Late on July 27, Sen. Joe Manchin and Senate Majority Leader Charles Schumer announced an agreement on the Inflation Reduction Act (IRA): a reconciliation package that implements prescription drug pricing reform, invests in Affordable Care Act health care subsidies, imposes a corporate minimum tax and improves tax enforcement, and—most relevant for this post—provides $369 billion to support energy production and reduce greenhouse gas emissions.
Governments globally are grappling with difficult decisions about green energy policies: maintain green initiatives or remove the strains on economic growth? It is interesting to look across the globe for examples of how different Governments are reacting.
In recent months, the UK has opted to “tweak” its green levies to save households an anticipated average of £50 per year. This has been a highly political issue, with domestic gas and electricity costs becoming a major factor in the increased cost of living in the UK. In particular, the government said it would adjust the Energy Company Obligation scheme (ECO) to give large energy suppliers an extra two years to hit targets and relax some of the scheme’s targets by 33%, subject to the outcome of a consultation by the Department of Energy & Climate Change (DECC).
So, what is the proposed change? First, it is helpful to recall ECO’s original targets and objectives. Effective 1 January 2013, the ECO obliges gas and electricity suppliers to improve the energy efficiency of domestic customers’ buildings by meeting three targets:…