There are philosophical and physical contradictions in the Republican Party against companies that incorporate climate change into their businesses and goals. The philosophical one is that climate change and government efforts to address it have become established concepts virtually everywhere outside the Republican committee room. Corporations will go mad and, in other words, be derelict of trustees and simply ignore them on principle. Republicans, on the other hand, expect corporations to do so, and by putting pressure on them, they are ruining the party’s reputation for allowing corporations to run things as they see fit. The physical contradiction is that most of the country’s clean energy infrastructure is being built in districts including McCarthy, even though Republican representatives oppose actions to mitigate climate change. (see here for detailed data).
These contradictions will grow as environmental considerations become a cornerstone of corporate strategy, including in companies that work with fossil fuels. Here, there is a clash of ideological fundamentalism and corporate pragmatism, blacklisted by Texas corporations allegedly hostile to fossil fuel producers. Are lending officers reluctant to fund Frackers, or are they simply managing their exposure to demand and regulatory risks? Republican outrage, precisely to limit its scope, is to work with the Securities and Exchange Commission to mandate climate change disclosures, representing a triumph of outrage over practicality.
What is likely at work here, and has plagued the Republican Party’s relationship with the House in the past, is about the divide between big and small business owners. The Chamber’s long-standing support for globalization, which was also a Republican position before former President Donald Trump took over the party, has been an insult to small domestic businesses that are less competitive internationally. This extends to environmental issues. Large oil companies publicly support a carbon tax and crackdown on methane leaks as a means of managing long-term regulatory risk, but smaller exploration and production companies do not. This has created a divide in an industry that has traditionally been allied with the Republican Party, and the recent Republican populist trend has increased the tendency to voice support (and solicit donations) for the little man.
Meanwhile, as cleantech reaches critical mass in more states, their constituencies will demand more public support from Republican politicians, supporting the kinds of things the side of the aisle is famous for: more. Easy permits, looser labor laws, lower taxes. ), and more states will challenge the Republican orthodoxy on climate. The incentives provided by the Infrastructure Investment and Jobs Act and the Inflation Reduction Act will accelerate the decentralization not only of cleantech deployment, but also of manufacturing and associated jobs.
That ultimately complicates the fossil fuel skepticism. Texas, after all, is not only the largest producer of conventional fuels, but also produces more electricity from wind and solar power combined than any other state. It is also home to Tesla, the country’s largest electric car maker.
One of the constituencies to watch in this regard is public utilities. The industry has traditionally been an obstacle to more rapid deployment of renewable and distributed energy because it threatens the monopoly of utilities. However, the IRA included some utility-friendly measures, such as subsidies for existing nuclear power plants. Additionally, the law makes some tweaks to how utilities can treat tax credits for renewable energy projects, allowing them to be transferred to third parties and recognized in advance. , could put utilities on a more level playing field with independent developers. Given that utilities tend to wield a lot of power in the state capitol, local Republican officials have been criticized for supporting strong voters who are doing well on climate policy, as well as party leaders who oppose it at the federal level. may be caught between maintaining the unity of
In fact, one of the unintended consequences of the House Republican anti-ESG push could accelerate the rollout of multi-billion dollar IRAs. The narrowly controlled House of Representatives can block further legislation, but it has little power necessary to reverse the just-passed climate laws. (In fact, a small Republican majority might doom McCarthy’s bid for the Gavel. Faced with the prospect of 2024, a government agency with 10 years to spend on a legislative period may conclude that the political period is only two years.
Efficient? No, it’s not. Even before infusing hundreds of billions of dollars in a short period of time, the IRA’s entanglement with reshoring and geopolitical competition threatens inflation in the cleantech sector, whose calling card is spectacular deflation. We can probably expect some House oversight hearings on it, even if there’s a conspicuous lack of useful plans to mitigate it.
Bloomberg Opinion Details:
• What’s next for Biden’s green agenda after the midterms?Liam Denning
• Democrats have trouble with debt ceilings: Jonathan Bernstein
• Can MAGA Republicans Learn to Love Democracy?: Francis Wilkinson
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Liam Denning is a Bloomberg Opinion columnist on energy and commodities. A former investment banker, he was the editor of the Wall Street Journal’s Heard on the Street column and a reporter for the Financial Times’ Lex column.
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