Timothy Gardner and Jarrett Renshaw

WASHINGTON (Reuters] – Democrats close to finalizing a U.S.-supported plan. Two sources confirmed that Senator Joe Manchin’s plan would provide tax credit for power plants that capture carbon to increase their revenue. The White House is trying to convince him that a multi-trillion-dollar spending plan will be passed.

Carbon sequestration tax credits are a key part of “Build Back better” legislation being introduced in Congress. They reward industries that install equipment to capture and store carbon dioxide.

Manchin, a conservative Democrat from West Virginia and the country’s second largest producer of coal, was a significant obstacle in the passage the spending plan. According to Manchin, he is keen for Democrats to cut the spending plan from $3.5 billion to approximately $1.5 trillion. He also wants an active role in the energy provisions.

According to the plan under discussion, it would raise the tax credit “45Q”, which is currently at $50 per metric tons to at least $85 per tonne for power plants that use coal and other fuels. The tax credit for industrial plants like those producing cement, steel, and biofuels was increased last week by lawmakers.

As progress is made on 45Q, Democrats are also trying to reverse Manchin’s opposition to a wider White House proposal to decarbonize the nation’s power grid, the sources said.

Clean Energy Payment Program, (CEPP), would pay utilities for adding more renewable energy sources like wind and solar power. Those who don’t will be penalized.

The 45Q credit value will be increased to encourage investment in carbon capture. This is seen as an important tool for combating climate change.

The tax credits as well as the CEPP, if passed could be a big help to President Joe Biden in achieving his climate goals. These include decarbonizing America’s power grid by 2035, and decarbonizing the economy overall by 2050.

The two initiatives are intertwined – both politically and commercially – and negotiators and observers say nearing an agreement on the tax credits is a good sign.

“It’s a sequencing thing. If we get the first part done, it makes it easier to get the payment plan portion done,” said one source familiar with the negotiations.

A request to comment was not received by the White House immediately.

MANCHIN’S LONG-STANDING OPOSITION TO CEPP

CEPP provides that utilities will be paid by the Energy Department for increasing clean energy supplies by 4 percent annually. A supplier that fails to achieve the targeted 4% increase would be responsible for $40 per megawatt-hour.

Negotiators have a variety of options, including lowering the target rise to 3% and adjusting other dials to make compliance easier for power companies.

Manchin (whose office declined to comment in this article) has publicly criticized the plan. He claimed that the utility sector is already moving towards clean energy and that it would be a waste of taxpayer dollars.

The transition is underway. Now they’re wanting to pay companies to do what they’re already doing. It makes no sense to me at all for us to take billions of dollars and pay utilities for what they’re going to do as the market transitions,” Manchin told CNN in September.

Critics believe Manchin is protecting coal and natural gases, both of which are key economic drivers in his native state. This would also benefit his family. Manchin, who founded Enersystems private coal brokerage in 1988, still holds a large stake in the company. His son is currently the CEO.

According to Manchin’s most recent financial disclosure, he has $5 million in stock and earned almost $500,000 from Enersystems alone.

Lee Beck, international director for carbon capture with the nonprofit Clean Air Task Force said both policies must be included in reconciliation bills. The 45Q technology supports one specific technology, while CEPP will bring about holistic decarbonization.

Beck stated, “It is really a portfolio approach. Both of these pieces are for decarbonization. One is for innovation. The other is for comprehensive climate policy.”