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Outlook for Energy Policy Under the Next Congress
Phillip Rosetti, Josiah Neely, R Street, November 17, 2022
The 2022 election results are finally coming into focus, which now leads to the question everyone is asking: what will energy and climate policy look like in the next Congress? The picture being painted at this point is that Republicans will have a narrow majority in the House of Representatives and Democrats will retain the Senate and potentially even pick up a seat for a 51-49 majority. In 2021, we wrote on the challenges to President Joe Biden’s energy agenda under the narrow majority his party held and the need to win Sen. Joe Manchin’s (D-W.V.) support on all matters; we now follow this up by highlighting the challenges for energy policy in the next Congress.
Manchin is still important, but might be less important
Sen. Manchin will continue to play a key role in any energy-related legislative efforts, both as a swing vote and as the likely returning chairman of the Senate Energy and Natural Resources Committee. But his importance may be somewhat diminished. Last Congress, with Democrats having a narrow majority in both chambers, they could pursue “budget reconciliation” to circumvent the Senate’s usual 60 vote requirement and pass legislation via simple majority. With a Republican House, budget reconciliation is a less viable vehicle for any energy policy agenda, so Sen. Manchin will not be the only show in town when it comes to energy legislation. However, without budget reconciliation, Democrats will likely need 60 votes for legislation, meaning Manchin’s vote and approval of legislation will likely still be a requirement. In fact, Senate Democrats’ ability to pass more party-aligned legislation is lessened under the next Congress rather than expanded, despite the potential for a larger Senate majority.
Sen. Manchin will continue to play a key role in the confirmation of the president’s appointment to energy-related positions. These appointees have significant power to implement the president’s agenda, which, given the difficulty President Biden faces in getting his agenda through a Republican-controlled House, means that the bulk of the president’s policy will likely come from his agencies—and by extension his political appointees. Traditionally, these appointees are nominated by the president, and then the Senate holds hearings to evaluate the candidate. Finally, the Senate votes to confirm the appointment. In the past, this vote required 60 votes and was usually bipartisan, but ever since the “nuclear option” was used, nominations now only require a simple majority vote. Here is where it gets complicated.
The appointees that Biden wants to implement his energy, climate and regulatory agenda usually need a confirmation hearing from the relevant committee in the Senate. In this case, that means Sen. Manchin gets to decide if and when those nominees receive a hearing, potentially preventing appointments that Sen. Manchin views as unfavorable. This has been prominent in recent days as Sen. Manchin has refused to have a reconfirmation hearing for the current chairman of the Federal Energy Regulatory Commission, presumably in response to President Biden’s derogatory claims about coal energy. If President Biden selects nominees that Manchin views unfavorably, they may not get appointed at all.
The wild card, though, is the last undecided seat in the Senate which will be determined in Georgia. If Democrats take a win here, then they will hold 51 seats in the Senate, which means that if Sen. Manchin refuses to hold a hearing for a nominee, the Senate Majority Leader could force a floor vote where 50 Democrats vote to confirm and Vice President Kamala Harris could be the tie-breaking vote. Alternatively, if Republicans win in Georgia, and the Senate remains in a 50-50 split, Sen. Manchin’s vote would still be required to confirm appointees even without a hearing and the president would have to select energy-related nominees that meet Sen. Manchin’s approval. It should be noted, though, that the political optics of circumventing a Senate committee chairman’s traditional role in the confirmation process would be bad, and even though the president could get around Sen. Manchin, it may not be the ideal choice.
Republican energy and climate agenda may depend on election lessons learned
Under Former President Donald J. Trump, the story of the Republican energy agenda was a tale of two perspectives. When it came to policy and legislative issues, Republicans were largely unified, with votes aimed at keeping energy costs down and promoting energy innovation. But the way in which Republicans talked about energy and environmental issues was bifurcated, with more vulnerable Republicans like Sen. Susan Collins (R-Maine) or Sen. Lisa Murkowski (R-Alaska) taking a more moderate approach and pushing for a role for small-government climate policies, while President Trump and his closely aligned supporters eschewed any focus on climate change.
The varying rhetoric on climate from Republicans reflects a political challenge for the party. Winning—and holding—a majority requires that Republicans have policy ideas that are amenable to moderate voters in swing states and districts, which propels some Republicans to want to embrace a positive climate agenda consistent with Republican principles, even if it is not a popular topic with their base.
Where Republicans in the next Congress go on a climate and energy agenda will largely depend on their evaluation of why the 2022 midterms went so poorly. If Republicans view turnout as the problem, they may double-down on rhetoric more aligned with former President Trump’s efforts to galvanize their base. It should be noted, though, that pro-Trump voters do not seem to be reliable voters in midterms, with only 16 percent of voters saying their vote was intended to “express support for Trump.” Generally, candidates that were backed by Trump performed poorly, and the 2022 race represented an important bucking of a midterm trend, which is that independent voters did not vote in opposition of the incumbent party. In almost every midterm election, independent voters tend to vote in opposition to the party that holds the presidency by a margin of 10 points or more, but in 2022 independent voters favored Democrats, albeit by a narrow margin.
