FERC Should Stick to Just Being Boring
Author
Josiah Neeley - R Street Institute
R Street Institute
Current Issue
Issue
6
Parent Article
Josiah Neeley

In the coming years, the nation’s electric grid is going to undergo a transformation, as new technologies and the widespread buildout of clean energy resources necessitate major upgrades and expansions of the electrical transmission system. It’s natural to ask what role America’s main federal electricity regulator, the Federal Energy Regulatory Commission, will play in this metamorphosis.

Some would like to see FERC become a green advocate, actively seeking to push the grid in a more climate-friendly direction. But this would be a mistake. Ironically, FERC will have the greatest impact if it focuses on boring but important technology-neutral market reforms rather than pursuing headline-grabbing but ultimately insignificant sustainability mandates.

FERC is not an environmental regulator of the electrical sector. Nor should it be. Its mission is to ensure that the electric grid functions properly. Its staff has technical experience with matters of electric reliability, wholesale markets, and other related issues. Attempts to give FERC an explicit decarbonization mandate, such as making it consider the emissions impact of particular projects, risks degrading its effectiveness both at its core mission and side goals.

Instead, the best way for FERC to help aid the energy transition is to focus on what it does best. For example, one of the biggest barriers to renewable energy deployment is backlogs in generator interconnection. Zero-carbon resources compose 90 percent of new projects in grid interconnection, totaling about three-quarters of the capacity of all existing power plants. Regulatory delays can slow a project by years. Partly as a result of these delays, only about one quarter of projects reach completion. Reducing interconnection backlogs is not a sexy issue, but it’s an important one and is well within FERC’s wheelhouse.

Under the Biden administration, FERC has taken initial steps toward interconnection reform, but has accomplished a modest amount to date. The administration’s most celebrated action was FERC’s recent Order 2023, which reduces barriers to new generator interconnection. Upon closer inspection, however, the order does not require much more than what all regional grid operators otherwise planned to do. More importantly, it does not address the core problems driving massive interconnection costs and backlogs. This requires deeper reform, including synergies with transmission reform.

Another key barrier to clean energy adoption that is squarely within FERC’s remit to address is transmission congestion. Transmission congestion can prevent electricity from clean energy sources from reaching centers of electrical demand, which raises prices as well as emissions and can even exacerbate reliability problems. Grid-enhancing technologies can dramatically reduce grid congestion and double renewable energy integration in some regions.

Transmission owners, who make money based on their regulated rate base, have a perverse incentive to use their own lines more efficiently. Therefore, this puts FERC in the role of substituting for competitive forces, which it did in requiring use of one grid-enhancing technology in Order 881. Further reforms are hamstrung by the lack of grid congestion transparency in the Southeast, which makes it hard to legally demonstrate the cost savings of these technologies.

A third way FERC can provide a constructive role in grid modernization is by helping to develop better market rules for pricing reliability services. FERC is also undergoing region-specific reforms to rules that credit resources for their reliability value. This is tricky math, as unconventional wind, solar, and storage are imperfect substitutes for conventional thermal power plants. If FERC tilts the scales in favor of thermal power, it could undermine the clean energy transition, but if it over-credits renewables it risks reliability problems that will undoubtedly spur government interventions, delaying the transition.

Modernizing reliability policy also requires addressing historic blind-spots. None is larger than the fact that nearly all consumption is presumed to have the same reliability value. The result is that modest supply shortfalls from, say, an abrupt wind downturn or natural gas pipeline problem result in involuntary, widespread outages. Market-friendly reforms would enable low-value uses of electricity to curtail voluntarily for compensation, while augmenting reliability for high-value uses. Such demand flexibility is an essential ingredient to integrate high levels of renewable energy.

None of these polices explicitly favor clean energy or are based on environmental considerations. But FERC’s emissions impact by implementing its mission robustly should not be understated. In fact, polices such as these can have a greater influence on emissions trajectories than the Inflation Reduction Act and EPA’s newly released power plant regulations. In the end, FERC epitomizes how market-friendly economic policy can be a boon to both our pocketbooks and planet. When it comes to what drives power industry decarbonization, the mundane is the sublime.

Josiah Neeley is a senior fellow in energy policy at the R Street Institute.

The Debate: FERC and Building the Clean Grid
Author
Ken Berlin - Atlantic Council
Rob Gramlich - Grid Strategies LLC
Alexandra B. Klass - University of Michigan Law School
Josiah Neeley - R Street Institute
Atlantic Council
Grid Strategies LLC
University of Michigan Law School
R Street Institute
Current Issue
Issue
6
The Debate: The New Toxic Substances Control Act Is Now Five Years Old: A Report

The transmission grid is the critical superhighway that connects energy supply and demand. But our grid was designed for the power plants of the past—not for the diverse range of resources and technologies of our clean energy future. Over 70 percent of the nation’s transmission infrastructure is more than 25 years old, and in many areas of the country constraints have already been an impediment to renewable power. To meet greenhouse gas reduction goals, we will need to expand electric transmission systems by 60 percent by 2030 and possibly triple the capacity of these systems by 2050. The Inflation Reduction Act has large loan guarantees to spur grid investment, but hundreds of billions more will be eventually needed.

Grid modernization will require the Federal Energy Regulatory Commission, which oversees the interstate transmission of electricity, to take a leadership role in coordinating with industry investors and other agencies as we balance the reliability, cost allocation, and environmental concerns associated with transmission grid expansion. Last summer, FERC adopted new policies that remove many barriers for new solar and wind power suppliers interconnecting with the grid. Meanwhile, a proposed Department of Energy rule would speed upgrades by having DOE manage environmental reviews, which must be completed within two years.

Still, many critical policy issues within FERC’s wheelhouse remain unresolved. These include improving the transmission planning process, coordinating with utilities and with states so new lines can be placed where they are needed. But how should environmental and land impacts be considered and balanced in this process? Who should build new transmission lines, and can expansion of the grid balance the needs of the regional power markets and states? How will the costs of expanding transmission be allocated in a manner that is cost effective and fair? As the transmission grid faces more physical interruptions due to extreme weather events, what is the role of FERC in safeguarding reliability and resilience?

The transmission grid is the critical superhighway that connects energy supply and demand. But our grid was designed for the power plants of the past—not for the diverse range of resources and technologies of our clean energy future. To meet greenhouse gas reduction goals, we will need to expand electric transmission systems by 60 percent by 2030 and possibly triple the capacity of these systems by 2050. Can we preserve the local environment while protecting the planet from the dangers of global climate change?

Energy Transition Will Confront Legal and Policy Impediments
Author
Ethan Shenkman - Arnold & Porter
Arnold & Porter
Current Issue
Issue
5
Ethan Shenkman

The Inflation Reduction Act is potentially the most impactful climate legislation ever enacted, but it only addresses two legs of a three-legged stool. The IRA addresses technology—spurring development of a wide range of clean energy innovations—and economics, significantly lowering costs. What it doesn’t address are the new legal frameworks that must be developed if the energy transition is to become a reality.

The sheer scale of the build-out required for the many needed types of clean energy projects, the magnitude of the infrastructure and supply chains necessary to support them, and the speed with which this transformation must be accomplished is difficult to fathom. Experts say that to reach net-zero carbon emissions, new utility-scale wind and solar generation will have to be sited, permitted, and constructed across a land area equivalent to several large midwestern states. To deliver that power to where it’s needed, studies show that transmission will have to increase 25 percent over a decade. According to the Prince-ton-led REPEAT Project, if we can’t build new transmission at a fast enough pace, roughly 80 percent of the emissions reductions expected from the IRA might not happen.

Meanwhile, the need for exponential growth in carbon capture from emissions and direct air capture will require rapid expansion in the number of capture facilities, CO2 transportation channels, and sequestration sites. With sequestration taking place in areas of deep geologic storage around the country, including in the Gulf of Mexico, tens of thousands of miles of high-capacity trunk pipelines and over 100,000 miles of spur pipelines will be needed to deliver CO2 to permanent storage locations.

