Time for Congress to bolster energy security

Russia’s war on Ukraine has upended global commodity markets and rekindled concerns about energy security. High energy prices are hurting consumers, Europe is at risk of natural gas supply shortages and boosting fossil fuel production elsewhere will take time and could hamper climate goals. It is time to reframe U.S. climate and energy policy around these challenges. Support for fossil fuel production with lower carbon intensity, paired with policies that will reduce oil and gas demand in the medium to long term, may be able to get through Congress and to the president’s desk. This approach would help consumers, support U.S. allies, and maintain a long-term commitment to reducing greenhouse gas emissions.

The climate portions of the stalled reconciliation bill provide a good starting point. Clean energy tax credits, energy efficiency measures, strong incentives for electric vehicle (EV) adoption, support for clean hydrogen and other low-emissions fuels, investments in domestic manufacturing of clean energy technologies and securing critical materials could have an enormous emissions impact. This would deliver a long-overdue effort to build a cleaner and more resilient energy system.

If paired with executive action and state initiatives, such as more stringent fuel economy standards, such investments would dramatically reduce fossil fuel dependence. Rhodium Group estimates that by 2030, such an approach could cut U.S. gasoline consumption by 13 to 15 percent and free up 9 billion to 14 billion cubic feet per day of natural gas, much of which could be exported. Reduced dependence would cut U.S. expenditures on oil imports by 11 to 24 percent and save American households $500 per year in average energy costs. These policies could cut net greenhouse gas (GHG) emissions by 46 to 51 percent below 2005 levels, putting the U.S. climate target within reach.     

Structural changes in our energy strategy will protect consumers and contribute to decarbonization, but also respond to today’s crises. Sanctions on Russia sent oil prices as high as $139 per barrel in early March, and full sanctions on Russian energy exports have the potential to create a larger price spike. After months of elevated natural gas and electricity prices in Europe, policymakers are in a race to cut their dependence on Russian gas and prepare for next winter.

On the supply side, the Biden administration and Congress have options to help increase the production and export of oil and gas. The president’s recent announcement of sales from the Strategic Petroleum Reserve could help stabilize markets for the next few months. A clear commitment to refill strategic reserves when oil prices fall below a certain threshold would enhance resilience to future shocks. The industry response would be aided by speedier permitting of new infrastructure and a clearer signal from the president and Congress that more investment is needed and welcomed.

U.S. liquefied natural gas (LNG) has been a boon to Europe in recent months and will play an important role this decade. Washington and Brussels recently announced their joint aspiration for the United States to supply an additional 50 billion cubic meters per year of LNG by 2030. President Biden and his counterparts have pledged to make sure that the necessary export terminals can be permitted and financed, but to work for European markets, our exports will have to be as clean as possible.

LNG with lower emissions intensity will be more competitive in a carbon-constrained world. Companies aiming to reduce their emissions footprint are looking for accelerated permitting of Class VI wells for carbon sequestration, tax credits for carbon capture and storage, incentives for direct capture of carbon dioxide and credits for hydrogen blending and methane reduction. Incremental investments here will pay big dividends for the transatlantic partnership and the competitiveness of U.S. LNG.

Additional efforts to increase U.S. oil and gas exports will concern environmental advocates, but it is total GHG emissions that matter for climate outcomes. Rhodium Group estimates that the climate policies outlined above would cut domestic natural gas consumption by twice the amount the Biden administration has committed to export to Europe. The United States could send that gas to Europe — and pass policies to ensure that U.S. LNG has far lower emissions intensity than Russian gas — without risking price shocks at home or increased global emissions.  

Is it possible to pass these critical climate and energy policies in a new bill? Finding 60 votes in the Senate is almost always a challenge regardless of the issue. However, Senate Democrats could use the existing budget reconciliation framework to pass the most important climate policies from Build Back Better, paired with new measures to boost short-term energy security. This is their best shot to cut emissions and respond to the climate crisis. Congress should seize this opportunity to leverage U.S. competitive advantages, help allies and build energy resilience.

Ben Cahill is a senior fellow in the Energy Security and Climate Change Program at the Center for Strategic and International Studies.

John Larsen is a non-resident senior associate in the Energy Security and Climate Change Program at the Center for Strategic and International Studies and a partner at Rhodium Group.Joseph Majkut is director of the Energy Security and Climate Change Program at the Center for Strategic and International Studies.

Tags Ben Cahill Biden Build Back Better climate Energy Energy Fossil fuels Joe Biden John Larsen Joseph Majkut Renewable energy Russia Ukraine

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