How Green Is Green Hydrogen? It’s an Energy Source Shell Game
Author
Joseph E. Aldy - Harvard Kennedy School
Harvard Kennedy School
Current Issue
Issue
2
Joseph E. Aldy

Delivering on ambitious net-zero emissions goals will require advancing and commercializing technologies to supply an array of energy services. Electrification may not deliver the high heat or produce sufficient power to meet the needs in energy-intensive industry and heavy-duty transport. Some have looked at the potential for producing hydrogen as an alternative to natural gas and petroleum products for these uses. This raises the key question of the carbon intensity of hydrogen production.

In practice, hydrogen has been manufactured primarily with natural gas as a feedstock, but it can also be produced with water by using electricity. To reduce the carbon intensity of production, a natural gas-based process could be combined with carbon capture and storage technology, which is termed “blue hydrogen.” Alternatively, a manufacturer could run water though an electrolyzer, which yields separate hydrogen and oxygen outputs, and the carbon intensity of this approach would depend on the emissions associated with the needed electricity. Powering the electrolyzer with renewable electricity would produce what is termed “green hydrogen.”

While creating hydrogen with an electrolyzer is capital-intensive, the costs of this technology have fallen in recent years and the prospect of a growing market for green hydrogen may enable further cost-reducing innovation. There are challenges, however, in determining the “greenness” of green hydrogen that reflect the composition, quantity, and timing of electricity generation.

Suppose a new hydrogen facility signs a contract with an existing wind farm. Such a contract may be “unbundled,” meaning that the hydrogen facility acquires renewable credits from the wind plant without directly acquiring the generated electricity. In this case, the contract does not spur incremental wind power investment; the farm was already built. Given the effectively zero marginal cost of producing power from a wind farm when the wind is blowing, the contract does not spur incremental power generation. This simply shifts who claims the renewable credits associated with an existing facility, without altering the amount of renewable power produced in the electricity market.

A new hydrogen facility will increase electricity demand. If an unbundled renewables contract transfers the claims to renewable credits without increasing renewable generation, then this new demand would be met by existing power plants with spare generation capacity, which will likely be natural gas in most parts of the country.

Suppose a new hydrogen facility signs a long-term power purchase agreement with the developer of a new wind farm. The contract is for a quantity of renewable power delivered to the grid equal to the expected annual consumption by the hydrogen facility.

Even in this case, there may be cause for concern that the hydrogen facility is not effectively zero-carbon. Would the wind farm have been built anyway? With renewable power tax credits and state and local policies subsidizing wind, the farm developer may have gone forward with the project without an agreement with the hydrogen facility. Just as in the previous case, the composition of the generating capacity in the electricity market does not change in response to the renewables contract signed by the hydrogen producer.

Suppose that the hydrogen plant contract spurs incremental investment in wind power capacity. The timing of when the wind blows may not coincide with when the hydrogen facility consumes electricity. Given high capital costs, a hydrogen production facility may run 24 hours per day, 7 days a week. This would increase electricity demand during some parts of the day and some parts of the year when the wind does not blow. Again, natural gas power plants with spare capacity would likely ramp up to meet this demand in the market. Burning natural gas to produce electricity to produce hydrogen to substitute for natural gas in manufacturing would not reduce greenhouse gas emissions.

Given generous subsidies in the Inflation Reduction Act, the economic stakes are quite significant. A blue hydrogen facility could claim a production tax credit equal to 10 to 20 percent or more (depending on the carbon capture efficiency of the facility) of its production costs. In contrast, some market analysts estimate that the green hydrogen production tax credit could be greater than total production costs if the cost of electrolyzers continues to fall.

The key question is whether and how the build-out of new hydrogen production facilities influences the investment in and generation from renewable facilities, as well as from existing natural gas power plants. Absent rigorous consideration of power market impacts, taxpayers may pay a lot for hydrogen that appears green without meaningfully reducing emissions.

How Green Is Green Hydrogen? It’s an Energy Source Shell Game.

ELI Report
Author
Akielly Hu - Environmental Law Institute
Environmental Law Institute
Current Issue
Issue
1

Environmental Justice Champion Benjamin Wilson receives 2022 ELI award, celebrating lasting impacts on the legal profession

This year, ELI presented its annual environmental achievement award to Benjamin F. Wilson, a visionary leader who has tirelessly advocated for greater diversity, equity, and inclusion throughout his career. An award ceremony was held in person on October 25 at the Omni Shoreham Hotel in Washington, D.C., and streamed live on YouTube. The annual event convenes law, management, and policy professionals to honor outstanding achievements in environmental protection. Proceeds support ELI’s research and education programs and publications.

