The Power of Policy: Transportation & Energy in the U.S.
The most recent UN report on climate change has raised the alarm that the world has truly reached a “now or never” stage in reducing greenhouse gas concentrations to limit global warming to 1.5 degrees celsius. The Intergovernmental Panel on Climate Change (IPCC) reported that current energy policies have the world on track to reach warming levels that are more than double the 1.5 limit set by the Paris Agreement. Scientists are also warning us that we are dangerously close to reaching tipping points that will lead to “cascading and irreversible climate effects.”
Given the increasing urgency for drastic emissions reductions, government action by enacting major legislation is becoming ever more critical. Most governments, including the United States, have set climate commitments, many formally reported pursuant to the Paris agreement. The Biden Administration has committed the U.S. to reducing its greenhouse gas emissions by 50 percent by 2030, and to reaching net-zero emissions by 2050. While this is an encouraging step, the reality is that these goals will not be met through the incremental changes that have characterized policy-making to date. The urgency of the climate challenge requires effective and bold federal policy to achieve meaningful, long-term reductions.
Action in the energy and food and agriculture sectors is specially needed, as they are the two largest U.S. sources of emissions. Reforming policies to accelerate the transition to climate-smart energy and agricultural practices are critical to meet U.S. and global climate goals. For instance, the UN points out that federal fiscal policies - including tax rules - can powerfully shift the behavior of both food producers and consumers. Policy support is not the only thing necessary to achieving climate goals in the energy and agriculture sectors; the UN also highlights the key role that finance plays in climate action – yet it is policy that powerfully guides the capital to help to exacerbate or solve the problem. Reducing emission requires “rapid development and deployment” of zero-carbon technologies, which in turn requires investment in these technologies. The government can play a role here both directly and indirectly by incentivizing decarbonisation through support to innovation and to infrastructure, as well as to mitigate the risks from climate impacts. From innovation to infrastructure, the federal government must align its own programs to accelerate climate action.
This policy series will cover government policies and programs in energy and food and agriculture as well as finance to unpack what policy measures are being put in place to reach climate goals, and what more is needed to meet what the science requires.
Fortunately the government has the tools to reach climate targets and accelerate the transition to a safe climate future. Regulations, incentive programs, and market based programs, such as cap-and-trade policies, are all ways that the government can step in to drive change. This requires work from all branches of the government, as each has a role to play in reducing U.S. greenhouse gas emissions. While the Executive branch and presidential administration are key to implementing programs and driving the agenda on climate-smart policies, it is Congress that is in charge of passing legislation needed to address the climate challenge. Congress also controls the purse strings of the federal government, determining appropriation of funding for climate programs. The current Congress has managed to pass meaningful legislation through the bipartisan infrastructure bill that included many climate provisions, and is hopefully on the brink of passing the “Inflation Reduction Act,” which includes climate spending that would represent “the single largest investment in climate solutions and environmental justice in US history.” As this congressional term rapidly draws to a close, pressure is mounting for Congress to act on the climate crisis. If they’re unable to pass this bill, the upcoming midterm elections will set the U.S. course of action on climate policies and likely determine whether the country will be able to meet its climate goals, or will continue on the current emissions paths that will cause irreversible damage and suffering. As we’ve seen in these past few weeks, the Judicial branch is also a key player on climate policy and legislation. They provide a venue for those who wish to seek or challenge environmental measures, and the way that the court handles the growing number of cases being brought to them will affect environmental policy greatly; the court can set boundaries on the policy making abilities and regulatory abilities of the other two branches. A prime example of this is the recent decision by the Court to narrow the ability of the Environmental Protection Agency to regulate carbon emissions under the Clean Air Act. This presents yet another setback in our country’s Climate strategy, and further heightens the need for congressional climate action.
We’ll tackle all of these issues and more in our series, starting with energy.
Issue 1: Energy
The Moment: The confluence of Ukraine, the Pandemic and the Climate Crisis
The news today is dominated by headlines about the climate crisis, the war in Ukraine, and the ongoing Covid-19 pandemic. In the face of these global emergencies, our first policy piece explores the risks from our current energy system and how an energy transformation - supported by governmental policy making - can mitigate so many threats - conflict, economic, climate and health and beyond.
