillions in new spending on semiconductor manufacturing, health care for veterans exposed to toxic burn pits, and upgrades to critical infrastructure like bridges, water pipes and broadband.Some of that spending could potentially be reduced by congressional appropriators working under the proposed spending caps, but much of it is exempt from the cap or already out the door. Most of the $1.9 trillion economic aid plan Mr. Biden signed in March 2021, which Republicans blame for fueling high inflation, is already spent as well.The plan squarely targets the climate, health and tax bill that Democrats passed along party lines last summer by cutting that bill’s energy subsidies. It would also rescind additional enforcement dollars that the law sent to the Internal Revenue Service to crack down on wealthy tax cheats. The Congressional Budget Office says that change would cost the government about $100 billion in tax revenue.Taken together, those efforts reduce deficits by a bit over $100 billion, suggesting debt levels are not the primary consideration in targeting those provisions. The bill’s next 200 pages show what actually is: a sustained push to tilt federal support away from low-emission energy and further toward fossil fuels, including mandating new oil and gas leasing on federal lands and reducing barriers to the construction of new pipelines.Republicans say those efforts would save consumers money by reducing gasoline and heating costs. Democrats say they would halt progress on Mr. Biden’s efforts to galvanize domestic manufacturing growth and fight climate change.The plan “would cost Americans trillions in climate harm,” said Senator Sheldon Whitehouse of Rhode Island, the Democratic chairman of the Budget Committee. “And it would shrink our economy by disinvesting in the technologies of tomorrow.”Republicans have positioned their fossil fuel efforts as a solution to a supposed production crisis in the United States. “I have spent the last two years working with the other side of the aisle, watching them systematically take this country apart when it comes to our natural resources,” Representative Jerry Carl of Alabama said last month before voting to pass the energy bill now embedded in the debt ceiling bill.Government statistics show a rosier picture for the industry. Oil production in the United States has nearly returned to record highs under Mr. Biden. The Energy Department projects it will smash records next year, led by output increases from Texas and New Mexico. Natural gas production has never been higher.White House officials warn that Republicans are risking a catastrophic default with their demands attached to raising the borrowing cap. “The way to have a real negotiation on the budget is for House Republicans to take threats of default, when it comes to the economy and what it could potentially do to the economy, off the table,” Karine Jean-Pierre, the White House press secretary, told reporters on Thursday.Mr. McCarthy has defended his entire set of demands as a complete package to reorient economic policy. But he mentioned energy only in passing in his speech to Wall Street.The issue he called a crisis — and the basis he cited for refusing to raise the borrowing limit without conditions — was fiscal policy and debt. Debt limit negotiations, he said, “are an opportunity to examine our nation’s finances.” More

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    Climate Change May Bring New Era of Trade Wars, as E.U. and U.S. Spar

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    Countries are pursuing new solutions to try to mitigate climate change. More trade fights are likely to come hand in hand.WASHINGTON — Efforts to mitigate climate change are prompting countries across the world to embrace dramatically different policies toward industry and trade, bringing governments into conflict.These new clashes over climate policy are straining international alliances and the global trading system, hinting at a future in which policies aimed at staving off environmental catastrophe could also result in more frequent cross-border trade wars.In recent months, the United States and Europe have proposed or introduced subsidies, tariffs and other policies aimed at speeding the green energy transition. Proponents of the measures say governments must move aggressively to expand sources of cleaner energy and penalize the biggest emitters of planet-warming gases if they hope to avert a global climate disaster.But critics say these policies often put foreign countries and companies at a disadvantage, as governments subsidize their own industries or charge new tariffs on foreign products. The policies depart from a decades-long status quo in trade, in which the United States and Europe often joined forces through the World Trade Organization to try to knock down trade barriers and encourage countries to treat one another’s products more equally to boost global commerce.Now, new policies are pitting close allies against one another and widening fractures in an already fragile system of global trade governance, as countries try to contend with the existential challenge of climate change.