And if the hydrogen economy is going to take hold—which many believe is necessary to help the transportation, industrial, and power sectors transition from fossil fuels—the country will need to build large-scale hydrogen hubs with an abundance of new infrastructure for storage and distribution.

Mining operations will inevitably need to be expanded to meet rapidly rising demand for critical minerals like lithium, nickel, cobalt, and rare earth elements used in the production of batteries, magnets, catalysts, and energy storage systems. Some forecasts predict that graphite production will need to increase by almost 1,000 percent to meet the need for electric vehicle batteries. The International Energy Agency warns that “demand for critical minerals—in most cases well above anything seen previously—poses huge questions about the availability and reliability of supply.”

Do we have the legal frameworks in place to build big enough and fast enough? A growing chorus of experts says, “no.” In their provocative article, “The Greens’ Dilemma,” J.B. Ruhl and James Salzman, professors of environmental law at Vanderbilt and UCLA, summarize the paradox confronting environmental practitioners: “The massive scale of new climate infrastructure urgently needed to meet our nation’s greenhouse gas emissions reduction policy goals will face a substantial obstacle in the form of existing federal, state, and local environmental laws.”

As New York Times columnist Ezra Klein recently observed, proponents of climate action “wanted more money for clean energy and more ambitious targets for phasing out fossil fuels and got them. Now that new energy system needs to be built, and fast.” And stakeholders are “nowhere near agreement on how to do that.”

Government officials agree. California Governor Gavin Newsom recently remarked, “You can’t be serious about climate and the environment without reforming permitting and procurement in this state.” John Podesta, who is overseeing implementation of the IRA for the Biden administration, put it bluntly: “We got so good at stopping projects that we forgot how to build things in America.” Meanwhile, the sclerotic permitting process and other legal challenges are blocking hundreds of renewable-energy projects, according to the Sabin Center for Climate Change Law.

How do we move forward? Professors Ruhl and Salzman call the question: “How can environmental law be reformed to facilitate building climate infrastructure faster without unduly sacrificing its core progressive goals of environmental conservation, distributional equity, and public participation?”

That question implies others. What legal reforms are needed? What are the societal implications of this energy and infrastructure transformation? How do we ensure that the transition will be equitable for all segments of society? And what is the role of environmental and energy transition practitioners in helping us get there?

This November, the Environmental Law Institute and Georgetown Climate Center will be convening a diverse array of experts to discuss these fundamental questions at the “Energy Transition Conference” in Washington, D.C. Stay tuned for further details.

Energy Transition Will Confront Legal and Policy Impediments.

Searching for Solutions to Permit a Carbon-Free Energy Transition
Author
David P. Clarke - Writer & Editor
Writer & Editor
Current Issue
Issue
5
David P. Clarke

With bipartisan demand for reforming what the National Law Review has described as a “lengthy, expensive, and perilous environmental review process,” is Congress set to break a logjam that has delayed and killed numerous infrastructure proposals? The answer has far-reaching consequences. Achieving President Biden’s goals of a carbon-free power sector by 2035 and net-zero economy by 2050 will require significant reform, and soon.

At a May Senate Energy and Natural Resources Committee hearing on permitting reform, chairman Joe Manchin (D-WV) declared, “We’re going to make something happen.” Less than a month later, Biden signed the Fiscal Responsibility Act of 2023, the debt ceiling deal, that includes several noteworthy National Environmental Policy Act reforms. For example, the FRA establishes a two-year deadline for completing NEPA environmental impact statements and a one-year deadline for environmental assessments. Project sponsors can now challenge agency delays in court.

Environmentalists aren’t happy about the reforms. Christy Goldfuss, chief policy impact officer for the Natural Resources Defense Council, complained that revising permitting through the debt-ceiling package was “the wrong way” to debate reforms and will “do more harm than good” by limiting needed environmental reviews. She also complained about the legislation’s “ramming” through approval of a West Virginia natural gas pipeline that Manchin wanted.

But Brandon Tuck, counsel to law firm Vinson & Elkins, describes the FRA changes as “modest” and likely to do little to move the needle on infrastructure projects. Even the new mandatory timelines might not drive project approvals, because federal agencies still have numerous substantive environmental law obligations whose timelines might not be compressible to fit tighter NEPA timelines. The FRA reform allowing permit applicants to prepare EISs is the one change that could actually save months during early NEPA stages, Tuck says, by enabling project sponsors to circumvent delays from limited agency resources and cumbersome federal contracting requirements.

Indeed, NEPA environmental reviews aren’t the biggest roadblock facing the clean energy transition, Tuck adds. Large-scale solar and other clean energy projects will be built, but to get their clean power to market the construction of large interstate transmission lines must be accelerated. To date, however, states’ authority to oppose interstate lines has thwarted new projects, he says, a problem that has emerged front and center of permitting reform negotiations.

The concern is not new. The Energy Policy Act of 2005 gives the Federal Energy Regulatory Commission “backstop siting authority” when states reject or fail to act on a transmission project. FERC can approve power lines in National Interest Electric Transmission Corridors designated by the Energy Department. But FERC’s authority “has never really been called into play,” Tuck notes. Right now, even if FERC exercises its authority, that power would not trump state authority to oppose transmission passing through its territories.

During Manchin’s hearing, Jason Grumet, CEO of the American Clean Power Association, representing 800 clean energy companies, highlighted that concern. Past congressional efforts to support national interest transmission buildouts has been “entirely ineffective,” with no line permitted in the nearly two decades since FERC got its backstop authority, Grumet said. A single state stakeholder can block a project that would stretch for hundreds of miles, even if all other states involved had approved it.

Now, climate change has made demand for interstate transmission increasingly urgent. According to a Princeton University analysis, if U.S. transmission development continues at the last decade’s one percent rate, over 80 percent of the greenhouse gas emission reductions achievable through wind, solar, and other clean energy supported by Biden’s $369 billion Inflation Reduction Act investments would be lost.

Congress took another step to strengthen FERC’s backstop authority in the 2021 Infrastructure Investment and Jobs Act. To implement that additional authority, in January FERC published a proposed rulemaking notice that, among other things, would allow the commission to supersede a state regulatory body’s decision denying approval of a proposed NIETC transmission project.

In search of a solution to the transmission buildout problem, Manchin introduced his Building American Energy Security Act of 2023, which includes provisions that would again enhance FERC’s backstop permitting authority, giving states one year to issue or deny a permit before the commission could act. Biden “doesn’t love everything” in Manchin’s bill but supports it, according to the president’s senior clean energy advisor, John Podesta.

Searching for Solutions to Permit a Carbon-Free Energy Transition.

ELI Report
Author
Margaret Badding - Environmental Law Institute
Environmental Law Institute
Current Issue
Issue
3

White Paper ELI report developed for power sector highlights environmental justice considerations in renewable energy roll out

The modern energy network is rapidly evolving with new renewable energy and battery storage developments. In 2021, wind, solar, and battery storage accounted for 81 percent of all new capacity added in the United States and produced an estimated 13 percent of electric power generation. While these projects are highly beneficial, including their contributions to decarbonization and reductions to air pollution, they can also raise environmental justice issues for the communities in which they are sited.

In November, the Electric Power Research Institute published a white paper developed by ELI titled “Environmental Justice and Renewable Energy and Storage.” It identifies environmental justice challenges and opportunities in the development of renewable energy and battery storage facilities. The paper intends to be a practical resource for utility companies and provides leading practices to advance environmental justice in siting, designing, constructing, and operating renewable energy facilities, including utility-scale or large-scale solar, wind, and battery storage projects.

The report begins with a detailed discussion of different definitions of environmental justice, including federal, state-level, and community views. The concept of EJ is broken down into four fundamental components: distributive justice, procedural justice, recognition justice, and restorative justice. The paper then discusses how EJ communities can be identified, including mapping and screening tools. These include EPA’s EJSCREEN and the White House Council on Environmental Quality’s Climate and Economic Justice Screening Tool.