If Republicans conclude that they need to pursue a grow-the-party strategy rather than relying only on energizing the base, they may want to build on their budding small-government climate agenda. When Democrats took the House of Representatives in 2018, they formed the House Select Committee on the Climate Crisis to investigate climate policies. While this was a boon to Democrats’ ability to elevate the profile of climate-related issues, it also was a surprise benefit to Republicans that were able to use the committee to promote their own vision of how to address climate change with smaller government and less intrusive policies. Every Republican on the House Select Committee on the Climate Crisis except for Rep. Anthony Gonzalez—whose district will be eliminated in 2023 and could not be reelected—won their races by large margins. While these seats were always safe districts for Republicans, it highlights that the growing Republican climate movement exemplified by the Republicans’ Climate Task Force and Climate Caucus is likely helping Republicans gain moderate voters without hurting their views with their base.
Next Congress, Republicans will have to decide whether to retain—and likely rename—the House Select Committee on the Climate Crisis, which could be a vehicle for generating policies that help Republicans in moderate districts, or to eliminate the committee, which would be a more appealing vote to Republicans who have opposed the committee. We do not yet know what Republicans in the House will do, but the 2022 election results show a vindication for the climate Republicans, and we could see more climate focus from Republicans next Congress than ever before.
The biggest energy issues are bipartisan and likely to see progress
The energy policy topic that has dominated attention since passage of the Inflation Reduction Act (IRA) has been permitting reform. At R Street, we estimated that at least two-thirds of electricity subsidies under the IRA will go to clean energy that would have been constructed anyway and will deliver no additional climate benefit. An analysis of the IRA from Princeton University estimates that 80 percent of the potential climate benefits are locked behind transmission growth, which will require permitting reform. Both Republicans and Democrats have been outspoken supporters of permitting reform, and the last major permitting reform happened under Former President Barack Obama when Republicans held both chambers in Congress.
The fact that the next Congress is looking divided is a boon, rather than a harm, to many of the major energy policy issues on the horizon. This is because the preferred policy vehicle of the current Congress, budget reconciliation, is limited to budget-related matters and cannot address issues like permitting reform. The fact that the 118th Congress is likely going to force policymakers into bipartisanship to address these issues makes both compromise and legislative success more likely.
If permitting reform happens, it will probably end up as a combination of Democrat and Republican proposals, with changes to permitting laws that will likely accelerate clean energy and related infrastructure while potentially green lighting major oil and gas-related projects that Republicans—and Sen. Manchin—have prioritized in their concern of energy prices.
Other major energy policy issues, such as innovation, have always been reliable bipartisan winners and are unlikely to be slowed by the next Congress.
One major potential issue, though, is the worsening budget outlook. Interest payments on debt in 2022 are expected to be $635 billion, 25 percent higher than last year. This reflects increased spending during the pandemic, as well as rising interest rates, which make financing additional spending or energy subsidies from debt increasingly untenable. It is not yet clear how much pressure this will put on both Democrats and Republicans to cut spending and raise taxes, but it should be noted that the historic energy policy paradigm of subsidy expansion cannot continue forever. Republicans traditionally have used their majorities under Democratic presidents to criticize spending, and this dynamic is likely to be politically rewarding under the nation’s current fiscal conditions.
Republicans will be able to put a spotlight on unpopular Biden policies
An underappreciated aspect of holding a majority in either chamber of Congress is the ability to decide what hearings are held, and the privilege of inviting more witnesses to testify. Typically, the minority party only has one or two witnesses at hearings, and carefully selects them to try to counter the narrative of the hearing. With Republicans poised to hold the House, they will be able to hold hearings on topics they view as politically important, and they will be able to invite more witnesses to represent a broader array of views on policy topics. This may be problematic for President Biden, whose energy and climate policy agenda since he took office has largely gone unchecked by Congress.
Many of President Biden’s energy policy moves have garnered little media attention but are politically unpopular. For example, even before President Biden could appoint a secretary for the Department of Interior, his acting secretary issued an order that suspended all oil and gas leases and drilling permits on federal land. Given the current environment of high energy prices, Americans may be surprised by, and disappointed in, the administration’s handling of energy production. Additionally, Congress has largely given the president a pass on moves that would normally be considered highly controversial, such as requesting foreign authoritarian regimes to increase their own energy production while simultaneously threatening action against domestic producers. Republicans will also be able to scrutinize the executive branch’s permitting processes and causes of delays, as well as potential waste from the president’s implementation of subsidy programs implemented by Congress. The IRA in particular, which allocates hundreds of billions of dollars of subsidy for energy and environment programs, will likely face more scrutiny under the next Congress than it did when it was news.
The outlook for climate and energy policy is mixed under the next Congress. Those hoping for the passage of large bills in the vein of Build Back Better or the IRA are likely to be disappointed. But many of the big policy issues likely to come into play in the near term are generally bipartisan, and issues like permitting reform may be helped rather than harmed by the composition of the next Congress. Sen. Manchin will continue to play an important role, but depending on the outcome in Georgia, he may no longer be the deciding vote for all things related to energy policy in the president’s agenda.
Less certain at this point is the agenda Republicans will pursue in the House, as the more Trump-aligned Republicans performed poorly in the election while the climate-Republicans all performed very well. This could breathe new life into Rep. Kevin McCarthy’s budding climate agenda, but such efforts may be unpopular with less climate-concerned Republicans whom McCarthy will need the support of to secure speakership.
More certain, though, is that Republicans in the House will have a vehicle to draw attention to moves by the Biden administration that they oppose, and President Biden will face more scrutiny under the next Congress than he has enjoyed during his term so far.
Overall, we can expect major policy issues like permitting reform to continue to move, Republicans to use hearings to draw attention to President Biden’s more contentious policies, and confirmation of nominees to contentious issues largely focused on Democrats. And the direction we see Republicans move on issues like climate change may depend largely on the results of election autopsies.