“The climate crisis requires economic transformation at a scale and speed humanity has never attempted in our 5,000 years of written history,” said Todd N. Tucker, the director of industrial policy and trade at the Roosevelt Institute, who is an advocate for some of the measures. “Unsurprisingly, a task of this magnitude will require a new policy tool kit.”The current system of global trade funnels tens of millions of shipping containers stuffed with couches, clothing and car parts from foreign factories to the United States each year, often at astonishingly low prices. But the prices that consumers pay for these goods do not take into account the environmental harm generated by the far-off factories that make them, or by the container ships and cargo planes that carry them across the ocean.A factory in Chengde, China. U.S. officials believe they must lessen a dangerous dependence on goods from China.Fred Dufour/Agence France-Presse — Getty ImagesAmerican and European officials argue that more needs to be done to discourage trade in products made with more pollution or carbon emissions. And U.S. officials believe they must lessen a dangerous dependence on China in particular for the materials needed to power the green energy transition, like solar panels and electric vehicle batteries.The Biden administration is putting in place generous subsidies to encourage the production of clean energy technology in the United States, such as tax credits for consumers who buy American-made clean cars and companies building new plants for solar and wind power equipment. Both the United States and Europe are introducing taxes and tariffs aimed at encouraging less environmentally harmful ways of producing goods.Biden administration officials have expressed hopes that the climate transition could be a new opportunity for cooperation with allies. But so far, their initiatives seem to have mainly stirred controversy when the United States is already under attack for its response to recent trade rulings.The administration has publicly flouted several decisions of World Trade Organization panels that ruled against the United States in trade disputes involving national security issues. In two separate announcements in December, the Office of the United States Trade Representative said it would not change its policies to abide by W.T.O. decisions.But the biggest source of contention has been new tax credits for clean energy equipment and vehicles made in North America that were part of a sweeping climate and health policy bill that President Biden signed into law last year. European officials have called the measure a “job killer” and expressed fears they will lose out to the United States on new investments in batteries, green hydrogen, steel and other industries. In response, European Union officials began outlining their own plan this month to subsidize green energy industries — a move that critics fear will plunge the world into a costly and inefficient “subsidy war.”The United States and European Union have been searching for changes that could be made to mollify both sides before the U.S. tax-credit rules are settled in March. But the Biden administration appears to have only limited ability to change some of the law’s provisions. Members of Congress say they intentionally worded the law to benefit American manufacturing.Biden administration is putting in place subsidies to encourage the production of clean energy technology in the United States, such as tax credits for consumers who buy American-made clean cars.Brittany Greeson for The New York TimesEuropean officials have suggested that they could bring a trade case at the World Trade Organization that might be a prelude to imposing tariffs on American products in retaliation.Valdis Dombrovskis, the European commissioner for trade, said that the European Union was committed to finding solutions but that negotiations needed to make progress or the European Union would face “even stronger calls” to respond.“We need to follow the same rules of the game,” he said.Anne Krueger, a former official at the International Monetary Fund and World Bank, said the potential pain of American subsidies on Japan, South Korea and allies in Europe was “enormous.”“When you discriminate in favor of American companies and against the rest of the world, you’re hurting yourself and hurting others at the same time,” said Ms. Krueger, now a senior fellow at the School of Advanced International Studies at Johns Hopkins University.But in a letter last week, a collection of prominent labor unions and environmental groups urged Mr. Biden to move forward with the plans without delays, saying outdated trade rules should not be used to undermine support for a new clean energy economy.