The report summarizes common concerns of EJ communities, including decreased property values and impacts on culturally and historically important sites. While these project concerns can affect any community in which a renewable energy facility is being sited, they can be amplified for EJ communities. For instance, decreased property values, while a potential worry for any community hosting a renewable energy facility, can be of particular concern to neighborhoods that have faced disadvantages with home ownership—due to historical issues such as redlining. As such, some EJ communities may experience a proposed energy facility as another instance in a long history of discrimination.

The report identifies leading practices, which include undertaking meaningful engagement with a stepwise approach. That means meeting with community members early in the process, planning a proactive engagement strategy, and increasing community capacity with training, access, and local expertise. It also means designing mitigation approaches collaboratively to address community concerns, and identifying and implementing community benefits. Community benefits can include job creation, access to renewable energy, energy efficiency, grid resilience, brownfields redevelopment, and investments in other community initiatives such as infrastructure upgrades or community co-ownership of projects. Community benefits agreements are discussed as an instrument for providing for community benefits that has been employed in the context of environmental justice.

ELI’s Elly Beckerman, James McElfish, and Elissa Torres-Soto authored the white paper in collaboration with EPRI, an independent non-profit energy research, development, and deployment organization. Torres-Soto gave a presentation on the report and key findings at EPRI’s Sustainability Summit held in November.

A subsequent collaboration between ELI and EPRI this year is examining and highlighting best practices to address EJ challenges in rural and suburban electric transmission development, another fundamental component of the clean energy transition. Given the United States will need to triple its transmission infrastructure by 2050 to fully decarbonize the grid, it is essential to address communities’ experience and EJ challenges affecting transmission projects.

Webinar tackles green hydrogen development opportunities and challenges

As the United States transitions away from fossil fuels, a variety of energy carriers are needed to achieve a carbon-free future. These include not just batteries but green hydrogen, made from carbon-free sources like solar panels or wind turbines. It presents a key opportunity: green hydrogen is storable, versatile, and sustainable. Yet challenges remain to its adoption.

In February, ELI held a webinar titled “Exploring Green Hydrogen’s Role in Our Energy Future,” examining opportunities and challenges facing the energy carrier’s development. The webinar was the first of 2023 in the GreenTech Webinar Series, which facilitates dialogue on catalyzing technologies to respond to environmental issues.

The event was moderated by Beth Deane, chief legal officer of Electric Hydrogen, and featured experts from the federal and state governments and industry leaders.

Sunita Satyapal, Director of the Department of Energy’s Hydrogen and Fuel Cell Technologies Office, provided an overview of DOE’s activities and the current regulatory landscape.

Satyapal discussed recent federal legislation, including the Bipartisan Infrastructure Law—which includes $9.5 billion in clean hydrogen funding and requires the development of a National Clean Hydrogen Strategy and Roadmap—and the Inflation Reduction Act, which created tax credits for hydrogen development up to $3 per kilogram. Satyapal also discussed DOE’s Hydrogen Energy Earthshot to accelerate development. The department’s hydrogen work includes research and development, technology integration, deployment, and financing.

Next, Tyson Eckerle, senior advisor for clean infrastructure and mobility in the California Governor’s Office of Business and Economic Development, discussed green hydrogen development in his state. Eckerle covered the legal context set by AB 1279 and SB 1020, which set legally binding emission reductions and create a path to 100 percent renewable energy by 2045.

To generate new hydrogen markets, demand must be increased by organizing stakeholders and creating scale. Eckerle emphasized the importance of regional networks and partnership with the federal government and private sector, highlighting the private-public duo of the California Fuel Cell Partnership and the Alliance for Renewable Clean Hydrogen Energy Systems.

Last, Venella Yadhati, Senior Manager of Ørsted’s P2X (Power-to-X), provided an overview of the company’s green hydrogen development. Yadhati discussed ongoing international collaboration and hydrogen project constraints, including scale and commercial viability.

GreenTech Webinar Series sponsors are Intel Corporation, BNSF Railway, Marten, and Constellation Energy.

ELI at International Women’s Day and UN Water Conference

Globally, women face disproportionate impacts from climate change and water insecurity, while often being frontline stewards of water resources. Research has shown that gender-inclusive policymaking results in more resilient solutions. Since 2017, ELI has supported empowering women in water decisionmaking as a partner of the Women in Water Diplomacy Network, a program initiated by the Stockholm International Water Institute.

In March, the network elevated the intersectional issues of gender equality and water when ELI co-convened several side events during the UN Women’s Commission on the Status of Women and the UN 2023 Water Conference, both held in New York City.

On March 8, International Women’s Day, Elizabeth Koch, ELI’s senior manager of international programs, spoke at a side event for the UN’s 67th CSW. The event, “Strengthening Rural Women’s Capacity in Natural Resources Management Through Improved Data,” focused on the significance of and strategies for improving gender-disaggregated water data as part of policy design.

Koch discussed the network’s principles of feminist foreign policy, which encompass the “4 R’s”: women’s reality, rights, representation, and resource allocation. Gender-disaggregated data are necessary for each element, to understand and mitigate inequity, Koch said. “If you are doing a water project and not doing the gender assessment, which requires sex-disaggregated data, you are doing a poor job.”

Two weeks later, the network promoted its efforts at the UN Water Conference. Jessica Troell, director of ELI’s International Waters Program, and Koch co-convened four side events and gave presentations on water tenure and women’s rights.

The first event focused on national leadership for inclusive water governance and featured an announcement from the Food and Agriculture Organization launching a global dialogue on water tenure.

The second event focused on integrated policy solutions for sustainable management of freshwater biodiversity and highlighted the network’s work to promote integrated national water laws through evidence-based policy analyses.

The third event discussed the importance of inclusive water diplomacy processes and the connections between women, water, peace, and security. The fourth event focused on benchmarking efforts to monitor key gender indicators across water governance institutions.

Environmental Justice During Renewables Roll Out

A Technology Tries a Leap
Author
David Rejeski - Weizenbaum Institute
Weizenbaum Institute
Current Issue
Issue
3
A cartoon of  women high jumps over a computer

For almost all professionals, quantum computing is background noise in their social media feed, occasionally rising to the level of awareness through far-reaching assertions about environmental salvation: “Quantum Computing Just Might Save the Planet” and “Quantum Computing Could Change the Way the World Uses Energy,” or even “Quantum Computing Will Be Bigger Than the Discovery of Fire!” Does any of this sound familiar? Just two years ago alternative meats were touted as a path to a future free of global-warming bovines and nutrient-polluting hogs—then the market collapsed. Or why hasn’t nanotechnology, first examined in this magazine almost twenty years ago, produced emissions-free manufacturing while eliminating resource inefficiency and waste.

It is not just flying cars and household robots that have failed to materialize, but hosts of other more mundane technologies with over-hyped promises. So should we pay attention this time? Quantum computing could hold the key to a new generation of high- performance, low-environmental impact batteries; efficient carbon capture technologies; or new ways to manufacture critical chemicals with far less energy. Separating uncritical, unbridled enthusiasm from realistic expectations is difficult at early stages of technology development and, as some observers have noted about today’s debates, “Hyperbolic expectations of future promise and potential have become more significant and intense.”

For the curious and quantum newbies, part of the challenge is being confronted with an impenetrable vocabulary—words like qubits, entanglement, superposition, and decoherence—and also a theory that has led scientists like Nobel physicist Richard Feynman to say, “Quantum mechanics describes nature as absurd from the point of view of common sense.”

Indeed, quantum computing has been a member of that club of fascinating technologies that always seem 20 or 30 years away, like nuclear fusion. But then in 2019, Google claimed that it had solved a problem in just 200 seconds that would have taken even the best classical supercomputer 10,000 years to complete—a feat termed quantum supremacy—later changed to quantum advantage after a number of scientists sent a letter to the journal Nature protesting the term “supremacy.” IBM quickly responded that the problem could be solved with an improved classical supercomputer technique in just 2.5 days, taking the sheen off of Google’s claim. And so it goes.