Wilson is the former chairman of Beveridge & Diamond PC, the largest and oldest environmental firm in the United States, and previously served in the Civil Division of the U.S. Department of Justice. Since 2017, he has led as chair of the ELI Board of Directors. His wide-ranging accomplishments include serving as the Court-Appointed Monitor in the Duke Energy coal ash spill proceeding and as Deputy Monitor-Emissions & Environmental in the Volkswagen “Dieselgate” matter. He also teaches environmental law at Howard University School of Law, where he co-founded the Howard Energy and Environmental Law Society.

Introductory remarks for Wilson were provided by incoming ELI Board Chair Rob Kirsch and Brenda Mallory, chair of the Council on Environmental Quality and former ELI board member. Mallory highlighted Wilson’s positive spirit and contributions not only to environmental law, but also to the careers of countless individuals, including her own. Denver Broncos quarterback and Wilson’s nephew, Russell Wilson, also offered congratulations via video remarks.

Wilson’s award ceremony was well attended by fellow colleagues at ELI and Beveridge & Diamond, as well as his students at Howard University, reflecting a lifetime of service at all three institutions and the deep relationships formed along the way. In an acceptance speech, Wilson spoke on his journey to advance civil rights and environmental law, beginning as a child born in the Deep South who witnessed profound violence and injustices.

Throughout his career, Wilson emphasized the important nexus between racial justice and the environment. At Howard University, “I wanted our students to understand that America’s greatest civil rights attorney had made an indelible impact on environmental law,” he said. He acknowledged the vital role of lawyers who sought racial justice, such as Wiley Branton, who represented the “Little Rock Nine” students, and Constance Baker Motley, who represented James Meredith, the student who integrated the University of Mississippi.

Wilson concluded by citing the disproportionate effects of climate change and drinking water crises in cities like Flint, Michigan, and his hometown of Jackson, Mississippi, as examples of the immense amount of work yet to be done. “Let us commit to getting this work done with equity and justice in mind, so that the benefits of our work are equally shared, and the burdens are not disproportionately placed on the most vulnerable,” Wilson urged the audience. “Future generations are counting on us. They are counting on you.”

Reflecting on this past year, ELI President Jordan Diamond reported overwhelmingly positive responses to many of the Institute’s programs. She also recognized and thanked longtime ELI senior attorney Jim McElfish, who retired this past year. McElfish is a leading expert on NEPA and water policy, among other areas of law.

Legal ed course trains professionals on energy law and justice

The 31st Annual Eastern Boot Camp on Environmental Law, ELI’s signature legal education course for environmental professionals, was offered for the first time in a hybrid mode—both in-person and online—this past November. For more than three decades, the Eastern Boot Camp has educated new and experienced lawyers, consultants, government officials, and nonprofit and advocacy professionals on the substance and practice of environmental law. The intensive course provides about 20 hours of continuing legal education credits over three consecutive days.

This year’s class reached a record number of attendees, with approximately 50 participants in-person at Arnold & Porter LLP in Washington, D.C., and more than 70 participants online. The course featured a renewed focus on environmental justice across all subject areas, in response to growing interest in the field and recent policy developments at the federal level. Faculty members incorporated EJ considerations in sessions on CERCLA, the Clean Water Act, and the Clean Air Act, among others. In addition, this year’s EJ session, taught by Barry Hill from the Environmental Law Institute and Michele Roberts from the Environmental Justice Health Alliance for Chemical Policy Reform, was extended to 1.5 hours.

Other changes included a revamped energy law session, which expanded its content to highlight the transition to renewable sources. Instructors Ethan Shenkman and Emily Orler from Arnold & Porter LLP dived deep into the energy implications of the Inflation Reduction Act, among other climate policies. Participants also enjoyed this year’s session on ethics in environmental law, thanks to engaging instruction by Anne Carpenter and Nadira Clarke from Baker Botts LLP.

Leadership initiative supports women in the environment

ELI’s Women in Environmental Law and Leadership (WELL) Initiative began in 2018 to advance female leadership in the environmental law and policy fields, and to inform ELI’s programs as they relate to women’s issues. WELL offers networking and professional development opportunities, where women can learn and share their experiences with one another. ELI members are eligible to join WELL as a membership benefit.

The initiative hosts a wide range of panels and events to promote thought leadership on gender issues and enhance the skills and knowledge of aspiring leaders. Recent WELL events include “Returning to the Office and the Future of Work for Women,” a webinar held in May on the transition back to in-person and hybrid work during the pandemic. Panelists discussed strategies for handling the return to office, the impact on work and home schedules, and how to achieve success in the workplace.

In July, WELL hosted a webinar on the past, present, and future of women in environmental law and policy, featuring panelists from multiple generations who reflected on opportunities and challenges for women in the field. Speakers working in law firms, government, nonprofits, and corporations spoke on their experiences navigating professional relationships and progressing in their career, even when few women were visible in their practice.