“It’s time to end this circular firing squad where countries threaten and, if successful, weaken or repeal one another’s climate measures through trade and investment agreements,” said Melinda St. Louis, the director of the Global Trade Watch for Public Citizen, one of the groups behind the letter.Valdis Dombrovskis, the European commissioner for trade, has pressed the United States to negotiate more on its climate-related subsidies for American manufacturing.Stephanie Lecocq/EPA, via ShutterstockOther recent climate policies have also spurred controversy. In mid-December, the European Union took a major step toward a new climate-focused trade policy as it reached a preliminary agreement to impose a new carbon tariff on certain imports. The so-called carbon border adjustment mechanism would apply to products from all countries that failed to take strict actions to cut their greenhouse gas emissions.The move is aimed at ensuring that European companies that must follow strict environmental regulations are not put at a disadvantage to competitors in countries where laxer environmental rules allow companies to produce and sell goods more cheaply. While European officials argue that their policy complies with global trade rules in a way that U.S. clean energy subsidies do not, it has still rankled countries like China and Turkey.The Biden administration has also been trying to create an international group that would impose tariffs on steel and aluminum from countries with laxer environmental policies. In December, it sent the European Union a brief initial proposal for such a trade arrangement.The idea still has a long way to go to be realized. But even as it would break new ground in addressing climate change, the approach may also end up aggravating allies like Canada, Mexico, Brazil and South Korea, which together provided more than half of America’s foreign steel last year.Under the initial proposal, these countries would theoretically have to produce steel as cleanly as the United States and Europe, or face tariffs on their products.A steel plant in Belgium. Under the initial proposal, countries would theoretically have to produce steel as cleanly as the United States and Europe, or face tariffs.Kevin Faingnaert for The New York TimesProponents of new climate-focused trade measures say discriminating against foreign products, and goods made with greater carbon emissions, is exactly what governments need to build up clean energy industries and address climate change.“You really do need to rethink some of the fundamentals of the system,” said Ilana Solomon, an independent trade consultant who previously worked with the Sierra Club.Ms. Solomon and others have proposed a “climate peace clause,” under which governments would commit to refrain from using the World Trade Organization and other trade agreements to challenge one another’s climate policies for 10 years.“The complete legitimacy of the global trading system has never been more in question,” she said.In the United States, support appears to be growing among both Republicans and Democrats for more nationalist policies that would encourage domestic production and discourage imports of dirtier goods — but that would also most likely violate World Trade Organization rules.Most Republicans do not support the idea of a national price on carbon. But they have shown more willingness to raise tariffs on foreign products that are made in environmentally damaging ways, which they see as a way to protect American jobs from foreign competition.Robert E. Lighthizer, a chief trade negotiator for the Trump administration, said there was “great overlap” between Republicans and Democrats on the idea of using trade tools to discourage imports of polluting products from abroad.“I’m coming at it to get more American employed and with higher wages,” he said. “You shouldn’t be able to get an economic advantage over some guy working in Detroit, trying to support his family, from pollution, by manufacturing overseas.” More

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    Chinese Solar Makers Evaded U.S. Tariffs, Investigation Finds

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    The Biden administration pre-emptively halted any penalties from the case in June, prompting critics to say the administration had shortcut its own trade rulesWASHINGTON — U.S. officials have determined that four of eight major Chinese solar companies under investigation in recent months tried to evade tariffs by funneling products into the United States through Southeast Asian countries, in a trade case that has pitted clean energy advocates against domestic solar panel manufacturers.The decision applies to the Thailand operations of Canadian Solar and Trina Solar, as well as BYD Cambodia and Vina Solar Vietnam, according to documents published by the Department of Commerce Friday morning.The ruling centered around esoteric trade laws that aim to protect American manufacturers from unfairly cheap foreign products. But more broadly, the case is related to an increasingly difficult question confronting U.S. policymakers: how quickly the United States can expect to wean itself off China’s supply of materials that are crucial for the American economy, including the solar panels that are needed for a transition to green energy.The investigation, initiated at the request of a small California-based company named Auxin Solar, centered on whether Chinese companies have been trying to bypass tariffs that the United States imposed on cheap solar panels imported from China. In recent years, Chinese solar companies have significantly expanded their manufacturing presence in Southeast Asian countries that do not face the same tariffs.The trade case rests on whether the Chinese companies are actually using these Southeast Asian countries as a significant site of manufacturing, or if they are just making minor changes to products that are largely made in China to try to get around U.S. trade rules.Other companies that were also under investigation — namely New East Solar