Ukraine and the True Cost of Fossil Fuel Dependency
As reported by the International Business Times, the Invasion of Ukraine by Russia is funded by fossil fuels and western governmental responses are hindered by their reliance on those very fossil fuels. Fossil fuels continue to fuel both a humanitarian crisis and climate disaster. The invasion of Ukraine and the harm to its people and nature, was possible in great part because of the enormous amount of wealth generated by Russia’s fossil fuel exports. Accounting for over half their GDP, oil and gas exports have helped fund the invasion and are seen by many Ukrainians as the root cause of the war. In an attempt to draw funds away from the Russian war effort, a large number of countries, including the US, Canada, and the EU have imposed sanctions on Russian oil and gas imports. For these countries, including our own, the war in Ukraine has put energy security back on top of the political agenda, as they realize the cost that a dependency on Russian energy has left them with now that the supply has been cut off. The convergence of the war in Ukraine and the increasing climate disasters, especially now, as wildfires and heatwaves rage across Europe, should signal to us the urgency to shift away from fossil fuels. A transition to renewable energy is not only key to preventing higher levels of global warming, but also could be the answer to energy supply security. A transition to clean energy would help cut out the geopolitics that threaten fossil fuel supply chains and often lead to armed conflict. That said, countries that rejected Russian oil and gas are now at a crossroads in terms of a clean energy transition – either they can accelerate the transition to clean and sovereign energy in response to the short supply of natural gasses, or they can finance the expansion of fossil fuel infrastructure to replace what was provided by Russia.
As the International Business Times puts it, “we have no room left in our collective carbon budget for any more fossil fuel expansion,” and an increased investment in fossil fuels at this stage will, as the BBC writes, “put the work at risk of being locked into irreversible warming.” Unfortunately, since the turn from Russian oil, not all countries are focusing on renewable energy to replace their supply. As energy prices have exploded due to the invasion of Ukraine, there has been a general rush to increase investment in oil and gas. New liquified natural gas facilities (LNGs) have been proposed in Germany, Italy, Greece, the Netherlands, and Canada, President Biden has called for the increased production of oil and gas, and part of the EU’s plan to transition from Russian oil is to provide €12 billion in funding for natural gas pipelines and fossil fuel infrastructure. These investments are justified as short-term solutions that will provide economic relief, but in reality the construction of new natural gas facilities has no net benefit; the facilities will not be built fast enough to help Ukraine or nations reliant on Russian oil, and will only either lock the world into irreversible warming or end up as massive stranded assets when they are shut down in favor of renewable energy. Even dated and costly coal-fired generation facilities are coming back online or their lifetimes are being extended, as climate change concerns are eclipsed by the energy crisis, fueled by over reliance on fossil fuels mostly imported from other nations.
The Cost to Energy-Producing Developing Nations
As countries struggle to replace Russian gas, fossil fuel companies and financiers are increasingly using this as an opportunity to ramp up production of natural gas in developing nations, often in spite of local wishes. As NPR reports in a recent article, efforts are concentrated in sub-Saharan Africa, where lobbiers are trying to persuade governments of African countries to approve projects that would provide gas to Europe. Not only will this increase in fossil fuels be catastrophic for the environment, but it also often brings greater harm than benefit to energy producing nations. The Center for Energy, Ecology, and Development (CEED) in the Philippines recently called out financers for backing massive new fossil fuel projects. Citing the conflict in Ukraine, they argue that a dependence on fossil fuels feeds instability, causing devastating political shocks in the developing nations that they’re implemented in and compounding the already deadly impacts of climate change that countries are disproportionately experiencing. For example, a project in Mozambique backed by Chase was paused in 2020 due to the political violence and environmental damage it inflicted. However, the project is now being pushed through in the name of Ukraine. To stop the expansion of fossil fuels and the exploitation and environmental damage they cause, global project financers, such as Banks, must change. In the larger context, the world is moving away from fossil fuels, and in the future the demand for the fuels from developing nations that exists now might not be there. Building up African fossil fuel infrastructure and capacity may set them up for a crash when demand drops again in the future. Gas projects will likely not be ready until late 2020s, and it is unclear whether gas prices will stay high until then. Many countries in Africa have taken on significant debt in anticipation of future revenues, with governments claiming that the development of their gas reserves is part of the “just transition,” arguing that the Global North gained huge reserves of wealth from exploiting their natural gas reserves, and it is only fair that governments of African countries have the chance to do the same.