For the environmental community, the nagging questions around quantum computing, as with other emerging technologies, are: “Can the tech deliver more environmental upsides than downsides and, if so, in what time frame and at what cost?” At a minimum, quantum computing will need to prove it can live with less energy and produce less end-of-life waste, while reducing demands on scarce resources when compared with alternative computing systems.

Before we take on the question of whether it can produce the numerous claimed benefits—from better car batteries to more efficient fertilizers—we need to untangle what it is, or isn’t. For the last half century, computing has been built on bits, 0s or 1s; think of a golf ball with two dimples on opposing sides. A quantum bit, or qubit for short, can be in multiple states at once. Now think of a golf ball with hundreds of dimples—the number of possible connections goes up exponentially. This ability to simultaneously be in multiple states is called superposition. It allows a quantum computer to crunch through large numbers of possible outcomes simultaneously. Now imagine that these qubits are linked (in qu-speak this is what is meant by entanglement) so they can exchange information. That is the good news. But this state is extremely fragile and can be sustained only if the qubits are effectively isolated from their environment, for instance, by cooling them down to near absolute zero in a vacuum chambers. Otherwise, the qubits decay and ultimately disappear, and that is what is called decoherence. Because of this challenge, errors creep into the calculations and must be corrected, most often through the use of more qubits. It can take thousands of error-correcting qubits to create one highly accurate logical qubit. As Michael Beircuk, who runs the Quantum Control Lab at the University of Sydney, has noted, quantum error correction “is the single biggest problem holding back quantum computing from realizing its great promise.”

A fully error-corrected, general-purpose quantum computer may be many years away. In the meantime (probably in the next five to fifteen years) there are two options. First, what are known as digital noisy intermediate-scale quantum computers, which rely on error correction to improve performance and accuracy. Second, analog quantum computers, which simulate the dynamics of quantum-mechanical systems, for instance, describing the behavior of electrons in materials or in large molecules—nature at its most fundamental levels. Even a few error-corrected qubits can accomplish a lot. One early use of a modest 2-5 qubit quantum simulator back in 2015 was the prediction of extreme drought conditions for a number of cities, including Brussels, Bratislava, and Sofia. Today’s quantum computers have reached beyond 400 logical qubits and projections to over 1,000 qubits in the next two years or so are now common.

It is important to emphasize that a hardware solution is not enough—quantum computers require quantum algorithms to function. Over 15 years ago, an article on quantum computing in Scientific American presciently noted that, “Quantum computers would suffer from many of the same algorithmic limitations as today’s classical computers.” Dave Bacon, former leader of the Google software effort in this area, stressed that “quantum code . . . has to be highly tailored to the qubits it will run on. That means the code for IBM’s chips won’t run on those of other companies.” The key to remember is that successful quantum computing depends on both hardware and software advances.

So is this a big deal? There are plenty of skeptics. One recent article noted that quantum computing is “newsful, but maybe not yet useful.” But that is often the fate of novel technologies. Viewed through the broader lens of history, observers of technology may see quantum computing as a discontinuous break—a change driven by innovations that radically improve the state-of-the-art over earlier microchips and their forerunner, vacuum tubes. Quantum computing arrives on the technological stage at a time when recent research shows slowing rates of disruptive advances, as measured by both patents and publications, and declining research productivity across multiple sectors and technology classes. Given the nature of our global environmental challenges, we need some game changers.

If quantum computing represents a true disruption, it should change industry structures, shifting the locus of innovation as new firms gain market share over legacy organizations often constrained by tradition, sunk costs, and internal inflexibility. In fact, new business formation now extends far beyond the large, established players in the quantum computing space like Google, Microsoft, Honeywell, and IBM. Startups have raised significant funding, over $1 billion in venture funds globally in 2021, allowing a number of pure-play firms, such as D-Wave and IonQ, to go public. According to Tracxn, a private technology tracking and analysis company, as of September 2022, there were 89 quantum computing startups in the United States alone. Many of these firms have advanced beyond series A venture funding, reducing the chances of business failure.

There are also increases in government funding. The new CHIPS and Science Act passed by Congress last year contains $153 million (most to be spent between 2023 and 2027) to support quantum computing efforts, including funding for a Next Generation Quantum Leaders Pilot program. The European Quantum Flagship program is providing one billion euros to support quantum computing research over a 10-year period. Back in 2017, China started construction of a multi-node quantum science research laboratory. “We predict by 2027 over $16.4 billion will be invested into quantum computing,” says Heather West, a research manager at IDC, a global market intelligence firm. Combined public and private-sector activities are driving the demand for researchers and engineers in firms, government labs, and universities and demand could outstrip supply. The QED-C directory, which contains job listings in the field, now has almost 450 openings.

All this sounds encouraging. But it is important to keep in mind that a significant amount of quantum computing effort is not focused on developing planet-saving applications, but on providing protection against the possibility that quantum computers could render historical (and future) encryption systems ineffective. We should also remember that the large and well-funded classical computing ecosystem will not sit still while the quantum folks try to get their systems to work. One can expect improvements in the speed, capacity, and costs of classical supercomputing, as well as its underlying algorithms. This combination could challenge quantum advantage, which puts a premium on identifying practical challenges that only a quantum computer can solve. A recent Forbes article on possible business risks of investing in quantum computing emphasized this point, namely, the need to find “use cases that matter and actually need quantum computing [italics mine].”

Nevertheless, there are increasing hints that quantum computing could provide environmentally relevant solutions, for instance, in developing novel materials for catalysts, batteries, photovoltaics, or carbon capture. When Richard Feynman talked about quantum computer applications in the early 1980s, he emphasized that “there is to be an exact simulation, that the computer will do exactly the same as nature.” Quantum computing was recently used by researchers at Notre Dame and Kyung Hee universities to develop a transparent window coating that could lower energy consumption by one third over traditional air conditioning. Microsoft has demonstrated how quantum computers can help manufacture fertilizers with better yields by improving the catalytic processes. Mercedes Benz is working with PsiQuantum to develop new electrolytes for lithium-ion batteries for electric cars. The goals are to improve battery energy density, charging speed, life, range, cost, and safety. Robert Bosch GmbH is using IBM quantum computers to accelerate research into substitutes for scare metals for electric motors and fuel cells, with the hope of reducing the global demand for materials such as nickel, copper, lithium, and rare-earth elements.

Additional applications could help tackle the complex optimizations associated with areas like transportation logistics and routing as well as energy grid management. Volkswagen demonstrated the first real-time traffic-routing system to rely on quantum computing and tested the approach in Lisbon, Portugal. This system used both classical computing to analyze anonymized movement data combined with optimization using a quantum algorithm running on a D-Wave quantum computer. These early use cases are critical to long-term success. Beside reducing risks for first movers, a wide range of proof-of-concept trials across different technology platforms, with different algorithms, and various end-use cases, creates a rich experimentation space for hypothesis testing and learning.

But will advances come in time? Given the extent and urgency of climate problems, solutions need to be taken to scale quickly—a process that often requires navigating regulatory barriers and then achieving market penetration domestically and internationally. These challenges are often overlooked by scientists and technology developers. For instance, novel fertilizers can take three to ten years to wind their way through the regulatory approval process in the United States, which involves both federal and state regulations. Even when approved, new fertilizers would face market hurdles dependent on their acceptance by retailers and, ultimately, farmers, The eventual scale needed to provide environmental and food security benefits is large (the world requires around 180 million tons of ammonia-based fertilizers annually to feed half of the current population). Or take electric vehicles and the hurdles they face. Any novel battery integrated into a commercial product like an automobile will have to past stringent tests involving a variety of national and international organizations such as Underwriters Lab, the Society of Manufacturing Engineers, the International Organization for Standardization (ISO), or the new EU Battery Regulations.

