Publications: Notes at the Margin

The Manchin/Schumer Compromise: A Big Deal (August 1, 2022)


The compromise advanced by Senators Schumer and Manchin on July 28, 2020, is a huge deal that could accelerate the energy sector transition. Instead of applying measures like those used for fifty years, the proposed legislation introduces incentives that will help new firms like Tesla thrive while offering few benefits to legacy firms that produce and market fossil fuels.


Key to this reversal is the abandonment of the “grand bargain” under which governments and large energy companies essentially monopolized the direction of and spending on energy research by nations. The new approach emphasizes making incentives available to all firms, not just current energy producers. In this environment, the companies with the best ideas often triumph while many older firms vanish. In the computer and automobile worlds, the success of Apple, Amazon, Microsoft, Meta, and Tesla is a testament to this, as is the failure of mainframe computer manufacturers, traditional phone companies, and many auto firms that failed to evolve. Legislation of the type proposed by Manchin and Schumer will likely speed the energy transition in much the same way.


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