In early September, the WELL D.C. Steering Committee hosted a networking happy hour at the D.C. office of Lewis Brisbois—the initiative’s first in-person event of the year. The event featured remarks from Jayni Hein, senior director for clean energy, infrastructure, NEPA at the Council on Environmental Quality. Later that month, ELI and WELL partnered with WilmerHale to hold a hybrid course on policy developments to curtail plastics disposal, held in-person at WilmerHale’s office in San Francisco and online via Zoom. The panel began with a keynote speech from California Attorney General Rob Bonta and was moderated by Shannon Morrissey from WilmerHale. Additional speakers included Kaitlyn Kalua from the California Ocean Protection Council, Steph Karba from Patagonia, and Margaret Spring from Monterey Bay Aquarium. Panelists discussed the science driving legislative efforts to reduce plastics disposal, including Senate Bill 54 in California, and the potential for increased enforcement and litigation related to plastics production and disposal.

Benjamin Wilson of Beveridge & Diamond Wins ELI Award

A Time for Triage
Author
Michael B. Gerrard - Columbia Law School
Columbia Law School
Current Issue
Issue
6
A Time for Triage

The world is desperately behind in the energy transformation needed to avoid the worst impacts of climate change. Catching up requires a massive buildout of wind and solar power and associated infrastructure, but in the United States many impediments stand in the way. Among them, ironically enough, are environmental laws. Here I argue that we must accept difficult tradeoffs, sacrificing some of what we consider precious in order to avoid far worse impacts.

The Intergovernmental Panel on Climate Change says that avoiding catastrophic climate change requires keeping global average temperatures within 1.5 Celsius degrees above pre-industrial levels. In May, the World Meteorological Organization said there is a 50/50 chance that we will hit that level in just five years. We are now at around 1.2 degrees, and we are already seeing record-breaking heat waves, wildfires, droughts, and flooding; every added notch on the thermometer makes things worse.

According to the Climate Action Tracker, if all countries fulfill their latest pledges pursuant to the Paris climate agreement, the world will be between 1.7 and 2.6 degrees hotter by 2100. Unfortunately, many countries—including the United States—are far behind in meeting their pledges, and the actual policies and actions underway would take us to 2.0–3.6 degrees by the end of the century. Especially at the upper end of that range, such an increase would be an unimaginably terrible world, with large areas rendered uninhabitable and billions of people (that’s billions, with a “b”) displaced from their homes and looking for some place, any place, to live.

Every scenario for staying even at a fallback position of 2 degrees at century’s end includes the all-out construction of renewable energy projects, primarily wind and solar. The United States in particular needs a World War II-scale mobilization. That era saw a huge investment in research and development, and a nationwide commitment to meeting defense workforce and production goals.

This renewable energy is needed not only to replace fossil fuels in generating electricity, allowing the country to shut down all of its coal plants and almost all of its natural gas plants. Along with other countries, we also need to electrify transport, heating, buildings, and much of industry. U.S. electricity demand would about double, even after aggressive efforts to improve energy efficiency.

To get all this electricity from where it will be generated to where it is used, we also need a massive expansion of transmission—a tripling or quadrupling in capacity under some scenarios.

One attempt to quantify all of this was undertaken by Princeton University’s Net Zero America project in 2021. It sets forth several scenarios for the United States, of which only one does not rely on a large number of new nuclear power plants along with carbon capture and sequestration to allow continued use of natural gas for electricity. That scenario involves 3,085 gigawatts of wind generating capacity and 2,750 gigawatts of solar. This would require an estimated 4,000 square miles of land for the wind and 21,000 square miles for the solar (though much of this land could simultaneously support agriculture or other commercial or industrial uses). That adds up to about the land area of West Virginia.

The reason so much land is required is power density: it takes one or two orders of magnitude more acreage to produce a given amount of electricity with wind or solar than with coal, natural gas, or nuclear power, even considering the land disturbance to acquire their needed fuel.

Several studies conclude that achieving the needed level of wind and solar requires building on the order of 100 gigawatts a year out to 2050. To put this in perspective, one good-sized nuclear power plant, or a very large wind farm, has a capacity of about 1 gigawatt. So we would have to build the equivalent of around 100 of these every year.

The principal way to reduce the amount of new wind and solar required under these scenarios would be large-scale deployment of technologies that are not yet and might never be at a commercial scale. These include small modular nuclear reactors, fusion power, tidal generators, carbon capture, geothermal, or perhaps other energy sources that are not yet on the horizon. These may work out, and a great deal of research and development is being pursued, as it should, but we cannot assume success and relax other efforts.

The worsening projections about future climate conditions also mean that we will need to build more infrastructure to adapt to those conditions—sea walls, larger drainage systems, elevated buildings and roads, and much else. We may also need to build new cities and expand old ones to accommodate those who are displaced from drowning coastlines, parched lands, and forests that have become tinderboxes. This may be millions or tens of millions of Americans, without doing anything for the far greater numbers of people in other countries who will be displaced in large part because of historical emissions from the United States.

