Accelerating Decarbonization of the U.S. Energy System (2021) / Chapter Skim
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4 How to Achieve Deep Decarbonization
4 How to Achieve Deep Decarbonization
Pages 163-244
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From page 163... ...
, and place the nation on a 30-year path to net zero, while retaining optionality about the nature of the midcentury system. The package would also address the four societal goals developed in Chapter 3: enhanced U.S.
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economy to carbon neutrality. be conducted by the Office of Equitable Energy Transitions.
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• Sponsor external research to support development and evaluation of equity indicators and public engagement. • Report annually on energy equity indicators and triennially on transition impacts and opportunities.
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Department of Energy (DOE) continues to establish appliance minimum efficiency standards.
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. Enact five federal actions to advance Congress $8 million per year Two of these actions involve clean electricity markets, and to for Federal Energy FERC utilizing existing improve their regulation, design, and Regulatory Commission authorities and three involve functioning.b (FERC)
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Establish an environmental product Congressional $5 million per year. declaration library to create appropriation the accounting and reporting for EPA and infrastructure to support the DOE development of a comprehensive Buy Clean policy.
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Establish a federal Green Bank Congressional Capitalized with Additional requirements include to finance low- or zero-carbon authorization $30 billion, plus public reporting of both energy technology, business creation, and and $3 billion per year until equity analyses of investment infrastructure. appropriation 2030.
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and fund and $1.5 billion for grid to underserved areas. rural electric private companies.
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The CO2 pipeline Require fair public participation agencies 5-year planning plus network is needed even with measures to ensure meaningful $50 million for block 100% non-fossil electric power community input. grants for community to enable carbon capture at and stakeholder cement and other industrial engagement.
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Bank No additional appropriation required for loans and loan guarantees from Green Bank and Export-Import Bank.
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to increase state's share of Low Income Home Energy Assistance Program (LIHEAP) funds for home electrification and efficiency.
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Assist families, businesses, communities, cities, and states in an equitable transition, ensuring that the disadvantaged and at-risk do not suffer disproportionate burdens. Please note that the primary policies targeting fairness, diversity, and inclusion during the transition are the establishment of the Office of Equitable Energy Transitions and the National Transition Corporation, which are the fourth and fifth policies in this table.
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each state. Establish local community Congressional $1 billion per year in Required to qualify for funding block grants for planning and to appropriations grants administered by from the National Transition help identify especially at-risk to DOE regional centers.
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. Technological Goals Invest in energy efficiency and productivity.
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(3) Amend the Energy Policy Act of 2005 to assign to FERC the responsibility to designate any new National Interest Electric Transmission Corridors and to clarify that it is in the national interest for the United States to achieve net-zero climate goals as part of any such designations.
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(4) Congress should provide support for doctoral and postdoctoral fellowships in science and engineering, policy, and social sciences for students researching and inno vating in low-carbon technologies, sustainable design, and energy transitions, with at least 25 fellowships per state to ensure regional equity and build skills and knowledge throughout the United States.
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(4) Congress should provide information annually to the White House Office of Equitable Energy Transitions detailing regional progress toward decarbonization goals and benchmarks for equity.
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. Carbon revenue allocation can attenuate these impacts at carbon prices up to $40 per ton, which is why carbon pricing proposals in the United States almost always include them.
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The approach recommended here combines an overarching but insufficient (to achieve net-zero emissions) economy-wide carbon price and greenhouse gas budget with an additional set of policies that are all essential to address equity and justice considerations and to drive decarbonization in key sectors.
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Economy The starting point for decarbonization is to establish an overarching, economy-wide, cumulative GHG emission budget for the next several decades that produces an emissions trajectory leading to zero net emissions by midcentury. As discussed in prior chapters, net zero means that any remaining emissions at midcentury must be offset by negative emissions technologies such as afforestation, carbon capture and sequestration at electricity or industrial facilities, or direct ambient air capture and sequestration.