The Opportunity of a Just Energy Transition
At the same time as the world grapples with high energy prices driven by the invasion of Ukraine, the impacts of climate change are increasing the demand for energy across the globe. Record-breaking heatwaves in Europe are straining the country’s energy capacity as the demand for electricity skyrockets. This problem is a shared one, with regions in China experiencing unprecedented demand for electricity due to unusually warm weather. Parts of the world that haven’t experienced such heat before are facing challenges in meeting the power demand, as their storage capacities and energy systems aren’t accustomed to such intense demand. Regions in the U.S. are under pressure as well, as increased energy use tests the limits of state power grids, causing partial power outages and rolling blackouts. This experience is familiar to some parts of the U.S. already; in 2021 Texas experienced multiple blackouts due to surging energy demands during both a cold snap and later a heat wave.
However, Texas’s experience this year has been different – in early June, a heat wave struck the state earlier in the summer than ever experienced before. However, unlike in past years, the increased use of air conditioning in response to the rising temperatures didn’t lead to state-wide blackouts. Experts attribute Texas’s grid’s resilience to wind and solar power, which generated 40 percent of the power demanded during the peak of the heat wave, when temperatures topped 102 degrees fahrenheit. These renewables were not only responsible for keeping the power on, but also for keeping down expenses, as they have no fuel costs. As the price of fossil fuels has skyrocketed this past year, renewable energy has even more upsides. Texas, a state that has long been home to oil and gas giants and whose officials often disparage renewables, is now massively dependent on renewables. In 2021, wind and solar provided 38 percent of the state’s power, coming close to the 42 percent provided by natural gas. However, Joshua Rhodes, an energy researcher at UT Austin, points out that the potential for renewable energy generation in Texas is limited by a lack of infrastructure. He says that, "about half of the solar that could be produced is not being produced right now because there's no more room on the lines.” Increasing storage capacity for renewable energy would help address the variability of wind and solar power and allow these sources to be used to their full potential. Regulatory support is crucial to providing infrastructure to supplement Texas’s growing renewables, and part of the recently-passed Infrastructure Investment and Jobs Act addresses this by providing funds for grid expansion through the construction of transmission lines.
Building An Energy Transition
EU Proposes a Ban on Combustion Engine Cars
In June the European Parliament voted to ban the sale of combustion engine cars by 2035. The deal requires 100% reduction in CO2 emissions from new cars by 2035, and is likely to become law. An additional draft law to accompany this one will require countries in the EU to install millions of vehicle chargers. If implemented, this package would represent a major step toward the EU’s goal to cut emissions by 55 percent by 2030. The hope is that these regulations will accelerate the EU’s transition to EVs by incentivising producers to invest in electric vehicle production and by making it easier for consumers to purchase the cars. According to the Chief Financial Officer of Volkswagen, Arno Antlitz, this is an attainable goal. However, he highlights that the most difficult part of this transition is not “ramping up the car plants, but ramping up the battery supply chain." As carmakers look to secure more battery cell supplies in anticipation of this EU decision, it is becoming apparent that finding enough raw battery materials will be an issue. Many in the industry expect that an EV battery shortage will increase the price of the vehicles and slow the shift from combustion engine cars.