There are many impediments grounded in law to achieving this level of wind and solar and the needed adaptation infrastructure. Each one could become, if not a veto point, a cause of years of delay that can kill a project, or a specter that keeps it from serious consideration in the first place.

Local zoning and building codes are high on the list. So are various federal statutes—the Endangered Species Act and other species protection laws; the National Environmental Policy Act and its state equivalents, with all of their procedural intricacies; and the wetlands and coastal protections in Section 404 of the Clean Water Act. We also have the laws protecting public lands and marine habitat. Concerns of environmental justice communities and Indigenous peoples must be considered. Labor and human rights conditions along the supply chains must be addressed. Property rights and trade protections will play important roles.

Each of these factors is entirely legitimate. Each has its own strong constituency that understandably does not want to budge on its particular issues. But cumulatively they contribute to preventing us from building what is needed at the pace and scale essential to address the climate crisis. So do many other financial, engineering, labor, supply chain, and other considerations. When all this is added up, it is difficult to imagine how the United States can build the renewables capacity needed to come even close to our temperature targets.

The Inflation Reduction Act, which President Biden signed on August 16, provides for approximately $370 billion over the next decade in energy and climate spending, including tax credits that will make it much less expensive to build renewables and other elements of clean energy infrastructure. The law provides a great deal of money for agencies to hire staff or consultants to prepare environmental impact assessments and to process applications, but otherwise it does little to clear away the obstacles to all this construction. The deal between Senators Joe Manchin (D-WV) and Chuck Schumer (D-NY) that allowed the passage of the law also included the enactment this fall of separate “permitting reform” legislation; the inevitable fight over that bill will feature loudly competing voices on how much needs to be given to the fossil fuel industry, and what environmental procedures need to be relaxed in exchange for an easier path for clean energy.

This brings me to my point. Rather than climate denial, the environmental community has tradeoff denial. We don’t recognize that it’s too late to preserve everything we consider precious, and to linger in making decisions. Society has run out of time to save everything we want to save, and to mull things over for years. Had the emissions curves peaked and started falling in the 1980s, when an increasing number of scientists were trying to sound the alarm about climate change, we might not have been forced into these tough choices. But that didn’t happen; we squandered the time. We have to acknowledge that we need to be in an era of triage, where we save what we can but recognize that there are things we’ll have to give up.

The United States has a special obligation to accelerate the clean energy transition—we have the world’s greatest financial and technological resources, our per capita greenhouse gas emissions are much higher than those of almost any other country, and our cumulative emissions and consequent climate damage are still the world’s largest.

All this leads me to what will certainly be a number of very unpopular suggestions.

One of the things I’d like to put on the table for debate is that sometimes we need to intrude into the critical habitat of an endangered species if that habitat is where we need to put our wind farms, solar arrays, transmission lines to carry the power, or the mines to extract essential minerals for the manufacture of the new clean energy equipment. We should certainly look for sites with the smallest impacts and also strive to mitigate the impacts that remain. But if despite reasonable measures some birds, bats, or plants will die as a result of building the necessary clean energy projects, that is the hard choice we need to make. Because if we don’t make this choice, far more birds, bats, and much else will die from the ravages of climate change.

We will need to give up some scenic mountain and ocean vistas. It’s wonderful to look at unadorned nature, but the best places for wind turbines are where winds are strongest, such as on top of ridge lines or off the coasts. I would rather see wind turbines on the horizon than know that coastal cities are drowning and millions of acres of human and species habitat are flooded or on fire. The wind and solar facilities in the Princeton scenario could be visible from an area the size of Texas and California combined; if we are precluded from putting these turbines and panels anywhere that people can see them, we’re totally sunk.

We also need to find ways for NEPA to take a lot less than the current average of 4.5 years to go through the environmental impact statement process. (The first section of the New York City subway system was built in less time.) The average approval time for new transmission lines (without which many wind and solar farms are useless) now exceeds 10 years. EISs shouldn’t have to rival War and Peace in length.

We also need to re-examine the demand for local consent. My work has found that in nearly each of the 50 states, cities and towns have enacted zoning or building laws to block renewables. (That’s why in 2019 I founded the Renewable Energy Legal Defense Initiative, which provides pro bono legal assistance to community groups and others that favor wind and solar but that are facing local opposition.) We have to preempt a lot of these laws that block renewables—in other words, to allow a higher level of government to nullify restrictions imposed by a lower level. New York adopted a law in 2020 giving the state sole authority to approve utility-scale wind and solar projects; Albany needs to consider local restrictions but does not have to follow them. New York had adopted a prior law in 2011 on renewables siting, but no project was approved under that law until 2018. Since the enactment of the new law, New York has approved 17 projects; few required going against local restrictions, but the hanging sword of that possibility no doubt sped up some of the projects, as did other expedited procedures under the law. California adopted a similar law last summer.