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That is, the budget provides a look-back mechanism as discussed in the referenced papers to make policy adjustments -- including the tax level -- depending on observed cumulative emissions. Unlike an ordinary cap-and-trade, which provides greater emission certainty and leaves cost uncertain, fixing a carbon price (through a carbon tax or a cap-and-trade with a price collar)
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S . E N E R G Y S Y S T E M A Price on Carbon with Appropriate Measures to Address Competitiveness and Equity As noted above, economy-wide carbon pricing is important to encourage emission reductions and to achieve net-zero emissions at the lowest cost.
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With this in mind, the committee proposes not to select a carbon price designed to directly achieve net-zero emissions. Rather, it recommends that Congress adopt a policy meeting all of these objectives: • Implement a carbon price of $40t/CO2 in 2021 rising at 5 percent per year, targeting emissions from all uses of fossil fuels and industrial processes with GHG emissions.
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As described in the remainder of this chapter, this carbon price will then be combined with additional, harmonized companion policies to achieve net-zero emissions (Burtraw et al., 2018) in ways that address equity and competitiveness imperatives.
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The following federal actions are necessary to build and implement an equity and social justice framework as part of the energy transition: • Congressional authorization of and appropriations for the convening of a 2-year National Transition Task Force comprised of nongovernmental com munity and expert stakeholders, with a directive for the Task Force to report to the White House Office of Equitable Energy Transitions, Congress, and the public on: º The vulnerabilities of U.S. labor sectors and communities to the transition of the U.S.
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, as well as recommendations for any needed changes in those programs or for any new programs to support equitable and just outcomes; º Analysis, insights, and recommendations to the EPA with regard to estab lishing cumulative air-emission limits, targets for local emissions reduc tions, and other environmental improvements (e.g., water quality, exposure to hazardous wastes) specific to local environmental justice communities; º Barriers and opportunities to successful and equitable public engagement processes for the planning of low-carbon energy systems; º Social, public health, and environmental risks of infrastructure abandon ment from bankruptcies; º Federal decommissioning and remediation regulations, and the policy reforms needed, focusing on retired and retiring fossil-fueled generating plants and abandoned oil wells, natural gas wells, and coal mines while recommending a time frame to expand the analysis to other fossil fuel infrastructure; and º The design of a federal program for an ongoing triennial national assess ment on transition impacts and opportunities with attention to the equity dimensions described above, with that assessment to be conducted by the Office of Equitable Energy Transitions (described below)
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To these ends, the committee recommends that Congress: • Establish a new federally chartered, independent National Transition Corporation (NTC) to complement the functions of the White House Office of Equitable Energy Transitions, to ensure coordination and funding in the areas of job losses, critical infrastructure, and equitable access to economic opportunities and wealth creation.
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• The NTC would also have the responsibility to: º Recommend changes to laws or regulations to expand the notification requirements and thresholds in the Worker Adjustment and Retraining Act to give vulnerable communities and labor sectors adequate time to plan for and secure resources for retraining; º Establish an Energy Transition Jobs Initiative as a joint effort of the National Transition Task Force and Office of Equitable Energy Transitions, to aggre gate and streamline delivery of support packages to transition frontline workers. This can be accomplished by updating the triggers and qualify ing standards of economic adjustment programs to recognize the unique circumstances of transition frontline workers and to enable proactive plan ning and by extending support beyond the coal industry to extraction, processing, and distribution of other carbon-intensive energy resources; º Fund major community-based demonstration projects that strengthen equity outcomes and further NTC objectives to support activities such as fund reclamation and remediation in the case of orphaned infrastructure and unfavorable bankruptcy proceedings; fund the implementation and enforcement of existing laws to accomplish reclamation and remediation; direct distributions to replace critical revenue shortfalls; fund develop ment opportunities for low-income communities to invest in a wide range of clean energy projects, including distributed renewable energy, energy storage, microgrids, and transportation.
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. Others include energy-efficiency standards for appliances; energy efficiency standards for new and existing buildings; CAFE/GHG emissions standards for vehicle fleets; standards for the design of zerocarbon electricity markets; standards for labor engaged in clean-energy work; standards for corporate reporting of climate risk; and standards for U.S.