Cambodia, Hanwha Q CELLS Malaysia, Jinko Solar Malaysia and the Vietnam operations of Boviet Solar — were found not to be violating U.S. trade rules.Typically, companies that are found to be circumventing U.S. tariffs would immediately be subject to higher duty rates to bring their products into the United States. But in an unusual measure, the Biden administration in June pre-empted those higher duties by announcing a two-year pause on any tariff increases on solar products.The administration said its decision to halt additional tariffs would help ensure that the United States has enough solar panels as it tries to reduce its reliance on fossil fuels in the months to come. The Biden administration has set an ambitious goal of generating 100 percent of the nation’s electricity from carbon-free energy sources by 2035, a goal that may require more than doubling the annual pace of solar installations.But domestic manufacturing groups have criticized the president’s decision to halt any imposition of tariffs, saying he is failing to enforce America’s trade rules and crack down on unfair Chinese practices.Solar importers, too, have expressed dissatisfaction with the decision, saying that the two-year pause is not enough time to establish sufficient manufacturing capacity outside China to meet rising U.S. demand.Enormous planned investments in solar energy have raised the stakes of the debate. The Inflation Reduction Act, a sweeping new climate law signed by President Biden in August, provides roughly $37 billion in incentives for companies to produce solar panels, wind turbines, batteries and other crucial minerals in the United States, aiming to reverse the longstanding migration of clean energy manufacturing to China and elsewhere.The clash is the latest chapter in a decade-long conflict between the United States and China over the solar industry. In 2012, the United States began imposing duties on Chinese solar panels, arguing that Chinese manufacturers were unfairly selling their products in the United States at prices below the cost of production. Chinese solar manufacturers shifted their operations to Taiwan instead, but the United States soon expanded its tariffs to apply to Taiwan, as well.In recent years, Chinese companies have set up new manufacturing operations in Southeast Asia, and exports of solar products to the United States from Vietnam, Malaysia, Thailand and Cambodia have exploded. In many cases, these factories appear to rely on raw materials sourced largely from China, like polysilicon.That business model has proved problematic in more ways than one. The U.S. government has found that major Chinese producers of polysilicon and solar products are guilty of using forced labor in the Xinjiang region of China and has banned any products using that polysilicon from the United States.Auxin Solar and other domestic manufacturers have also said that the boom in business in Southeast Asia was an attempt by Chinese companies to evade the duties that the United States had imposed on Chinese products.In a preliminary decision on the case on Friday, officials at the Commerce Department agreed, at least for some cases. The Commerce Department will now require solar companies exporting to the United States from Thailand, Malaysia, Vietnam and Cambodia to certify that a significant proportion of their materials are coming from outside China. Otherwise, companies in those countries will be subject to the same duties paid by their Chinese suppliers starting in 2024. The Commerce Department will continue to review the case and issue its final decision on the matter on May 1, 2023.Mamun Rashid, the chief executive of Auxin Solar, said in a statement that the findings “largely validated and confirmed Auxin’s allegations of Chinese cheating.”“We will continue to press forward in these cases as they continue to make sure all trade cheats are playing by the rules,” he said.Abigail Ross Hopper, the chief executive of the Solar Energy Industries Association, which opposed the investigation, said the group was “obviously disappointed that commerce elected to exceed its legal authority” by ruling against the imports from Southeast Asia.“This decision will strand billions of dollars’ worth of American clean energy investments and result in the significant loss of good-paying, American, clean energy jobs,” she said, adding, “This is a mistake we will have to deal with for the next several years.”Major solar importers have complained for months of difficulties obtaining enough solar panels to meet growing demand for clean energy solutions. George Hershman, the chief executive of SOLV Energy, a large solar contracting firm that has provided engineering, construction and maintenance services for projects across 26 states, said the decision was likely to disrupt an industry that has already been reeling from supply chain constraints in recent years.