We also can’t afford to spend years negotiating every project until everyone is happy. To meet our renewables targets, we will need to reform public participation (important as it is) to keep it from paralyzing clean energy development until some elusive form of consensus is reached. And while it may be desirable to compensate neighbors who suffer losses as a result of these projects, this should not be asymmetric; clean energy projects should not have to pay for their negative externalities while (in the absence of a carbon tax) fossil fuel projects do not.

So I think we need to have a serious conversation about what does and does not survive the triage that we must undertake. What do we absolutely, positively have to preserve regardless of everything, and what might we have to sacrifice? These are tough and painful choices. There is no objective, right answer. It depends on a series of normative judgments. We environmental professionals will not be the ones making those judgments, but we can influence them. At a minimum, when there is an important clean energy or climate adaptation project that has some negative impacts and we know how to block or delay it using the environmental laws we have mastered, maybe we should instead refrain from doing that, and get out of the way. When an agency official is curious about some possible obscure impact, maybe she shouldn’t insist that the environmental impact statement study it, and perhaps the courts should excuse the absence.

For many years much of my law practice included litigating against things like highways, landfills, and incinerators. I used to say that I never met an EIS that I couldn’t sue. But the worm has turned. The task before us now is to quickly build a massive amount of clean energy and climate adaptation infrastructure. For these sorts of projects, we need to set aside our tools of obstruction (though of course we should continue using them against fossil fuel projects that have clean substitutes).

This is not all about making sacrifices. The needed energy transition will confer many benefits in addition to slashing greenhouse gas emissions and helping to solve the climate crisis. It will also lessen the conventional air pollution that takes millions of lives globally every year, and the water pollution from many forms of fossil fuel extraction. It will reduce reliance on imported fuels and on the countries that produce them, such as Russia and Saudi Arabia. It will cut down the use of fuels whose prices can fluctuate wildly; high energy prices are one of the core causes of today’s inflation. It will create many jobs; according to the Princeton study, the all-renewables scenario would lead to a net increase of about five million jobs in the United States (after subtracting the jobs lost in fossil fuel industries— mostly gasoline station employees).

I think we also need to set aside a number of illusions about easy solutions that appear to be just around the corner but actually allow us to avoid tough choices such as those mentioned above.

In theory, we could create much of the renewable electricity capacity we need by putting solar panels on rooftops, parking lots, and similar surfaces. In reality only a small fraction of building owners, especially homeowners, will put panels on their roofs, certainly if they have to pay for it themselves up front. We can require new structures to have them, but there is little discussion of mandating their placement on existing buildings that are otherwise not undergoing major work. Cumbersome local approval processes also stand in the way. (In Australia, these installations can be approved online in as little as a day; in the United States it can take months.) Abandoned agricultural and mined land may have greater potential, if it is available for sale and otherwise physically suitable, and solar panels can be floated on reservoirs (“floatovoltaics”). So far at least, “distributed” solar costs around three times as much as utility-scale solar for the same generating capacity, so choices are needed about what to subsidize.

In theory, a price could be put on carbon that will percolate through the economy and transform our energy and consumption patterns; but in reality our political leaders are spooked by increases in the price of gasoline and electricity, and there is little if any indication that they’ll ever agree to impose a carbon price—certainly not one of the magnitude that economists say is necessary to do the job, despite protestations by advocates that the carbon revenues can be distributed in ways that can offset the pocketbook impact. The Inflation Reduction Act of 2022 demonstrates that Congress is all about carrots, not sticks—and not a single Republican member of the House or the Senate voted for even the carrots.

In theory, we could shut down our existing nuclear power plants even though they are operating well, and replace them with renewables and efficiency. In reality, whenever we’ve shut down a nuclear power plant, its electricity has mostly been replaced by natural gas. And much of the new renewables that have been brought on line aren’t able to aid in decarbonization since they’re having to stand in for a reactor that, until it was shut down, was a close to zero-carbon power source.

In theory, we could avoid having to build hundreds of millions of electric cars (with all the minerals needed to build them and the electricity to run them) by switching to mass transit and bicycles. In reality, mass transit and bicycles are wonderful in parts of some cities, but in few suburbs and almost no rural areas, where the densities are too low to support transit and the distances are too great for bicycles except for the hardiest (though the new generation of electric bikes certainly helps). There are many reasons to try to achieve greater densities (reducing racial segregation, improving affordability, consuming less land, encouraging physical activity through more walking and biking), but that is a campaign that has already been fought for decades and has its own withering battles with limited success. In sum, we can reduce the number of car trips, but there are real limits.

After Pearl Harbor, Congress gave immense powers to the War Production Board, and U.S. industry mobilized with stunning speed to produce the airplanes, tanks, and other materiel needed to win the war. But very few Americans were standing in the way. Indeed, the era saw unprecedented unity, and people of all kinds joined the war effort, including women and racial minorities who had previously been excluded from many roles. Unfortunately, today we have a major political party doing everything it can to block action on climate change. Anti-renewables organizations have sprung up, and right-wing media are amplifying their false messages.