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. Other carbon pricing programs in the electric sector -- for example, the multistate Regional Greenhouse Gas Initiative -- auction the allowances and then reinvest the proceeds in consumers' bill reductions or energy efficiency measures (which further reduce consumers' electricity bills; see Hibbard and Tierney, 2011; Hibbard et al., 2018)
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In one design, allowances would still be required for GHG emissions from electric generators, as under carbon pricing. Allocation, however, would be based on the volume of electricity generation and the established standard "performance rate" (this is sometimes called a rate-based approach)
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Minimum energy efficiency standards for appliances, building efficiency standards, and average vehicle fuel-economy standards have been long used to drive increased energy efficiency and energy productivity (Alliance Commission, 2013; Nadel et al., 2015)
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The federal government should set an emissions cap for existing and new federally owned buildings, with the cap declining at 3 percent per year (Architecture 2030, 2014) and with emissions reductions accomplished through energy efficiency upgrades, switching to electric or district systems, and/or generating/procuring carbon-free renewable energy.
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. The California Energy Commission is preparing a modification to its Building Energy Efficiency Standards to mandate new construction to be all electric starting in 2023.
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In conjunction with the overarching market-based policies to explicitly price and directly drive down power-sector CO2 emissions to net zero, the structure and design of retail utility regulation and wholesale electricity markets together need to support such investment, operations, and reliability. Wholesale market design, combined with state and federal policies, will play key roles in enabling new zero-carbon resources to enter the market as rapidly as possible (and for others to remain in operation, where current power market conditions do not support continued operations of certain existing zero-carbon resources in the absence of carbon prices)
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(Many of the committee's recommendations for federal action aim at encouraging these and other states to take more aggressive action to reduce carbon emissions from their power sector and elsewhere in local economies.)
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• Congress clarify that the Federal Power Act does not limit the ability of states to use policies (e.g., long-term contracting with zero-carbon resources pro cured through market-based mechanisms) to support entry of zero-carbon re sources into electric utility portfolios and wholesale power markets.
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In 2019, there were 3.6 million workers in clean energy jobs in the United States, including energy efficiency, electric and alternative fuel vehicles, solar energy, wind energy, biofuels, and battery storage (NASEO and EFI, 2019)
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. To maintain the social contract for a transition to net zero, workers must be assured that the clean energy economy can work for them and that their rights will be protected.
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. Many financial risk-management experts observe that climate risk still is poorly priced into financial markets, in part because there is inadequate transparency in corporate financial statements and because it is difficult to assign probabilities on government action (Litterman, 2020a,b)
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In additional the committee recommends: • The Commodities Future Trading Commission should build on the recom mendations of the report Managing Climate Risk in the U.S. Financial System (Climate-Related Market Risk Subcommittee, 2020)
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A Buy Clean procurement policy will drive down embodied carbon emissions within products by establishing a baseline level of emissions intensity for key input materials and requiring that a percentage of materials procured achieve that baseline or lower. Focusing on federal, state, and local government procurements -- which, according to expert testimony, account for the purchase of 90 percent of the cement and concrete and 50 percent of the steel used in the United States (Friedmann, 2019)
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. A comprehensive Buy Clean policy might include an additional requirement that a portion of procurements meet higher emissions standards, creating a high achievers' market to drive down emission intensity and cost.
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The necessary investments take many forms: investment in long-distance transmission of renewable energy or in EV-charging networks; investment in education and training to build a talented workforce that is fit for service in a low-carbon economy; investment in domestic manufacturing of clean energy technologies; investment in R&D for technology innovation and deployment; investment in understanding and mitigating the impacts of decarbonization on communities; and investment in building resilient communities in a low-carbon economy. The committee thus proposes a number of institutions and policy instruments designed to mobilize public and private investment in and financing of the energy transition.