Quantum computing faces multiple growing pains: first developing quantum computing itself, then applying it to solve important problems, and finally scaling the resulting solutions globally. A recent International Energy Agency report on “Reaching Net Zero by 2050” emphasized that achieving this goal will require not only further rapid deployment of available technologies, but also the “widespread use of technologies that are not on the market yet.” The agency said that “in 2050, almost half the reductions come from technologies that are currently at the demonstration or prototype phase.” Quantum computing is in this class of technologies under development that will probably have their full impact in the time span of 2035 to 2050. That is the same time frame as the global need to achieve net-zero carbon emission.

In the intermediate timeframe, it will be important to ensure that the ongoing deployment of quantum computing does not exacerbate natural burdens. One obvious question for environmentalists is whether quantum computing will affect the material and resource requirements of our computational infrastructure as well as associated end-of-life impacts. The production of microchips came with significant environmental costs, resulting in 23 Superfund sites in Silicon Valley alone, most contaminated with trichloroethylene, a solvent used in the early production of semiconductors. At the tail end of the life cycle there continue to be concerns about tons of computers piling up globally with little or no recycling, recovery, or reuse strategies. So-called e-waste amounts to over 53 million metric tons annually. Recycling rates are generally below 20 percent.

In contrast to the semiconductor industry, where a dominant material (silicon) and associated process technologies were locked in early, there are multiple and competing materials and technologies for quantum computing. Some approaches to achieving a quantum state make use of silicon, but a variety of other materials are being explored, including diamonds. Recently, researchers explored cuprous oxide found in a gemstone from Namibia as a platform for quantum simulators. Beyond the materials for quantum processors, there are materials linked to creating and maintaining the operating environment for quantum calculations to occur. For instance, cryogenic cooling systems often use liquid helium, which is becoming increasingly costly as the global supply dwindles.

Part of the total energy impacts are likely to be related to the energy needed to achieve and maintain a quantum state. To date, there are few comparative analyses of the operating energy required by various quantum computing platforms. A study done by the National Renewable Energy Lab provided some rough quantification and showed that the energy required for cooling is significantly larger than that required for computation, a reversal from energy usage patterns seen in conventional computing.

The largest positive impact may be related to energy use avoided if quantum computing reduces the need for more energy-intensive classical computing resources—what has been termed an energy quantum advantage. Some initial research involved the energy used to solve a problem (called the random quantum circuits problem) using supercomputers at NASA’s Ames Research Center and the Summit Supercomputer at Oak Ridge National Lab, compared with a quantum computer at Google. The problem required 21 to 97 megawatt-hours to run on the supercomputers versus .00042 megawatt-hours on the quantum computer. This is an impressive gain—five orders of magnitude—but provides one data point that was not run on a practical use case. Google claims that the Sycamore quantum processor consumes 26 kilowatts of electrical power, far less than a supercomputer (and around the power consumption of an average U.S. house).

Environmentalists interested in quantum computing face a set of decision points: if, when, and how to engage. Though the quantum computing ecosystem is in flux and the evolution of the technology is fraught with uncertainties, time still matters. As writer Bill McKibben has pointed out, “We’re running out of options and we’re running out of decades.” Understanding the pace of change of the technologies and the actors in the innovation system will define strategies, for instance by shaping or adapting, and impact actions, such as placing big bets or creating options and no-regrets moves versus a watch-and-wait strategy. It will make the difference between getting in front of issues or falling behind.

Regarding energy and resource use, it is not too early to begin thinking about how to quantify the impacts of the emerging quantum infrastructure, how to develop harmonized metrics, encourage data sharing, and heighten awareness within the field of the energy and broader sustainability impacts. The preponderance of competing technologies will make estimates difficult in the near term. But measurement techniques and metrics need to be explored, including the relevance and applicability of existing energy and environmental metrics, which cover areas like cooling, energy efficiency, resource use, and carbon footprint. Some efforts are underway. For instance, DARPA, the Defense Department’s independent R&D arm, has launched a program designed to “develop quantum computing yardsticks that can accurately measure what’s important to focus on in the race toward large, fault-tolerant quantum computers.” Quantum researchers in both academia and industry should be integrated into on-going efforts to promote what is now termed sustainable computing, a subset of a larger, longer-term goal of addressing the “twin challenges of a green and digital transformation.” In addition, design strategies to reduce future energy use could also be developed, disseminated, and evaluated and could include reducing the energy for cooling while designing quantum systems to achieve less energy use. These benefits will want to improve error correction, allowing overall increases in computing efficiency.

As one critic has noted, “The set of problems with efficient quantum solutions remains small, even as the latest research seeks to determine just what makes a problem a good fit for quantum computing.” That means that identifying environmental use cases that matter can help build confidence, increase investment, and open up new market opportunities. A recent assessment of quantum computing applications related to climate change stated that “the intersection between climate and quantum sciences remains largely unexplored. It would be useful to determine in detail which climate science applications will be the first to benefit from quantum simulation, although such an analysis remains difficult to do.” A recent report by the Quantum Economic Development Consortium emphasizes the need for more public-private collaboration and the need to bring together use-case experts with quantum technical experts, improving downstream-to-upstream dialogue. This connectivity is critical to developing an efficient path to market for technology developers that also creates public confidence that any associated risks are being addressed and managed.

Steering emerging quantum computing resources toward solving critical and practical environmental challenges will require the creation of what Harvard philosopher of science Peter Galison has termed a trading zone where members hold “a new cluster of skills in common, a new mode of producing scientific knowledge that is rich enough to coordinate highly diverse subject matter.” These interactions could be facilitated through the creation of research coordination networks, R&D “sandboxes,” convergence accelerators, or synthesis centers, models that have been used by the National Science Foundation and other funders to build interdisciplinary communities focused on problems requiring deep integration between researchers and practitioners from diverse fields.

Given the technological complexity of quantum computing and high expertise requirements for quantum researchers and practitioners, it is more than likely it could exacerbate the growing digital divide, both socially and geographically. The environmental community should take a critical stance toward inequality and exclusion regarding the access and use of the technology, including its impacts, both positive and negative; intended and unintended. Gender issues have already emerged. Members of the Quantum Gender Initiative emphasize, “Our societies suffer from gender discrimination at several levels. As part of these societies, the community of researchers in the fields of Quantum Optics, Quantum Information, Quantum Foundations and affine subjects is not free of this problem.” Amen, but more reflection and intervention is needed especially to avoid a potential quantum digital divide. Though still in its infancy, the concept of corporate digital responsibility could be applied to quantum computing. According to the International Corporate Digital Responsibility Manifesto, CDR is “a set of practices and behaviors that help an organization use data and digital technologies in ways that are perceived as socially, economically, and environmentally responsible [which includes] a commitment to equity, diversity and inclusion.”

Another option is to make quantum computing resources “accessible through the cloud by some organization for commercial or benevolent reasons (say by the Gates Foundation, or by a country, like Norway)…to counter many of the risks of monopolization of access.” In the long term, there needs to be incentives for quantum computing professionals to perform ethical research that takes into account a wide range of social and environmental impacts, which will include involving the gatekeepers of the research enterprise, such as funders, journal publishers, and conference organizers.

Business should also become involved. For instance, Qlimate is a quantum computing net-zero initiative, supported by PsiQuantum, that aims to use quantum computing resources to support large-scale decarbonization.

In 1949, mathematician John von Neumann calculated that the first primitive computers, monsters using vacuum tubes and weighing tons, could reduce the time to run a set of complex calculations from the 11 years required by humans, to 16 hours, and then to 15 minutes. Possibly the first example of computer supremacy, the calculations simulated the explosion of a thermonuclear device. Years later, such simulations enabled the Soviet Union and the United States to have the confidence to ban nuclear testing. Former Secretary of Defense Ashton Carter observed, “Disruptive scientific and technological progress is not inherently good or inherently evil. But its arc is for us to shape.” Quantum computing offers the environmental community another opportunity to shape the arc of technology. It will not be a silver bullet for our immediate problems but, for those thinking long term, a possible hedge against what some scientists have already termed a “ghastly future.” TEF

COVER STORY Mastering quantum computing could help reduce energy and resource use while enhancing agricultural productivity, making better electric vehicle batteries, modeling the climate, or creating novel materials to remove atmospheric carbon. But is this hype or a real hope?

