U.S. climate and energy laws push rest of world, IEA chief says

Executive Editor

The recently passed infrastructure law will have a ripple effect worldwide and encourage other governments to invest in new clean energy technologies, Fatih Birol, executive director of the International Energy Agency, told Cipher in an exclusive interview.

“It is definitely one of the critical moments in the U.S., but also global energy markets,” Birol said in a virtual interview from the agency’s headquarters in Paris last week as part of Cipher’s Newsmakers series.

I believe many of the colleagues in the U.S. may not see it. But if you are outside of the U.S. like me—working with many governments, talking with the different heads of governments, heads of companies, and so on—they see if the United States goes for electric cars, if the U.S. goes for carbon capture and storage, if the U.S. puts money in the hydrogen applications, there must be something in it. So, ‘it’s a winner,’ they think.
Fatih Birol, executive director of the International Energy Agency

The clean energy provisions of the infrastructure law and the Build Back Better bill, which lawmakers are still debating, have been pared back from initial aspirations of President Biden and some Democrats. But they both still represent historic levels of government investments in clean energy.

The infrastructure law is putting more than $100 billion in climate and clean energy programs, including nearly $40 billion in energy research and development alone within the Energy Department.

That’s equivalent to doubling the energy R&D budget for five years straight, according to ClearPath, a nonprofit organization focused on clean energy innovation policy.

“This is the largest investment in new clean energy technologies in R&D in the last 40 years,” Spencer Nelson, ClearPath’s senior research director, told Cipher.

But the infrastructure law is just the beginning for Biden and many congressional Democrats. The Build Back Better (BBB) legislation, which passed the House before Thanksgiving and is awaiting action by the Senate, would put some $500 billion toward clean energy. The BBB would pour $2.2 trillion of federal spending over 10 years into a host of issues, climate change being one of the most prominent.

Its fate is uncertain due to opposition by congressional Republicans and a couple of key Senate Democrats, particularly Sen. Joe Manchin of West Virginia, which is rich in coal and natural gas.

If the BBB doesn’t pass, “the pace of the progress will be much smaller,” Birol said.

The infrastructure law and BBB are designed to work in tandem. Here’s an example of what that means:

The infrastructure law pours $8 billion and $3.5 billion, respectively, into building hubs that will support first-of-their-kind facilities making clean hydrogen fuel and capturing carbon dioxide emissions from the ambient air (called direct air capture).

The Build Back Better bill would provide tax credits for more developers to build clean hydrogen and direct air capture facilities.

“What the BBB provides is a pull from the market side,” said David Hart, director of the Center for Clean Energy Innovation at the Information Technology and Innovation Foundation.

If the BBB doesn’t pass, “it raises the risk of some of those demonstration projects not leading to commercial projects,” Hart told Cipher.

At least one entrepreneur says she would stick with it, despite the headwinds such a failure of passage would suggest.

Jennifer Holmgren is CEO of LanzaTech, a company using new technology to turn pollution, including carbon dioxide emissions, into usable products ranging from sustainable aviation fuel to yoga clothes.

Although based in the United States, most of LanzaTech’s current business is outside the U.S. The infrastructure law “will allow us to build plants here,” Holmgren said in an interview from LanzaTech’s headquarters in Skokie, Ill. (Stay tuned soon for the debut of our “Innovators” video series with Holmgren.)

“We’re not going to fail” if BBB doesn’t pass, Holmgren said. Echoing Birol, she said it would slow things down. “The question is, how fast can we go?”

Birol says he is keeping in close touch with U.S. lawmakers on both sides of the aisle urging passage of the Build Back Better bill.

Birol’s intergovernmental agency was first founded by wealthy nations in the aftermath of the 1970’s oil crisis to protect energy security. The group covered 45% of global energy consumption when Birol became executive director in 2015; today it’s close to 80%.

As the urgency of climate change has grown, IEA’s mission has shifted to tackle the problem. Its clout has grown, too. Birol was even named one of Time’s 100 most influential people this year, nominated by President Biden’s Chief Climate Envoy John Kerry.

“We hope that they [U.S. lawmakers] understand that pushing clean energy is not only important for addressing the climate challenges, but to prepare U.S. economy for the next chapter of the energy industry,” Birol said. “It will be a huge competition and [the] United States, to be honest with you, is not the only country that pushes the envelope when it comes to clean energy technologies.”