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At the USDA for example, the Rural Energy for America Program administered by the Rural Business and Cooperative Service offers loans and grants to rural businesses and agriculture producers to adopt renewable and energy efficiency measures in their farm operations. At the subnational level, at least nine states have established Green Banks or funds, ranging from the Connecticut Green Bank to the Colorado Clean Energy Fund.
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Its objectives within the energy transition space would include fostering long-term domestic manufacturing capacity in clean energy and energy efficiency. The committee recommends: • Establishment of a federal Green Bank with a specific public mission to fi nance low- or zero-carbon buildings and technologies, business creation, and infrastructure.
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Even assuming significant deployment of distributed energy resources (e.g., solar panels, microgrids, energy efficiency, and flexible demand) , the nation will also need an expanded high-voltage grid to connect regions with high-quality renewables to locations where people live and work (U.S.
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. The approach approved by Congress in 2005 to designate National Interest Electric Transmission Corridors proved unsuccessful (Swanstrom and Jolivert, 2009; CRS, 2010)
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• Amend the Energy Policy Act of 2005 to assign to FERC the responsibility to designate any new National Interest Electric Transmission Corridors and to clarify that it is in the national interest for the U.S. to achieve net-zero climate goals as part of any such designations.
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for expansion of electric transmission systems. º DOE to analyze, plan for, develop workable business model/regulatory structures, and provide financial incentives (through the Green Bank)
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, where utilities have exclusive franchises to sell electricity to consumers, legislatures and utility regulators have established carve-outs where third parties may own EV charging stations that sell power to vehicle operators. In spite of considerable work under way to support development of EV charging infrastructure, significant gaps may exist between the scope of EV charging infrastructure that is on the ground or on drawing boards, and the vast network of EV charging stations that will be needed to provide consumer confidence.
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S . E N E R G Y S Y S T E M º Update its assessment of the ability and plans of the private sector to build out the EV charging infrastructure consistent with the pace of EV deployment needed for vehicle electrification anticipated for deep decar bonization, and the need for vehicles on interstate highways and in public locations or high-density workplaces, and to identify gaps in funding and financial incentives as needed.
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. The Princeton Net Zero America study (Larson et al., 2020)
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One recent study matched potential sources and subsurface storage sites for carbon capture and sequestration (CCS) in California (EFI, 2020)
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• Extend 45Q tax credit for CCUS for projects that begin substantial construction prior to 2030 and make tax credit fully refundable for projects that commence construction prior to December 31, 2022. Set the 45Q subsidy rate for use equal to $35/tCO2 less whatever explicit carbon price is established and the 217
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Training the next generation of business, policy, and civil society leaders not only to successfully navigate the complexities of the transition but also to ensure that the United States regains the global lead in energy innovation will require significant new investments. To meet this need, Congress should establish a 10-year GI Bill-type of program to fund vocational, undergraduate, or master's degrees related to clean energy, energy efficiency, building electrification, sustainable design, or low-carbon technology.
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Last, Congress should also make significant new investments at the master's, doctoral, and postdoctoral levels to support clean energy innovation. Expanding the number of academic institutions awarding doctorates related to clean energy (engineering, sciences, architecture and design, social sciences, public policy and administration)
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. Congress should provide $375 million per year to support government-funded doctoral and postdoctoral fellowships in science and engineering, policy, and social sciences, for students researching and innovating in low-carbon technologies, sustainable design, and energy transitions, with at least 75 fellowships per state to ensure regional equity and build skills and knowledge throughout the country.
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• Congress should provide support for doctoral and postdoctoral fellowships in science and engineering, policy, and social sciences, for students researching and innovating in low-carbon technologies, sustainable design, and energy transitions, with at least 25 fellowships per state to ensure regional equity and build skills and knowledge throughout the United States. Cost: $375 million/year.
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The main policy tools available include loans, loan guarantees, tax credits, exportpromotion, and grants to manufacturers, some of which could be administered through the Green Bank, if established. The least costly to the taxpayer is the loan guarantee, which was used successfully during the American Reinvestment and Recovery Act.
