The U.S. House of Representatives narrowly passed a nearly $2 trillion budget reconciliation bill that, if enacted, would offer a big hand to the country's efforts to slash climate-warming greenhouse gas emissions, particularly from the energy sector.

On Nov. 19, the House voted 220-213 to pass the Build Back Better Act.

Along with social spending programs, the bill includes massive climate and clean energy investments. One of the most significant climate provisions would place a fee on methane emissions from oil and natural gas producers. The fee, which starts at $900 per metric tonne in 2023 and eventually rises to $1,500/tonne, could avoid roughly 172 million tonnes of CO2-equivalent emissions by 2050, according to one analysis.

The Build Back Better Act would also expand and extend key tax incentives for renewable resources and electric vehicles and create new investment tax credits for energy storage and high-voltage transmission lines. In addition, existing nuclear plants would be eligible for a federal production tax credit that ends after 2027, two years earlier than in a previous draft of the bill released Oct. 28.

The latest iteration of the bill's hydrogen production tax credit also watered down the benefit to producers of blue hydrogen, which is made from natural gas and utilizes carbon capture technology to mitigate process emissions. Under the previous version, facilities that generated 0.45-1.5kg of CO2-equivalent greenhouse gas emissions per kilogram of hydrogen produced could claim 50% of the credit. In the new version, this tier would only qualify for 33.4% of the credit.

Outside of tax-related measures, the bill provides $29 billion to help deploy low- and zero-emission technologies under a proposed greenhouse gas reduction fund. Much of that investment would go to nonprofit financing institutions that leverage private-sector money for projects that reduce or avoid emissions. In keeping with a major Biden administration priority, 40% of the investments must benefit low-income and disadvantaged communities.

The bill would also provide $9.7 billion in grants and loans for electric cooperatives to purchase and deploy clean energy or make efficiency improvements. That funding could also be used for debt relief and other costs associated with retiring fossil fuel-based generation. Separately, the legislation would provide $2.88 billion in loans for clean energy projects under the Rural Electrification Act of 1936.

Along with supporting emissions cuts from the power sector, the House bill invests heavily in vehicle electrification. In addition to providing tax credits for EV purchases, the bill sets aside funding and grant money for electric vehicle manufacturing and the installation of public EV charging equipment.

But the legislation excluded an earlier proposal from Democrats to create a national clean electricity performance program that would incentivize utilities to expand their share of emissions-free power.

Despite the loss of that provision, the Build Back Better Act and a separate bipartisan infrastructure package that President Joe Biden signed into law Nov. 15 are "transformative" pieces of legislation for the environmental justice effort, said Jahi Wise, senior advisor for climate policy and finance for the White House Office of Domestic Climate Policy, during a Nov. 4 webinar hosted by the American Council on Renewable Energy.

"Across the board on everything from addressing legacy pollution to incentivizing deployment of clean energy in low-income communities, from beefing up [National Environmental Policy Act] review to accelerating [distributed energy resource] deployment to transmission — it's like the entire package of what we need to move to a net-zero economy," Wise said. "And it's largely built from talking to folks in communities, folks in business, folks at the state and local level who have been doing this work for decades."

Next steps

The Build Back Better Act now heads to the Senate, where Democratic leaders hope to move the package quickly but face uncertain support from party moderate Sen. Joe Manchin, D-W.Va.

Manchin said on Nov. 1 that, based on the provisions of the framework he had seen, the proposal appeared to include "budget games that make the real cost of the so-called $1.75 trillion bill estimated to be almost twice that amount if the full time is run out."

"This is a recipe for an economic crisis," Manchin said during a Nov. 1 press conference. "I will not support a bill that is this consequential without thoroughly understanding the impact that it'll have on our national debt, our economy, and most importantly all of our American people."