Several academics have written about what we need to do to speed up the process. Among them are J.B. Ruhl, Jim Salzman, Jeff Thaler, Alexandra Klass, John Dernbach, Uma Outka, and John Ruple. Some of the suggestions that have emerged are more federal preemption of state and local control over renewables and transmission; more centralized decisionmaking, not just coordination, so that individual agencies can’t hold things up; broader allowance of mitigation when adverse impacts are found; and extensive use of eminent domain, especially for transmission lines.

We could have more use of programmatic EISs (which cover multiple similar projects, not just one) and regional assessments of species habitat and historic sites (necessarily accompanied by considerably greater agency staffing to do all of this) so that individual projects within the studied regions can move quickly. We should also adopt standard assessment and mitigation measures and permit conditions, so that the wheel doesn’t have to be reinvented and renegotiated every time, and impose tighter timelines for project reviews, with default approvals if those timelines are exceeded. Congress could provide for limits on judicial review, perhaps requiring all challenges to projects to be brought in the D.C. Circuit on the administrative record, with a short statute of limitations. Early engagement with disadvantaged communities, tribal governments and Indigenous peoples has also been found to be helpful.

A major challenge is that, in the hands of a pro-fossil fuel president or Congress, most of these tools could as readily be used to hasten the approval of dirty as well as clean energy projects. This further highlights the central importance of electoral politics in addressing the climate crisis.

We can’t afford any more obstacles. I think it’s incumbent on all of us who do understand the frightening magnitude of the climate threat to work to clear the path for the energy transformation we need.

There are some models of laws that have achieved speedy approvals for certain kinds of projects—the Telecommunications Act of 1996 for cell phone towers; the Defense Base Closure and Realignment Act of 1990; the Second War Powers Act of 1942. Whatever it is, I believe we need to move forward in this fashion, and not just plod along with business-as-usual environmental regulation toward a world of killing heat and mass human migration and species extinction. We need to end tradeoff denial. TEF

COVER STORY 2 It’s too late to protect everything. To save the climate, we need to build so much wind and solar that some will go in bad places. Not doing so would be much worse. Rather than climate denial, the environmental community has tradeoff denial.

Cut the Red Tape
Author
Mario Loyola - Florida International University Law School
Florida International University Law School
Current Issue
Issue
6
Cut the Red Tape

The United States has the world’s most costly, time-consuming, and unpredictable system for authorizing big infrastructure projects. It puts America at a grave competitive disadvantage compared with other industrial powers, including China. The social costs are enormous and are passed on to consumers, who must ultimately pay a premium for elevated risk and constricted supply. It deprives Americans of affordable energy, adequate roadways, and even safe drinking water.

And if you think the climate crisis is “code red for humanity,” as President Biden has said, the hard truth is this: Until Congress reforms the entire permitting system, the goal of a clean energy transition is almost certainly unachievable.

Consider the staggering amount of infrastructure that would be required to meet the administration’s goal of a zero-carbon electricity grid by 2035: scores of new nuclear plants, hundreds or thousands of new utility-scale solar plants, tens of thousands of windmills, hundreds of thousands of miles of transmission lines. Under current law and given agency workforce constraints, securing permits for all those projects in time to finish, or in some cases even to start, construction before 2035 is simply a fantasy.

Congress has appropriated nearly $2 trillion for “green” infrastructure. But money is not the limiting factor in America’s ability to deploy major infrastructure projects. The crucial limiting factor today—and the main obstacle to a clean energy transition going forward—is the massive amount of federal agency resources consumed by the struggle to comply with the National Environmental Policy Act in a context of inordinate litigation risk.

Section 102(2)(C) of NEPA requires agencies to prepare an environmental impact statement for any “major federal actions significantly affecting the quality of the human environment.” Any federal permit required for a major infrastructure project usually triggers the requirement of an EIS.

According to a recent survey by the White House Council on Environmental Quality, which was created by NEPA to oversee its implementation, the preparation of a typical EIS takes on average 4.5 years, consumes tens of thousands of agency person-hours, and costs millions of dollars in taxpayer resources. That’s on the top of the tens of millions an EIS can cost project proponents. So even with the most lavishly funded bureaucracy on Earth, the entire federal government produces at most 75 or 80 final EISs every year. That pace is woefully short of what is needed to reach the 2035 zero-carbon goal.

To give some sense of what this looks like on the ground, the Bureau of Land Management’s Nevada State Office, where dozens of solar projects would have to be evaluated, is totally overwhelmed by the effort to complete one EIS every year or two. The Nevada office has issued a “Prioritization Guidance” to help it select the small handful of applications its staff can handle over the next couple of years from among the flood of solar permit applications.