“The upside is that commerce took a nuanced approach to exempt a number of manufacturers rather than issuing a blanket ban of all products from the targeted countries,” Mr. Hershman said. “While it’s positive that companies will be able to access some of the crucial materials we need to deploy clean energy, it’s still true that this ruling will further constrict a challenged supply chain.”Some members of the Biden administration are sympathetic to these arguments. In a hearing in May before the Senate Energy Committee, Jennifer M. Granholm, the secretary of energy, said the investigation put at stake “the complete smothering of the investment and the jobs and the independence that we would be seeking as a nation to get our fuel from our own generation sources.”The investigation was under the purview of the Department of Commerce, not the Department of Energy, she said. “But I am certainly deeply concerned about the goal of getting to 100 percent clean electricity by 2035 if this is not resolved quickly.”But the Biden administration’s decision to effectively neutralize the trade investigation by halting any additional tariffs that would result from it until June 2024 has also attracted its share of criticism.Along with the small group of solar manufacturers who do not have ties to China, groups that lobby in favor of domestic manufacturing have protested the Biden administration’s taking action in a type of trade decision that is typically independent and quasi-judicial.“This is illegal activity that is directly harming our companies. That’s why we have trade laws,” said Nick Iacovella, the communications director for the Coalition for a Prosperous America, which called Friday for the Biden administration to rescind its emergency declaration halting the tariffs. “There’s absolutely no reason we should allow the Chinese to continue illegal activity for two years.”In a letter to the Biden administration in July, Democratic lawmakers, including Daniel T. Kildee of Michigan, also criticized the decision to pause the tariffs, saying it would undercut “existing and planned domestic solar manufacturing investments, hurting American workers and companies.”Trade remedy laws are one of the only tools available to defend American manufacturers and “should not be undermined,” they wrote.But other lawmakers called on Friday for an extension of the two-year pause on tariffs. Eight Democratic senators, led by Jacky Rosen from Nevada, said solar projects needed access to more basic components to operate.The debate is taking on increasing urgency now that the United States is preparing to make huge investments in its clean energy industry, through bills such as the Inflation Reduction Act.Analysts say it will still take time for the United States to be independent of foreign solar imports. In 2021, the United States had the capacity to manufacture roughly 7.5 gigawatts’ worth of solar modules a year, according to industry figures.In the wake of the passage of the new climate law, several companies have announced plans to increase that capacity by another 20 gigawatts a year over the coming decade, according to ClearView Energy Partners, a Washington research firm.But solar companies are expected to install far more than that — nearly 40 gigawatts worth of solar capacity in 2023, according to government forecasts — spurred on by other tax breaks for solar power in the new climate law. And the country still lacks the capacity to produce solar cells and wafers, key components that are primarily produced overseas.“Therefore, domestic solar panel manufacturers appear likely to rely heavily on an overseas supply chain after” any tariffs are potentially put in place by the end of 2024 as a result of the Commerce Department’s decision, the analysts at ClearView concluded. More

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    Portugal Could Hold an Answer for a Europe Captive to Russian Gas

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    Portugal has no coal mines, oil wells or gas fields. Its impressive hydropower production has been crippled this year by drought. And its long-running disconnect from the rest of Europe’s energy network has earned the country its status as an “energy island.”Yet with Russia withholding natural gas from countries opposed to its invasion of Ukraine, the tiny coastal nation of Portugal is suddenly poised to play a critical role in managing Europe’s looming energy crisis.For years, the Iberian Peninsula was cut off from the web of pipelines and huge supply of cheap Russian gas that power much of Europe. And so Portugal and Spain were compelled to invest heavily in renewable sources of energy like wind, solar and hydropower, and to establish an elaborate system for importing gas from North and West Africa, the United States, and elsewhere.Now, access to these alternate energy sources has taken on new significance. The changed circumstances are shifting the power balances among the 27 members of the European Union, creating opportunities as well as political tensions as the bloc seeks to counter Russia’s energy blackmail, manage the transition to renewables and determine infrastructure investments.The Alto Tamega dam, part of a hydropower facility in northern Portugal that will be operational in 2024.Matilde Viegas for The New York TimesThe urgency of Europe’s task is on display this week. On Wednesday, Russia’s energy monopoly, Gazprom, again suspended already reduced gas deliveries to Germany through its Nord Stream 1 pipeline. With natural gas costing about 10 times what it did a year ago, the European Union has called for an emergency meeting of its energy ministers next week.As Brussels tries to figure out how to manage the crisis, the possibility of funneling