Success Will Depend on Implementation
Author
Amy E. Turner - Columbia Law School
Columbia Law School
Current Issue
Issue
2
Parent Article
Amy E. Turner

New York’s Local Law 97, enacted by the city in 2019, is widely hailed as one of the country’s premier local carbon mitigation measures, and rightly so—on paper. With emissions limitations not kicking in until 2024, LL97 has yet to actually require any greenhouse gas reductions from the city’s buildings. And while the law is projected to reduce emissions from New York’s building sector by 40 percent by 2030 and 80 percent by 2050, these projections depend on robust implementation. A key issue in this regard is use of renewable energy credits, or RECs, to comply with the law’s requirements.

Local Law 97 allows building owners to deduct from their reportable annual building emissions the value of certain RECs, so long as those credits are derived from a renewable energy “resource located in or directly deliverable into [the] zone J load zone,” the portion of the electricity grid that serves New York City. When initially passed, there were relatively few RECs available attributable to electricity feeding into zone J, and therefore a building owner would have to invest in new, local renewable energy projects in order to fulfill its building decarbonization obligations with RECs.

The REC mechanism has offered those who would like to see a weaker implementation regime for LL97 more than one opportunity to push for such a result. In 2021, real estate stakeholders worked with then-Governor Andrew Cuomo on an attempt to dramatically broaden the pool of RECs eligible for LL97 compliance. Buried in a hundreds-of-pages-long draft of the governor’s proposed 2022-23 budget was a provision that would have allowed building owners to bypass the zone J limitation, opening up the REC market to far more abundant and less expensive RECs from renewable energy projects located far away in the state. Fortunately, attention from advocates, politicians, and journalists killed the provision.

More recently, the city’s Department of Buildings rules on LL97 implementation invited discussion about the use of RECs. While the DOB’s rules were generally consistent with the statutory text, environmental advocates had hoped the agency would place further restrictions on REC use. The renewable energy landscape has changed significantly in New York since LL97 was enacted. New York state enacted the Climate Leadership and Community Protection Act in 2019, committing to a fully green electricity grid by 2040, and thousands of megawatts of renewable energy are in development via hydropower and offshore wind.

The result is that too many RECs associated with these renewable energy resources will be available, and too many building owners will use them to avoid undertaking building improvements. An analysis by the Urban Green Council estimated that, without further DOB restrictions on REC use, approximately half of building emissions over the 2030 limits could be offset by RECs, gutting LL97’s ambition.

The city appears aware of these pitfalls. In early 2023, the mayor’s office introduced legislation that would limit REC use to a building’s emissions from electricity and clarify DOB’s authority to further restrict REC use. Several environmental groups are pushing to limit REC use to 30 percent of a building’s emissions over its designated emissions cap, an amount they say will force building improvements to be undertaken. Whatever the approach, DOB would ideally use its clarified scope of authority to implement REC limitations. Of course, DOB rules can change, and regulatory implementation of this novel law will remain an ongoing issue.

Local Law 97 is an innovation in building decarbonization policy, one that has spurred other cities and states to enact similar requirements. New York City must continue to lead by implementing the law as fully as possible, and by avoiding expansions of the REC market or other backdoor efforts to weaken it.

LL97 can still be a nation-leading model for building decarbonization. Implementation will be key.

Building Efficiency
Author
Katrina Wyman - New York University Law School
New York University Law School
Current Issue
Issue
2
New York City at Night

>In September 2017, with Manhattan’s skyscrapers rising behind him, New York City Mayor Bill de Blasio announced that he wanted to cap the amount of fossil fuels that large buildings in the city can use each year. He was two months away from easily being re-elected, and he may already have been thinking ahead to the run he would make in 2019 to be the Democratic presidential nominee against President Trump. At the time of de Blasio’s announcement, during Trump’s first year as president, regulating fossil fuel use in large buildings was not only a means of decarbonizing New York City’s largest source of GHGs, but also a way of signaling resistance to Trump and his skepticism about climate change.

>Under de Blasio’s proposal, large buildings—including those owned by the Trump family—that exceeded their caps would be fined, and the fines might be substantial, up to millions of dollars per year. Although de Blasio did not release draft legislation when he made his announcement, over 18 months later the city council overwhelmingly passed Local Law 97, capping greenhouse gas emissions from large buildings along the lines de Blasio had first sketched. The emissions limits take effect starting in 2024. With de Blasio no longer in office, the implementation of LL97 has fallen to his successor, Eric Adams, a more real-estate friendly mayor who has expressed concerns about fining building owners for not complying with the law.

>In recent months my colleague Danielle Spiegel-Feld and I have been researching the history of LL97 and other 21st century environmental laws and policies in New York City—and pondering their fate. Although there was a lot of talk about cities and states acting to limit climate change to counter the Trump administration as it was rolling back environmental regulations, we are somewhat unusual among teachers at law schools in devoting significant scholarly attention to local environmental law. As has been the case since the 1970s, environmental law in the United States is reflexively assumed to be federal law, or law in a few progressive states, such as California. Municipal laws like LL97 tend to fall under the radar. Perhaps many observers instinctively dismiss the potential for local and state governments to do much to protect the environment in light of their celebrated failures in the 20th century on air and water pollution. After all, these failures are part of what led to the passage of robust federal environmental statutes in the 1970s.

>Yet within New York City’s environmental policy community, LL97 is widely regarded as a signature climate law, and a model for other jurisdictions. Pete Sikora, an advocate who helped get the law through the city council, describes it as “the city’s world-leading climate and jobs law” because he hopes that the mandates will create employment in upgrading buildings to reduce their use of fossil fuels. Costa Constantinides, who oversaw the drafting of the bill as chair of the city council’s environmental protection committee, has publicly defended the law since leaving the council. Mark Chambers, who headed the Mayor’s Office of Sustainability while LL97 was drafted, is now senior director for building emissions and community resilience in the Biden administration’s Council on Environmental Quality. There he has helped to form a National Building Performance Standard Coalition to spur the adoption of similar laws in cities and states throughout the country.

>Non-New Yorkers might be tempted to dismiss the pride of some of these people as over-claiming, another example of the city’s penchant for bluster. Still, since New York City passed LL97, a small number of other cities, including Boston, Denver, and St. Louis, and states such as Colorado and Washington have passed similar laws for their building sectors. To its credit, Washington, D.C., actually passed a law requiring improvements in building energy efficiency before New York City.

>LL97 has also been noticed by people engaged with cities outside the United States on climate change. David Miller, the managing director of the C40 Center for City Climate Policy and Economy, and a former mayor of Toronto, wrote about LL97 as an example of a bold local solution to reducing greenhouse gas emissions in his 2020 book Solved: How the World’s Great Cities Are Fixing the Climate Crisis.

>As the growing number of advocates for decarbonizing buildings emphasize, removing fossil fuels from buildings will be an important component of societal decarbonization. Buildings account for over two-thirds of greenhouse gas emissions in many large U.S. cities; nationally, residential and commercial buildings account for almost 31 percent of GHGs. (These statistics incorporate emissions from fossil fuels burned on site in buildings, for example from burning natural gas for heating, and emissions from generating the electricity used in buildings, for example in coal- or natural gas-powered plants.) Removing fossil fuels from buildings also stands to improve public health: evidence is accumulating that burning them in buildings, for example by using gas stoves, contributes to asthma and may cause cancer.

>Nonetheless, the potential benefits of building performance laws such as LL97 have yet to be realized. No building in New York City will be subject to fines until 2024. Mayor Adams is almost certain to be under increasing pressure from real-estate owners in the coming year. A small number of building owners have even launched a Hail Mary legal challenge to the law on preemption and other grounds.