Meeting the Demand for the Raw Materials of the Energy Transition
In light of the demand for materials such as lithium, cobalt, nickel, and graphite, many companies and governments across the globe are looking for ways to increase their production of the valuable materials. In the U.S. this past March, President Biden signed an Executive Order that uses the 1950 Defense Production Act to boost production of the minerals found in EV batteries. According to the White House, this action represents a step towards “recognizing the critical importance of minerals and pushing to electrify the car industry.″ In part because the government is fast-tracking demand for the minerals and because of the increasing demand, companies in the U.S. are rushing to develop new lithium mines. In Nevada, the largest lithium mining project in the U.S. is on track to becoming fully approved by the state. Owners of the mine claim that once its production phase begins in 2025, the mine will have the capacity to provide 25 percent of the world’s lithium and will be active for 46 years. However, as is the case with most mining endeavors, interests in providing resources for clean energy clash with environmental concerns about contamination of groundwater and harm to wildlife. The owners of the mine, Lithium Nevada, have been working with the residents of the area, largely the Shoshone Tribe, to conduct environmental impact statements. And, while spokespersons for the tribe were not initially opposed to the mine, the rushed nature of the project’s approval process has induced concerns about potential long term impacts. As the world transitions away from fossil fuels, we must be extremely cautious not to start polluting in a different way. As the policy director of Earthworks, Lauren Pagel, puts it, “the clean energy transition cannot be built on dirty mining.”
Getting the Climate Transition Right: Fixing Carbon Offsets
Exploitation by fossil fuel companies is not the only abuse in the global south. A recent investigation by Bloomberg Green found how carbon offsets, a financial tool devised to fight climate change by turning carbon dioxide into a commodity, has the potential to be used for corporate benefit at the expense of local communities. While quality carbon offsets can contribute to real climate benefits by financing projects that would not otherwise occur and by bringing important income to communities in need, the Bloomberg story revealed how “a lack of oversight can leave people already in poverty ripe for exploitation—now in the name of climate progress.” In 2019, the World Resources Institute implemented a project in Coatitila, Mexico that paid villagers to reforest the woods surrounding their villages with oil giant BP Plc buying the carbon credits generated by the villagers, which helped to fund the projects. The vision is for carbon offsets to fund nature conservation at a premium over the income from deforestation for timber and farming. However, Bloomberg Green reported BP vastly underpaid for the offsets, handing over just 15 percent of the average going price for similar projects. Some village leaders interviewed by reporters say they hadn’t known how much carbon offsets are really worth, or even who was buying them, while others say that they were shut out of negotiations on how much they’d be paid. Bloomberg called the low price a form of “carbon colonization,” an exploitative process where BP procures valuable assets from poor communities in places already exposed to increased risks from climate change. BP paid villagers $4 per offset while selling its 1.5 million offsets for 16 dollars each. Not only did this exploit the Coatitila community, but critically, it was also too low a price to fund their conservation efforts, eliminating the incentive to continue conservation projects in lieu of chopping down trees for more profitable farming uses.
During the first wave of global carbon markets two decades ago, these lessons were learned: carbon reductions must be additional and actually beneficial to the atmosphere; they must be fair, with prior informed consent and cooperation; and nature-based offsets must be nature-aligned, such as restoration of ecosystems, not payment for plantations of monoculture trees — which were often planted on previously illegally deforested lands. We must get climate practices right, for justice, for nature which also protects us from climate impacts, and for people.
Energy Policy in the US:
Energy use in the U.S. is the nation’s biggest source of emissions, and is therefore a critical sector to focus emission reduction efforts. Under this broad category falls transportation, which alone is the biggest source of CO2 emissions in the U.S., topping 27 percent in 2020. Other major energy users are the electricity production sector, manufacturing and industry, and commercial and residential buildings. Even with the decline of coal’s competitiveness, the burning of fossil fuels remains the dominant mode of generating energy, providing 79% in 2021 Fortunately, technology exists that can drastically reduce these emissions through renewable energy power generation and the transportation transition from gasoline and other fossil fuels to electric vehicles and other types of electrified transportation (such as hybrid ships). While these clean technologies are increasingly the lowest cost, government policies continue to hold a thumb on the scale subsidizing fossil fuels. Globally in 2021, subsidies for fossil fuels amounted to over 440 billion, while in the U.S. direct fossil fuel subsidies amounted to $20 billion, and implicit subsidies tripled the financial benefit to fossil fuel producers to $62 billion. To meet our global climate goals, we must at least level the playing field with policy and subsidy shifts, as well as leverage the power of government procurement by the federal, state and local governments.
