Biden’s New Climate Rules: Major Win For Unions, Major Loss For Taxpayers?

By Tommy Wilson | Thursday, 20 June 2024 01:45 AM
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Image Credit : Photo by The New York Times

The Biden administration has recently cemented rules concerning subsidies in its flagship climate legislation, a move that is expected to significantly favor labor unions.

The Internal Revenue Service (IRS) and the Treasury Department have finalized the prevailing wage and apprenticeship requirements for certain incentives included in the Inflation Reduction Act (IRA), a colossal climate bill that President Joe Biden enacted in August 2022. The administration portrays these rules as a triumph for blue-collar workers, but according to infrastructure policy experts and industry stakeholders, they are more likely to confer a substantial advantage to labor unions, traditionally staunch backers of the Democratic Party, and escalate the costs of IRA-supported projects that are already on the rise.

As reported by the Daily Caller, Ben Brubeck, the Vice President of regulatory, labor, and state affairs for the Associated Builders and Contractors (ABC), expressed his concern over the policies, stating, "If the Biden administration’s goal is to undermine taxpayer investments in the construction of critical clean energy infrastructure funded by the Inflation Reduction Act, this final rule is a wild success." He further criticized the administration's "bold weaponization of the IRS and end-run around Congress" as an attempt to direct clean energy construction contracts to unionized labor and contractors, who are key election-year donors, by incentivizing private developers to require inflationary and exclusionary project labor agreements.

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The newly implemented rules necessitate that private developers of certain IRA-funded projects comply with project labor agreements (PLAs), pay the prevailing wage, and offer apprenticeships to access lucrative IRA tax credits, according to the IRS. Developers have the option to disregard these standards, but doing so would disqualify them from obtaining larger subsidies.

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John Podesta, a top climate official in the Biden administration, lauded the new rules, stating, "Meeting strong labor standards and building partnerships with unions will now be the norm for clean energy projects. Today’s final rules give clarity and certainty to developers and the workers they employ that clean energy jobs will be good jobs."

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However, the Biden administration's rules have been met with criticism. Diana Furchtgott-Roth, director of the Heritage Foundation’s Center for Energy, Climate, and Environment, told the Daily Caller News Foundation, "These rules definitely subsidize unionized workers, who are a tiny fraction of the American workforce, which is made up of about 164 million jobs. So, a subset of workers get to benefit from additional subsidies, but many others will continue to face more difficulties."

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Critics argue that the majority of American construction workers are not unionized, with ABC estimating that only about 10% were in 2023. They contend that these rules will heavily tilt the balance in favor of the small minority of organized laborers, causing delays in construction and discouraging competitive bids. This comes at a time when the U.S. is grappling with a shortage of about 500,000 construction laborers, according to a recent analysis conducted by ABC.

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Despite the criticism, pro-organized labor groups and labor unions, including some that are expected to be major supporters of Biden’s reelection bid, have welcomed the new rules. Jason Walsh, President of the BlueGreen Alliance, which has already endorsed Biden’s 2024 campaign, said in a statement, "One of the greatest promises of the Inflation Reduction Act is that it will create and maintain good-paying, union jobs in the clean economy, while building inclusive pathways into the highest quality training for lifelong careers in construction. With this rule we are seeing how that promise will come to fruition."

The IRS and the Treasury Department have yet to respond to requests for comment. The implications of these rules on the American workforce and the clean energy sector remain to be seen.

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