The Bipartisan Infrastructure Law of 2021, the CHIPS Act, and the Inflation Reduction Act (IRA), both of 2022, together provide hundreds of billions of USD geared towards spurring the transition to net-zero emissions. A powerful signal to the private sector that has already activated 220 billion USD in private investment announcements.
While investors and industry representatives alike stand ready to get to work, there is widespread concern that long-lasting and complex permitting processes for energy infrastructure projects -on all levels of government- will slow down the clean energy transition by causing major delays, mounting costs, and creating overall uncertainty for investors and developers that discourages energy projects. The need for permitting reform has been in the political limelight since last year, when Senator Joe Manchin linked his support for the IRA to a vote on his proposed reforms to the federal energy permitting process. Since then, four separate bills focusing on a permitting update have been introduced in the Senate and the Republican-led House of Representatives passed permitting legislation as well. So far, none of the proposals have garnered bipartisan support but negotiations around the permitting process are expected to continue at the Hill this summer.
Congress is not the only federal entity working on the issue. In mid-May, the White House announced its priorities for permitting reform and plans to update environmental review rules. In addition, a recent Supreme Court decision will have major implications for federal permitting as it narrows the scope of a major environmental law, the Clean Water Act, resulting in a reduction of permitting requirements for many infrastructure projects.
Then, at the end of May, a first humble bipartisan step was taken when energy permits became part of the negotiations to raise the U.S. debt ceiling and some limited changes to federal permitting eventually made it into the final deal approved by Congress and signed into law by President Biden at the beginning of June. The bill contains a handful of updates to environmental permitting rules, specifically around a decades old major environmental law, the National Environmental Policy Act (NEPA), which requires federal agencies to review major projects that could affect the environment. The bill now changes the requirements of how these reviews are implemented like setting deadlines coupled with an enforcement element that allows developers to seek the intervention of a court if those deadlines are missed or improving coordination of the agencies involved in a review by requiring them to name a lead agency.
While many had hoped for more sweeping changes the modest scope of revisions did not come as a complete surprise given the complexity of the issue and keeping in mind the tight deadline for negotiating a deal. Also, Democrats and Republicans remain divided over the kind of projects that should be prioritized and should benefit from speeding up permitting.
But the bottom-line is: There is a broader push towards reform by lawmakers on both sides of the aisle. And there appears to be a window of opportunity for the U.S. Congress to build on the recent discussions and to agree on more comprehensive legislation.
On the other side of the Atlantic, the matter of increasing the efficiency of the permitting process is all too familiar to observers. Bureaucratic hurdles have slowed down the energy transition in Germany, hindering the expansion of renewable energy. But things are moving in Germany as well. However, to fulfill objectives related to climate action, energy security, affordability, and infrastructure resilience we need to pick up the pace.
AmCham Germany’s take:
At present, there is an unprecedented drive towards the clean energy transition in both Europe and the United States. While the European Union and Germany have been at the forefront of prioritizing the shift towards green energy for some time, the Biden Administration is swiftly catching up with substantial investments and significant legislative measures. Lawmakers on both sides of the Atlantic are pushing for permitting reform, recognizing the need to increase efficiency to meet climate action, energy security, affordability, and infrastructure resilience goals. This a window of opportunity for the transatlantic partners.
The transatlantic business community calls for strengthening transatlantic relations as the drastic increase in energy costs threatens Germany's attractiveness as an industrial location. To secure a reliable and affordable energy supply and drive the transformation towards carbon neutrality, we need more cooperation with U.S. partners, joint standards, and collaboration on green fuels and technologies. Additionally, approval procedures need to be accelerated to implement infrastructure projects in Germany and Europe that are urgently needed, such as developing a hydrogen-ready LNG infrastructure, power lines, CO2 pipelines, and promoting low carbon technologies.
Against the backdrop of this recent Handelsblatt article(*) concerning the trend of gradual investment outflow and the potential threat it poses to Germany as a business location, Germany must prioritize advancing technologies and reducing bureaucracy to enhance its infrastructure to remain competitive. As our Transatlantic Business Barometer 2023 suggests, U.S. companies operating in Germany have identified labor and energy cost and digital infrastructure as major disadvantages. Just as the U.S., Germany must address its own challenges swiftly and pragmatically. Such measures are vital for Germany's position as a thriving business hub and as a vital transatlantic partner.
Further suggested readings:
https://www.csis.org/analysis/permitting-reform-debt-ceiling-bill-first-step-more-come
Links marked with (*) lead to paid content.