>Ironically, whether LL97 and other similar laws become a key technique for decarbonizing buildings may depend in part on whether the tax credits, rebates, and grant programs in the federal Inflation Reduction passed in 2022 are defined so as to shift onto federal taxpayers some of the costs that building owners will face to comply with the local and state laws. If building owners are able to use some of this federal largesse to reduce the costs of complying with the subnational laws, the combination of mandatory local and state building laws and federal tax credits and subsidies for satisfying them may mollify real estate opposition. More significantly, it also may establish a new form of cooperative environmental federalism—combining local and state regulation with federal subsidies paid directly to individuals as well as state and local governments—that could be scaled to promote decarbonization in other economic sectors where there are obstacles to aggressive federal regulation of greenhouse gas emissions.

>In considering the potential for performance standards to become a tool for forcing fossil fuels out of buildings, it is useful to start with a brief description. LL97 works as follows: Large buildings in the city (25,000 square feet and over) are grouped into different categories based on their types of use (multifamily housing, office, hospital, etc.). Each of these types is permitted to emit up to a specified amount of CO2 equivalent per square foot (for example, under draft regulations released by the city in October, laboratories are allowed to emit more per square foot than bowling alleys). A building’s limit, that is the volume of greenhouse gas emissions that it can emit each year, is based on multiplying the square footage of the building by the allowable amount of CO2e for the structure’s use type. Owners that exceed their emissions limits are liable to pay up to $268 per ton of excess emissions, a penalty that was designed to incentivize upgrades. To calculate a building’s annual emissions to determine if it is under its limit, owners must multiply the total amount of energy purchased for the building by the carbon intensity coefficient that the city assigns for the relevant type of energy (i.e., electricity procured from the grid, natural gas, fuel oil, etc.). Buildings’ emissions are first limited in 2024 and more stringent limits take effect starting in 2030. The limits gradually ratchet down until 2050, by which point, buildings are expected to be carbon neutral.

>Like many environmental laws, LL97 also contains some flexibility mechanisms. To protect low-income tenants from rent hikes, buildings with a specified share of rent-regulated apartments can opt to implement a list of measures to improve energy efficiency rather than comply with greenhouse gas emission limits. This is an example of a local government prioritizing housing affordability (in a city with a perennial affordability crisis) over limiting global warming. To fully decarbonize its building stock, New York City will need to find a way of decarbonizing the many rent-regulated and publicly owned apartment buildings in the city. Until it does, the environmental benefits of building decarbonization—including reducing on-site emissions that cause asthma, which is more prevalent in communities of color and low-income neighborhoods in the city—will not be equitably shared.

>Another flexibility mechanism that environmental advocates are currently seeking to limit allows building owners to buy Renewable Energy Credits for solar and wind energy and other carbon-free electricity delivered to New York City. When the law was passed, its sponsors thought that allowing buildings to comply by buying RECs might encourage large players in New York City’s real estate industry to support introducing more renewable energy into the city. The bill’s sponsors did not anticipate that the ability to use RECs to comply would be a major loophole. But after LL97 was passed, New York state adopted aggressive targets for fully decarbonizing the state’s electricity supplies by 2040 and has approved massive projects to bring renewable energy to the metropolitan area. As a result, there will be an abundance of RECs available for building owners to buy in the future. Whether the city takes action to limit their use will be an indication of how committed it is to decarbonizing buildings.

>There is a small cottage industry of literature going back to the 2000s examining why cities and states have sought to reduce greenhouse gas emissions. The literature generally starts from the premise that these local actions are puzzling, because cities would appear to be imposing costs on local actors for the benefit of the outside world. Various economic explanations might be offered for these local actions: maybe the cities are merely posturing to enhance their reputations and not planning to actually enforce costly requirements on local actors to decarbonize; or perhaps cities are attracted to the side benefits of reducing emissions, such as lower energy costs for residents, or the new jobs and industries that decarbonization might generate. These economic considerations contributed to the passage of LL97, but they don’t fully explain it. Climate activists fighting for the good of the planet, union officials, social justice-oriented groups representing low-income tenants, and a few key do-gooder politicians—all played a critical role in getting the law across the finish line.

>Enacting legal obligations on buildings to reduce greenhouse gas emissions required overcoming the political power of the real estate industry, which had thwarted Michael Bloomberg from mandating that the city’s large buildings improve energy efficiency when he was mayor. Overcoming real estate’s opposition this time around took a combination of committed insiders within the city council and mayoral administration, and interest groups that pushed through mandates. Their task was made easier in the late 2010s by having a climate skeptic president born in New York to a real estate developer who was wildly unpopular in his home city. Few people could better rally progressive Democrats in New York City behind a climate bill that took aim at real estate than President Trump.

>Those favoring building performance mandates had some other helpful facts on their side as well. By 2017, it was apparent to anyone seriously committed to addressing climate change in New York City that mandating building upgrades would be necessary to decarbonize the sector that accounted for an overwhelming share of the city’s GHGs. Bloomberg-era laws like a benchmarking law that in theory might have spurred buildings to reduce their emissions by showing them how inefficient they were compared to other buildings had not incentivized the aggressive decarbonization that it was clear would be needed to address the climate crisis.

>Among the insiders who recognized the urgency of mandating upgrades was Constantinides, the chair of the city council’s environmental protection committee who oversaw the drafting of LL97. Fiercely committed to passing environmental laws in the city—he has a son with asthma—he had worked in 2009 for the chair of the environmental protection committee, when Bloomberg dropped the idea of requiring building upgrades due to real estate opposition. When Mayor de Blasio announced his support for building mandates in 2017, he had few details of what these mandates would look like. It was Constantinides who supplied the law.

>But even someone as committed as Constantinides probably couldn’t have passed a law imposing potentially costly obligations on a powerful economic sector like the real estate industry in New York City without the support of outsiders. In the fights over LL97, a constellation of local interest groups helped provide that needed support, campaigning for the bill, and signaling to New York City’s overwhelmingly Democratic city council members that they should pass it. Among the most important was the Climate Works for All Coalition. Organized in 2014 by ALIGN, an alliance of community and labor groups, the coalition included District Council 37, the largest public-sector union in the city; the union-backed Working Families Party, which strives to move Democrats to the left through involvement in party primaries; and New York Communities for Change, a community group that works on economic and social justice as well as climate change. NYCC’s staff includes Pete Sikora, whose climate work seems to be premised on the theory that in a blue city in a blue state such as New York City, a multiracial coalition of “activists from communities of color” and “white progressive climate activists” can persuade the city’s government to adopt climate policy by targeting key municipal decisionmakers. Sikora recognizes that activists like himself can exert such power because local Democratic politicians in early 21st century New York City pay attention to groups that can credibly claim to influence the outcomes in the low-turnout Democratic primaries that largely determine who wins political office in the city. For this coalition, building mandates promised to reduce greenhouse gas emissions and create jobs for low-income New Yorkers. Meaningfully, mandates also represented a tangible way of opposing Trump—ALIGN published a report cataloging the energy inefficiency of Trump buildings using data disclosed under the Bloomberg-era benchmarking law. As progressive Democrats such as Alexandra Ocasio-Cortez won primaries and elections in New York City in the second half of 2018, centrist Democrats moved to the left and the building mandate bill seemed more politically palatable.

>What does this history suggest about the potential for other jurisdictions to pass building performance standards? One lesson is that it is possible to pass a law that, on paper at least, imposes the substantial cost of decarbonizing buildings on historically politically powerful real estate owners. Indeed, the Real Estate Board of New York, the main group representing owners in the city, did not outright oppose the law at the main city council committee hearing on it; the board emphasized its support for the bill’s goals and then listed serious concerns with its design. But 2019 was also a special time, with Trump in office and progressive Democrats in ascendance. To mandate that buildings decarbonize in more places across the country it may be necessary to find ways of spreading the cost beyond building owners of removing fossil fuels from people’s homes and workplaces.

