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In the coming weeks, Congress may adopt one of the most important climate policies in US history.

The $ 3.5 trillion budget plan includes a provision known as the Clean Electricity Payments Program, which will use charges and penalties to incentivize utilities to increase the share of carbon-free electricity in the total they sell each year. If that works, as expected, the legislation will ensure that by 2030, the energy sector will generate 80% of its electricity from sources such as wind, solar and nuclear power plants, which will reduce more than a billion tons of annual greenhouse gas emissions.

The move will be a foundational step in President Joe Biden’s ambitious climate plan, which aims to put the country on track to eliminate climate pollution from electricity generation by 2035 and reach zero emissions by mid-century.

However, there are serious questions about whether the program will be able to achieve its aggressive goals. How the country’s complex electricity sector actually reacts will depend largely on how the agency implementing the program designs it, and especially where it sets fees and penalties, some economists say.

It is also still unclear whether this measure will be adopted in any form similar to its current one, or even at all.

How will it work?

The Clean Electricity Payments Program is a pivot to the Clean Electricity Standard, a regulation enacted by many states that requires utilities to achieve certain levels of clean electricity by certain years. The proposal generally favors payments and fines over binding mandates because that could allow it to go through a legislative process known as budget negotiation, which requires only a simple majority in the Senate.

According to the Clean Air Task Force analysis, once companies increase their share of clean electricity above the annual target, they will receive payments for every additional megawatt-hour of electricity they sell, which comes from carbon-free sources. Those who do not reach this threshold will have to pay a commission.

The program does not require all electricity suppliers to reach the same level at the same time; he would adjust the annual targets according to the point at which each starts. But the overall goal is for the US energy sector to generate, on average, 80% of its electricity from clean sources over the next nine years.

US Senator Tina Smith of Minnesota supported the measure, which the Energy Department is likely to follow.

The budget bill also includes federal tax breaks to boost clean electricity production. With these loans, the program will fund between $ 150 billion and $ 200 billion, according to Third Way, a center-left think tank in Washington, DC.

Taken together, the package will constitute “the most ambitious and ambitious climate and clean energy policy the United States has ever adopted,” said Josh Fried, head of the organization’s climate and energy program.

What will the program do?

If these measures achieve 80% of clean electricity by 2030, it will more than double the share of carbon-free electricity in the United States and significantly accelerate the pace of the transition to clean energy.

Currently, about 38% of the electricity generated in the United States comes from carbon-free sources: 18% from renewable sources and 20% from nuclear power.

The Evergreen Collective’s report released this month by the Natural Resources Defense Council found that an 80% increase in energy would result in an 86% reduction in carbon emissions from 2005 levels.

This will eliminate over a billion tons of annual climate pollution over the next nine years. By comparison, the energy sector reduced annual emissions by just over 800 million tonnes in the 14 years leading up to 2019, almost entirely by switching from coal to natural gas and increasing the use of renewable energy sources.

How else does it help?

This will hit hard one of the largest sources of US climate pollution. The electricity sector produces a quarter of all greenhouse gases in the country, second only to the transport sector at 29%.

Cleaning up the energy sector also makes it easier to eliminate other major emission sources. This ensures, for example, that much of the electricity used to charge electric vehicles, trucks and buses is carbon-free. The same goes for things like heating and cooking if regulations require more homes and businesses to switch to electric stoves, heat pumps, and other cleaner technologies.

“If we want to achieve real, deep cuts in emissions, we have to do it with clean electricity,” says Leah Stokes, assistant professor of political science at the University of California, Santa Barbara, who advised on policy issues. …

Meanwhile, other studies have shown that switching to about 80% carbon-free electricity will spur $ 1.5 trillion in clean energy investments, create hundreds of thousands of jobs, and save hundreds of thousands of lives in the coming decades by reducing air pollution.

But will this really lead to 80% clean electricity by 2030?

“Who knows?” says James Bushnell, an environmental and energy economist at the University of California, Davis.

The downside of using incentives instead of strict requirements is that you cannot guarantee the end result. Bushnell said the government will need to make some imperfect predictions or continually assess and refine how big the sticks and the abundance of the carrots need to be to bring about the desired change.

He will also need to carefully design the program to keep the industry from playing with it. He sees scenarios in which utilities can pool large amounts of clean electricity in some years and narrow blunders in others in ways that minimize fines, maximize disbursements, and slow program progress.

Another problem is that much of today’s data on electricity production and sales in the US is self-reported, while the “purity” of electricity purchased from the markets in real time is not always clear. Thus, the government is likely to need to establish rigorous monitoring and verification processes, and develop reliable ways to certify or track carbon-free electricity sources and their end-use.

What will this mean for electricity prices?

Most estimates of the Clean Electricity Payments Program conclude that it will lead to lower consumer prices. This is because it is funded by the federal government and utilities will have to use payments in the best interest of customers.

“In the traditional [clean electricity standard]costs are reflected in electricity tariffs and therefore by utility consumers, ”says Evergreen, co-authored by Stokes. On the contrary, the payments program will shield Americans from rising electricity bills, the report said.

But Bushnell says that even if these performance payments are used to lower prices, in some cases they could still rise. This is because all utilities will compete for limited sources of both old and new clean electricity, which will drive up prices. Dirty electricity prices can fall for the same reasons as market supply and demand. Actual results from market to market remain to be seen, he said.

So why not just put mandates into effect?

While the simple commitment of utilities to sell clean electricity at a given level at a specific time offers a clearer path to the desired outcome, the proposed payment plan has one major advantage: it is politically feasible.

In particular, it could allow legislators to incorporate the proposal into the budget negotiation process. This allows Congress to pass legislation on certain tax and expenditure issues with 51 votes in the Senate – just as many as Democrats if Vice President Kamala Harris intervenes to give the casting vote.

A regulatory rule cannot claim reconciliation by requiring it to provide 60 votes to overcome the pirate threat.

Does this mean that it will definitely pass?

Not at all.

There are severe restrictions on what measures can be included in the negotiation process, in accordance with the so-called Byrd’s rule. The Senate cannot consider “outside” provisions requiring any proposal to change federal spending or taxes in a manner that, among other things, is more than secondary to other policy objectives.

So there is always a chance that a Senate deputy might rule that certain measures are inadequate, excluding them entirely from the final bill.