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Cost: Initial appropriation of $1 billion/year phasing down over 10 years as performance targets are reached. • Provide loans and loan guarantees to manufacturers to produce low-carbon products, ideally through a Green Bank.
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DOE should also fund energy innovation policy evaluation studies to better understand the extent to which policies implemented (both RD&D investment and marketformation policies) are working.
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. The American Energy Innovation Act introduced in the Senate in February 2020 would require DOE to conduct 17 demonstration projects across four technology areas: energy storage, carbon capture, enhanced geothermal systems, and advanced nuclear (U.S.
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These regional innovation hubs should be focused on deep energy efficiency activities (e.g., ones that could reduce a building's energy consumption by 50 percent or more) and the development and exploitation of clean energy resources where there is a comparative advantage for that region (e.g., solar in the Southwest, offshore wind in the Northeast, onshore wind in the upper Midwest)
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social contract for decarbonization. Such studies should improve the understanding of how large-scale energy transitions can be accomplished; the full complexity of the diverse scientific, industry, and societal innovation systems involved; the factors that contribute to accelerating or delaying processes of change; and the rich intersections between changes in energy technologies and social practices and other processes of social and economic change.
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, without reducing funding for LIHEAP, and direct HHS to allow states to use a greater share of LIHEAP dollars for investments in energy efficiency measures and electric heating and cooling systems. Cost: $1.2 billion/year for 10 years.
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Additionally, USDA's Rural Utilities Service offers low-cost loans to rural utilities and tribal authorities to expand grid access. The Energy Policy Act of 2005 authorized the DOE Tribal Energy Loan Guarantee Program (TELGP)
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This extensive coordination is essential to properly design and implement accelerated technological changes toward carbon neutrality and also to ensure that the resulting economic and societal transformation advances the broad goals identified in Chapter 3 and meets the benchmarks for equity and inclusion established and monitored by the White House Office of Equitable Energy Transition (recommended earlier in this chapter)
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Congress should act to address these gaps by establishing and funding a multiscale planning infrastructure at federal, state, regional, and local levels with both the capacity to plan and coordinate an accelerated transition and to secure the knowledge resources necessary for that work. The committee recommends: • Federal: The bulk of the effort at the federal level is described earlier under the sections describing the National Transition Task Force and Office on Equitable Energy Transitions.
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Department of Commerce, with advisory as sistance from the White House Office of Equitable Energy Transitions, with the mandate to º Coordinate federal agency actions at the regional scale through the de ployment of federal agency staff to regional offices with specific attention and funding for local technical assistance. º Host a coordinating council of regional governors and mayors that meets annually to establish high-level policy goals for the transition.
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This office will coor dinate state efforts to accelerate the transition of the state's economy to carbon neutrality, host statewide stakeholder and community councils to coordinate decarbonization efforts, and coordinate state participation in regional transition coordinating councils. The office will also provide information to the Office of Equitable Energy Transitions on state progress toward carbon neutrality, the societal and economic criteria identified in Chapter 3, and the benchmarks established by the Office of Equitable Energy Transitions.
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Harvard Environmental Law Review Forum 41: 1–13. Alliance Commission on National Energy Efficiency Policy.
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carbon tax: A perspective from the policy world. Review of Environmental Economics and Policy 14(1)
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Washington DC: Office of Energy Efficiency and Renewable Energy.
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2004. Who Pays for Energy Efficiency Standards?
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2006. Energy efficiency policies: A retrospective examination.
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2016. Minimum energy efficiency standards for appliances: Old and new economic rationales.
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2016. Measuring Energy Savings from Benchmarking Policies in New York City, ACEEE Summer Study on Energy Efficiency in Buildings.
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2015. Does Information Provision Shrink the Energy Efficiency Gap?
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2019. Clean Energy in New York State: The Role and Economic Impacts of a Carbon Price in NYISO's Wholesale Electricity Markets.
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2020. "Murkowski, Manchin Introduce American Energy Innovation Act." Republican News.
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