By the time Senators Joe Manchin (D-WV) and Chuck Schumer (D-NY) agreed to streamline permitting as a side-deal to the Inflation Reduction Act, the 117th Congress had not done much of anything to lay the political groundwork for sweeping reform. Not surprisingly, what emerged from the deal was a potpourri of disconnected measures responding in most cases to the demands of narrow special interest groups and falling far short of what would be required for a clean energy transition by 2035. Even with the most dire stakes imaginable, the most that policymakers have been able to accomplish is tinkering at the margins.

Any serious effort to undertake a clean energy transition must start with a close look at the staggering amount of clean energy infrastructure that would be required. The next step is to wrap one’s head around the frightful tangle of red tape that turns the federal permitting process for most such projects into a years-long odyssey. That exercise sheds light on some of what Congress will have to do if it ever gets serious about the obstacles to a clean energy transition.

There are many estimates of the power capacity additions that would be required for a net-zero energy sector, most of them in the same general ballpark. For example, the Electric Power Research Institute estimates that to achieve a zero-carbon electrical system by 2035, the grid would need to add 900 gigawatts of new wind and solar, 80 GW of new nuclear capacity (doubling current nuclear capacity nationwide), and 200 GW of hydrogen-fueled turbines.

Many estimates don’t mention nuclear at all. That’s because powerful environmental advocacy groups remain adamantly opposed to it, which may also explain why Democrats have put virtually no effort into advancing nuclear power. That is a major obstacle to the clean energy transition in itself, because most scenarios aim to replace the “dispatchable” baseload generation of coal and natural gas plants with intermittent wind and solar, creating significant challenges for reliability and capacity. Utility-scale batteries, smart grids, and similar technologies have come a long way but the challenge of intermittency is why prominent international authorities call for a doubling and even tripling of nuclear power around the world for any chance of meeting the Paris Agreement’s goal of limiting warming to no more than 1.5 degrees Celsius.

The American nuclear fleet is dwindling and there are no plans to build any new nuclear plants in the United States. But even if there were, they couldn’t be part of the clean electricity mix in EPRI’s estimate. The permitting timeline for nuclear is the longest of any infrastructure sector. A nuclear reactor due to open in Georgia in the next couple of years started its odyssey through the federal permitting process in 2006, after many years of project design and development. Nuclear regulatory reform is urgently needed, but Congress has done virtually nothing about it.

One notably optimistic review of 11 studies of non-nuclear pathways to clean electricity by 2030 and 2035, by Energy Innovation LLC, shows a consistent estimate across studies of about one terawatt of solar and wind, plus 100 GW of battery storage. That review notes that this would require an average annual deployment of new renewable energy capacity at double or triple the record rate of 31 GW of wind and solar additions in 2020, “a challenging but feasible pace of development.”

The authors don’t elaborate on why they think that would be “feasible,” perhaps because they have been spared the trials and tribulations of going through the NEPA process. But it isn’t feasible—not remotely. Since the early Obama administration, federal agencies have strained to streamline their permitting processes and increase throughput. They are virtually at the limit of the streamlining that current law will allow without leaving their permits and NEPA reviews vulnerable to court challenge.

As many experts have noted, the fear of litigation risk is the main source of cost, delay, and uncertainty in the NEPA process. It is also the crucial limiting factor in the clean energy transition. Litigation risk has the entire federal bureaucracy backed up against a wall, struggling to produce permits and EISs that are perfect in every last detail, whether relevant to the agency decisionmaker or not. (The statutory purpose of NEPA, incidentally, is to inform the agency decisionmaker.) This means that without changes in the law, the only way to double or triple the pace of permitting at federal agencies is by doubling or tripling the size of the federal workforce involved in project reviews.

Reliable estimates are hard to come by, but a reasonable guess is that on the order of 10,000 federal agency staff spend most of their time involved in processing permit applications for infrastructure projects. To get a sense of how much the federal permitting bureaucracy would have to grow, let’s take a look at the most significant increase in that workforce produced in the entire 117th Congress, namely the Inflation Reduction Act’s provision of nearly $1 billion to increase permitting staff over five years, including $350 million for an Environmental Review Improvement Fund at the Federal Permitting Improvement Steering Council, which was created under the 2015 Fixing America’s Surface Transportation Act to coordinate the permitting of major infrastructure projects. This massive boost in funding would add perhaps five or six hundred full-time equivalents to that workforce. That’s an increase of maybe five percent, assuming agencies can find and train qualified personnel in this highly technical field quickly enough. The added staff would significantly help with the current backlog of applications, but the total would fall woefully short of the needed doubling of personnel.

As unrealistic as it is to think that we could double the size of the federal permitting workforce quickly enough to make a difference, there is yet another problem with Energy Innovation’s hopeful estimates. Its calculation of the required increase in average permitting pace presupposes a time horizon of 10 or 15 years, depending on whether we’re looking at 2030 or 2035. But that doesn’t take any account of the actual timeline for deploying infrastructure projects, which entails several years of preapplication and has to be followed by several years of actual construction.