>A classic way of overcoming opposition to a new law is for the government to offer subsidies to those who are opposed to it. Cities have some resources that they can devote to easing the burden on building owners of transitioning away from fossil fuels, but even a large city such as New York is not in a position to pay for switching out oil and gas boilers and gas stoves in the thousands of buildings in its borders. The Inflation Reduction Act may help lower the costs to owners of making some of these changes, and perhaps make it politically feasible for jurisdictions like New York City that already have laws to decarbonize to enforce them, and for other local and state governments to adopt such laws.

>Many of the tax credit provisions in the IRA are intended to spur the expansion of renewable energy such as solar and wind so that renewables can displace fossil fuels. While building owners will not directly benefit from these tax credits for electricity generation, they could benefit indirectly. Insofar as these credits help to decarbonize electricity buildings buy from the electric grid, this will reduce their emissions without owners having to invest in other measures. Because commercial buildings like large office buildings in New York City already get a lot of their energy from the electric grid, the decarbonization of grid-supplied electricity will particularly help commercial building owners to meet their LL97 emission limits.

>The owners of large residential buildings in the city will also benefit from greening grid-supplied electricity. But they tend to burn more fossil fuels on site in their buildings, so they may face higher costs to decarbonize because they have to remove gas and oil powered boilers and furnaces and gas stoves. The IRA could help these building owners too.

>To get a feel for how useful the IRA might be to the owners of residential buildings, I listened in October to a webinar on the IRA organized by Bright Power, a company that helps large building owners in New York City manage their energy use, and that has clients working to comply with LL97’s emission limits. Bright Power identifies government incentives for its clients to help them defray the costs of the projects that Bright Power manages for them, and so it has a strong incentive to understand under what circumstances the IRA could financially help building owners in the city. The webinar laid out the multitude of tax credits and government grant and rebate programs in the IRA. It also gave some concrete examples of the micro-level determinations that the Department of Treasury, Internal Revenue Service, other federal agencies, and state policymakers will need to make, and how important their decisions will be for the extent to which the IRA will help reduce the costs of taking out fossil fuels from buildings in New York City. As Amanda Clevinger, policy and programs manager at Bright Power, emailed me afterwards, “Although several states already offered incentives for building decarbonization prior to the passage of the IRA, the federal subsidies have the potential to offer consistency, scale, and accessibility unmatched by existing programs. For instance, New York City’s program for heat pumps ran out of money three years ahead of schedule, and most states don’t have any incentives available for electrical upgrades” which are needed to put in heat pumps. “The IRA could fill many gaps for buildings across the country,” Clevinger explained. How the uncertainties about the IRA subsidies are resolved will determine whom the IRA helps and how much, and the extent to which it helps to make politically palatable laws such as LL97 that mandate building decarbonization.

>Widely touted as a breakthrough because it is the first federal legislation to aggressively incentivize decarbonization, the IRA also may be historically significant because it could be seen as setting up a new model of cooperative federalism in environmental law. The 1970s-era environmental laws often require the federal government to set standards that states may assume responsibility for implementing instead of the federal government. Early in the history of these laws, the federal government provided considerable funding to help defray the costs of building sewage treatment plants and the like that were necessary to meet some of the federal standards.

>The IRA also proposes to transfer large sums of money to states and local governments and tribes for environmental purposes, some of which they could distribute to individuals as rebates. What is novel about the IRA is that much of the federal spending that it appropriates may come in the form of tax credits that flow directly to individuals and businesses without any role for states and local governments. These tax credits could help to decarbonize sectors whose emissions the federal government has had difficulty regulating, most notably the electric power sector, but also potentially buildings. Against the backdrop of these federal subsidies, local and state governments will hopefully be better positioned to set aggressive targets to decarbonize large buildings because owners and occupants will have access to federal subsidies to defray the costs of the transition, assuming that the promise of the IRA is fulfilled through its implementation. If successful, the tacit combination of state and local standards and federal subsidies for individuals to meet those standards would be a novel way of achieving environmental improvements in the United States. TEF

OPENING ARGUMENT New York City is addressing its climate impact by mandating that large buildings sharply reduce their greenhouse gas emissions. In a new cooperative federalism, the Inflation Reduction Act can mesh with these mandates through subsidies and incentives.

U.S. Primacy and the Race to Dominate the Global EV Market
Author
Bob Sussman - Sussman and Associates
Sussman and Associates
Current Issue
Issue
2
Bob Sussman

The Inflation Reduction Act marks a sea change in how we think about environmental protection and national competitiveness. The subsidies and incentives the IRA provides to anchor industries such as electric vehicle and solar panel manufacturing are designed not only to meet climate goals but to assure American economic dominance.

This is a departure from two longstanding tenets of mainstream economics. The first is a deep aversion to using public investment to create national champions in critical industries, displacing the role of private capital in picking industrial winners and losers and creating imbalances in trade flows through subsidies for key export industries. The second tenet is that the proper role of government is to set strong environmental goals and standards, with the private sector and not taxpayers bearing the cost of meeting them.

What changed? The short answer is pervasive fear of Chinese capture of U.S. domestic markets. Competition by low-cost overseas producers has plagued our industry for years, but the threat has become dire with our loss of productive capacity for semiconductors and other advanced technologies. When Democrats in Congress began to ponder tax incentives for electric vehicles and solar energy, they confronted an uncomfortable question: what if these incentives simply subsidized more imports of solar panels and EVs from China, further eroding our industrial base?

The IRA’s subsidies for U.S. solar panel manufacturing sought to re-establish an industry that had already migrated to Asia. For the automotive sector, the goal was to assure not only that EVs are assembled in U.S. factories but that our industry builds the battery supply chain critical to increasing EV production. China now controls the lion’s share of this global supply, prompting fears that U.S. producers could lose access to batteries and their component parts and that China could exploit its supply chain leverage to subsidize EV exports to the United States.

The IRA’s solution was to devise unprecedented incentives for building out the U.S. battery supply chain and subsidizing domestic EV production while simultaneously stimulating consumer demand. In addition to low-interest loans and grants to expand domestic manufacturing of batteries and their raw materials, the IRA provides tax credits (up to $7,500 per vehicle) for sales of EVs that are assembled in the United States and contain domestically produced batteries and component parts.

For example, in 2023, only vehicles assembled in North America are eligible for the credit, and starting in 2024, these vehicles cannot have battery components sourced from a “foreign entity of concern.” In addition, the amount of the credit is cut in half if the vehicle lacks certain minimum percentages of critical minerals and other battery components from North American suppliers.

U.S. auto manufacturers have expressed concern about their ability to meet these requirements, and senior officials of our trading partners have denounced them as protectionist. In the worst case, trade wars could erupt between auto-producing countries, and domestic EV sales could languish because few vehicles qualify for the credit.

Since an effective response to climate change depends on a rapid, large-scale transition to EVs, is the IRA a risky experiment in industrial policy that could have little impact on GHG emissions? Wouldn’t EV sales be more likely to flourish if all vehicles were eligible for tax credits, regardless of their place of manufacture? Is the U.S. really capable of reviving a moribund mining industry to produce lithium and other critical minerals, and creating low-wage, low-tech factories for battery components historically sourced from Asia?

For better or worse, these questions have already been decided by political realities and public sentiment. Democrats and Republicans agree that China is a dangerous opponent of U.S. economic and national security interests, and that we have already surrendered too much ground. Electric vehicle sales are expected to increase by over 500 percent in the next 15 years. No auto-producing country can afford to be sidelined by foreign competition and lose technology and jobs. China is now the world’s largest producer of EVs and batteries and is poised to expand its lead. If addressing climate change means Chinese dominance of the global EV market and marginalization of GM and Ford, many Americans would say the price is too high.

We need to implement the IRA tax credits flexibly so we are not placing impossible demands on our auto producers and closing the U.S. market to our trading partners. But climate policy and industrial competitiveness are now inextricably linked. Leaders who want to solve the climate crisis must protect the future of the U.S. auto industry or risk losing public support.

U.S. Primacy and the Race to Dominate the Global EV Market.