Progress made so far:
Under the Biden Administration, notable steps have been made towards reaching zero-emissions energy goals. Multiple executive orders signed into law by President Biden demonstrate the Executive Branch’s willingness to lead by example in the energy transition by setting goals to procure zero-emissions goods, energy, and vehicles. Given that the government is the nation’s largest purchaser of goods and services, spending $586 billion on contracts in 2019, it has the opportunity and responsibility to drive decarbonization. Its purchasing power can be used to stimulate markets for low-and-zero carbon products, facilitating their spread to the larger market. Thus far, President Biden has directed all federal agencies to purchase 100% zero-emission light-duty vehicles by 2027, as well as requiring federal agencies to procure 100% carbon-pollution-free electricity by 2030. His executive order also includes a net-zero emissions building portfolio by 2045, and overall net-zero federal operations by 2050. While the White House was working to catalyze a clean energy transition, congress was also busy passing legislation that includes large climate investments. On November 15th of 2021, the Infrastructure Investment and Jobs Act was signed into law. This legislation includes historic investment in transportation infrastructure, allocating $39 billion towards building a climate friendly passenger rail, replacing transit vehicles, like school and public buses, with ZEVs, and building a national network of EV chargers. The bill also invests over 65 billion in power infrastructure by constructing clean energy transmission lines to facilitate the expansion of renewables and clean energy.
Further steps needed/barriers to progress
While progress has been made that represents a large step forward from the past, it has not yet been enough to achieve the complete and rapid transition we need to reach our climate goals and curb climate change. While historic, the Infrastructure Investment and Jobs Act is, by definition, a long term investment, and will do little to achieve our 2030 emissions reduction targets. It does pave the way for an economy-wide transition to clean energy, but analysis by CSIS finds that because of its incremental nature, the bill will not meet Biden’s core commitment of a 50 percent reduction in GHGs by 2030 and net zero by 2050. Just $2.5 billion is allocated towards funding electric vehicle charging infrastructure, which will not be sufficient to meet Biden’s goal of building 500,000 stations. In addition, while the bill does address clean energy, it leaves out Biden’s original plan to provide hundreds of billions in clean energy tax credits and instead only allocates $10-12 billion towards renewable grid projects. The Build Back Better legislation, passed by the House in November of 2021, did include significant climate provisions, complete with funding topping $550 billion. Of this, $320 billion would come in the form of tax credits which provide incentives for companies and consumers to install solar panels, improve energy efficiency of their buildings, and buy electric vehicles. However, this legislation didn’t make it past the Senate in 2021.
Yet, there is light at the end of the tunnel: Last week it was announced that Senator Joe Manchin (D-W.Va.), who originally opposed the climate provisions in the Build Back Better legislation, is planning on backing the “Inflation Reduction Act,” a new package of sweeping legislation that includes ambitious climate action. The package allocates $369 billion towards climate spending, largely in the form of tax credits that will accelerate the transition to clean energy. If passed, this deal would be the “most significant U.S. climate legislation of all time,” and would set the U.S on track to reach a 40% reduction in emissions by 2030. While not quite the 52% emissions reduction goal set by the Biden administration, because of its potential to mobilize further action, this bill would make U.S. climate targets a real possibility rather than an unattainable objective.
Despite this hopeful news, there is a threat to federal policy power: The Supreme Court. On June 30, 2022, the Supreme Court’s majority opinion ruled, “agencies may not regulate on questions of vast economic or political significance without clear directions from Congress.” This means that while the EPA still can regulate carbon emissions from power plants, it can only do so with explicit congressional authorization. The decision signaled to many the Court’s rejection of the use of regulation to fight climate change. This follows the general trend of climate policy thus far; while there is support for providing incentives and investing in climate innovation, there seems to be an aversion, on both sides of the aisle, to creating regulations. Neither the Infrastructure Investment and Jobs Act nor the proposed Inflation Reduction Act contain the more ambitious climate regulatory provisions that were in Biden’s original Reconciliation Act proposals, such as an Energy Efficiency and Clean Electricity Standard. Effective climate policy is hindered when tools are taken away. With the Inflation Reduction Act we have a chance to get on track for what the science requires.
Check back for our next installment on food and agriculture policy - where we are and what we need, for our climate, communities, food security, farmers and the economy alike.