more gas to Europe through Portugal and Spain is gaining attention.Portugal and Spain were among the first European nations to build the kind of processing terminals needed to accept boatloads of natural gas in liquefied form and to convert it back into the vapor that could be piped into homes and businesses.This imported liquefied natural gas, or L.N.G., was more expensive than the type much of Europe piped in from Russia. But now that Germany, Italy, Finland and other European nations are frantically seeking to replace Russian gas with substitutes shipped by sea from the United States, North Africa and the Middle East, this disadvantage is an advantage.Solar panels in Sintra. Connecting such panels to Europe’s electricity grid could help ease energy shortages on the continent.Matilde Viegas for The New York TimesTogether, Spain and Portugal account for one-third of Europe’s capacity to process L.N.G. Spain has the most terminals and the biggest, though Portugal has the most strategically located.Its terminal in Sines is the closest of any in Europe to the United States and the Panama Canal; it was the first port in Europe to receive L.N.G. from the United States, in 2016. Even before the war in Ukraine, Washington identified it as a strategically important gateway for energy imports to the rest of Europe.Spain also has an extensive network of pipelines that carry natural gas from Algeria and Nigeria, as well as large storage facilities.Understand the Decline in U.S. Gas PricesCard 1 of 5Understand the Decline in U.S. Gas PricesGas prices are falling. More

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    Analysis Deems Biden’s Climate and Tax Bill Fiscally Responsible

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    Despite Republican claims, the new legislation would be only a modest corporate tax increase, Congress’s Joint Committee on Taxation found.After more than a year of trying — and failing — to pack much of President Biden’s domestic agenda into a single tax-and-spend bill, Democrats appear to have finally found a winning combination. They’ve scrapped most of the president’s plans, dialed down the cost and focused on climate change, health care and a lower budget deficit.As soon as party leaders announced that new bill last week, Republicans began attacking it in familiar terms. They called it a giant tax increase and a foolish expansion of government spending, which they alleged would hurt an economy reeling from rapid inflation.But outside estimates suggest the bill would not cement a giant tax increase or result in profligate federal spending.An analysis by the Joint Committee on Taxation, a congressional nonpartisan scorekeeper for tax legislation, suggests that the bill would raise about $70 billion over 10 years. But the increase would be front-loaded: By 2027, the bill would actually amount to a net tax cut each year, as new credits and other incentives for low-emission energy sources outweighed a new minimum tax on some large corporations.That analysis, along with a broader estimate of the bill’s provisions from the nonpartisan Committee for a Responsible Federal Budget, suggests that the legislation, if passed, would only modestly add to federal spending over the next 10 years. By the end of the decade, the bill would be reducing federal spending, compared with what is scheduled to happen if it does not become law.And because the bill also includes measures to empower the Internal Revenue Service to crack down on corporations and high-earning individuals who evade taxes, it is projected to reduce the federal budget deficit over a decade by about $300 billion.Adding up the headline cost for what Democrats are calling the Inflation Reduction Act is more complicated than it was for many previous tax or spending measures that lawmakers approved. The bill blends tax increases and tax credits, just as Republicans did when they passed President Donald J. Trump’s signature tax package in 2017. But it also includes a spending increase meant to boost tax revenues and a spending cut meant to put more money in consumers’ pockets.Maya MacGuineas, the president of the Committee for a Responsible Federal Budget, said the composition of the deal was vastly different from a larger bill that Democrats failed to push through the Senate in the fall. It included several spending programs that were set to expire after a few years, and budget hawks warned that the overall package would add heavily to federal debt if those programs were eventually made permanent, as Washington has been known to do, without offsetting tax increases.Ms. MacGuineas called the original idea, known as Build Back Better, “a massive gimmicky budget buster.” She had kinder words for the new package, saying it “manages to push against inflation, reduce the deficit, and, once fully phased in, it would actually cut net spending, without raising net taxes.”“That is a pretty monumental improvement,” she added.The bill springs from an agreement between Senator Chuck Schumer of New York, the majority leader, and Senator Joe Manchin III of West Virginia, a key centrist Democrat. President Biden blessed it last week, and it carries what remains of what was once his $4 trillion domestic agenda.Understand What Happened to Biden’s Domestic AgendaCard 1 of 7‘Build Back Better.’ More