Learn More From the 2022 Forum:
We were so pleased to have so many leaders in this issue area at Christensen Global’s recent Sun Valley Forum, including speakers from Ameresco, Rewiring America, Spring Free EV, and the U.S Department of Energy’s Office of the Under Secretary for Infrastructure and Loans Program Office. You can watch their keynote presentations on accelerating the transformation of our energy system in these videos from the forum. The ideas discussed in these presentations were built upon during the energy focused working session that followed the presentations, during which all forum participants were invited to work together in a focused environment to drive impact across the energy sector, to identify gaps and needs, and to spark action.
How Can You Get Involved?
While federal policy making is crucial to transitioning towards clean energy, the matter is not entirely in the hands of the government. We all have a role to play in accelerating the transition to renewable energy. Here, we highlight some ways to get involved to help navigate the wealth of resources and opportunities that are out there. For more information on the most recent developments in the climate movement, inspiring climate leaders, and ways to get involved, check out the interactive tool called Inside the Movement. This is a great resource for those who are looking to take action now. Another great resource is Christensen Global’s very own Forum Impact Hub, which compiles the speakers and foundations highlighted at our recently hosted Sun Valley Forum. This Forum brought together global leaders across sectors such as industry, innovation, government, and advocacy to share their work and accelerate resilience. For those that were unable to attend or who are interested in diving deeper into and becoming involved with the projects highlighted at the forum, the Forum Impact Hub is a great resource for exploring solutions and strategies for resilience that you can engage with today. From learning how to invest in the circular economy to taking action to persuade major banks to take action on climate change, the Impact Hub is a great place to get involved with and learn about resilient solutions.
For resources more tailored to the clean energy transition look into the Regulatory Assistance Project’s key issues page, which helps clarify the complexities of the energy issue, is a great resource. Visit their website to learn more about all things energy related, including Regulation and Governance, Energy Storage and Distribution, and Grid Scale Renewables. Their work as a global, non-governmental organization advances policy innovation in the energy realm. Their website also includes a knowledge center, which is an “extensive collection of resources for in-depth analysis and practical solutions to today's energy challenges.” Vote Solar is another nonprofit policy advocacy organization, whose mission is to “make solar more accessible and affordable across the United States.” Their website includes information on the latest developments, current federal policies on solar, and state-by-state updates on solar progress.
Finally, one of the most important ways that we as individuals can get involved is by raising our voices locally. The majority of energy policy is actually determined on the local level, through local decisions surrounding land use and zoning, building requirements, public transportation, provision of utilities, and more. Engaging in conversations about energy policy in your state and community can have a meaningful impact on gearing local energy priorities towards sustainability. Implementing energy efficient approaches into existing local activities also will have net benefits for the community overall, such as an increased budget for other priorities because of the money saved from reducing energy costs. In sum, one of the most impactful ways you can get involved in accelerating the energy transition is by tuning into the energy conversation in your state or locality and advocating for a shift in their policies to help achieve our country’s clean energy goals and also to improve the health of your community. To start learning more about your state’s energy policies, check out this report by the nonprofit the American Council for an Energy-Efficient Economy.
Note from the Author:
My name is Lily Pogue and I am going into my sophomore year at Dartmouth College. I grew up in Sun Valley, where Christensen Global is based, and am now back at home for the summer! I became interested in working for Christensen Global near the end of my freshman year, when I learned about the amazing work that they do. However, my interest in policy stretches further back to my senior year of highschool, when I did my Senior Project on Early Childhood Education. Throughout this project, I realized that the root cause of the issues with the childcare system, and with many other social problems we face today, is in policy. But, it is also through policy that meaningful changes can be made, and so I decided that I wanted to spend time in college taking classes related to policy. What draws me to the subject is its potential to do so much good for our environment, our communities, and the people who live in them. So, when I came across Christensen Global, I knew that I wanted to be involved – to learn from them and also to contribute to their work. Together, we decided that I would spend my time researching and writing a series for their blog focused on policy efforts in the energy, food and agriculture, and finance sectors to highlight the vital role these sectors play in achieving our climate goals.
Please check back for the next installments of this series including analyses of food & agriculture policy and climate-finance policy.