Between the bookends of preapplication and construction, permitting time for solar projects, according to the Solar Energy Industry Association, can be between three and five years. That means that to achieve net-zero by 2030 is already impossible: Projects that begin pre-application in this coming year generally won’t be coming online until 2030 at the earliest. And even for a clean electricity transition to occur by 2035, all the projects necessary for a roughly one terawatt addition of renewable electricity would have to finish pre-application and file their permits by 2027 at the latest. Then all those permits would have to be processed and the environmental reviews completed within three or four years. Hence the effective permitting window for a clean energy transition by 2035 is 2025-2032, a period of just seven years, not 15 as in the Energy Innovation’s estimates.

So during that main wave of permit processing and environmental review, the processing rate would have to be at least four times the rate of the record year of 2020, and perhaps significantly faster than that. In other words, Congress would have to at least quadruple or quintuple the size of the federal permitting workforce.

Now consider the hurdles facing the actual projects. Taking solar as an example, most studies suggest that the United States would have to add on the order of 500 GW of utility solar capacity. Suppose that each solar project in that total is very large, with a nameplate capacity of 500 MW. Adding 500 GW of solar capacity would require 1,000 such projects. Judging by the largest currently in operation, each such solar project would cover perhaps 5,000 acres, for a total of 5,000,000 acres. That’s the entire state of New Jersey—covered in solar panels.

Many of those solar projects won’t require federal permits at all, particularly if they aren’t built on federal land. But where the sun shines for 365 days a year is in the deserts and high plains of the western states—where the federal government owns virtually all the land. And every solar project built on federal land requires its own permit and its own EIS.

The NEPA process is tailor made for NIMBY-ism. “Scoping” allows local opponents to lodge issues that agencies must explore at length, and which can later be litigated. Each solar project application entails political trauma for regional agency staff and often for the agency headquarters as well. Worse still, covering an area the size of New Jersey with solar panels will have a myriad of environmental consequences, each of which must be studied in detail and avoided, minimized, or mitigated if possible—and many of which might impel the reasonable conservationist to ask, “Is this really worth it?” Anyone who has seen the leach fields for disposal of lithium batteries, where birds die within seconds of alighting, should wonder.

Then those solar and wind projects need to be connected to the grid by a network of new transmission lines. Linear projects such as transmission towers and pipelines are among the most resource-intensive permits for agencies to process. That’s because linear projects trigger permit requirements—and fierce local opposition—all along their route. All of this slows the already slow permitting process to a crawl. To give one example, the Transwest Express Transmission Line, running for 700 miles and with a capacity of 3 GW, was designed to transmit wind power from Wyoming to Nevada and California. It took 15 years to get the permits required for construction to begin.

The clean energy transition will entail transmission lines on a scale that most Americans can’t imagine. Wind and solar must be built where the wind blows and the sun shines, not where consumers are. Hence each megawatt of renewable capacity will require orders of magnitude more transmission line miles than each megawatt requires currently, and average length will grow exponentially as developers go looking further and further afield from their target markets for suitable sites. According to a National Academies report, the net-zero 2050 goals would require construction of one million miles of transmission lines by 2050.

Given the much longer lead times on transmission lines compared to renewable energy power plants, it’s easy to see another looming problem: solar plants sitting idle in the middle of nowhere for years on end, waiting for transmission lines to arrive. Indeed this is already happening, as in the case of the Cardinal-Hickory Creek transmission project in Iowa and Wisconsin.

A series of interrelated structural problems combine to create inordinate delays, costs, and uncertainties for infrastructure projects. Of those impacts the worst by far is uncertainty, the major source of risk to capital formation and hence a principal source of the significant social losses caused by the NEPA process.

Unfortunately, that uncertainty has many sources, most important of which is litigation risk, which maximizes the amount of time and resources agencies devote to processing permit applications out of all proportion to the environmental costs and benefits at stake.

The uncertainty begins with the inordinate litigation risk that hangs like a cloud over every EIS from the start. The problem has been years in the making. It started in the 1970s, with the invention of Court-ordered “hard look” NEPA review, which along with Chevron deference—another decision, requiring courts to favor agency positions where statutes are unclear—a few years later turned the standards of review spelled out in Section 706 of the Administrative Procedure Act upside down. (Where Section 706 specifies that courts are to review questions of law de novo and set aside agency actions only if they are “arbitrary and capricious,” courts now defer to agencies on questions of law and second guess agency findings on technical matters that judges struggle to understand at all.)

A related problem is that there is no doctrine of substantial performance or materiality: An agency may get an EIS 99.9 percent perfect, but if it forgot to study the habitat needs of the butterfly that one person casually mentioned in a town hall meeting during scoping—boom, permit vacated. Agencies have to think of literally everything, because the omission of one paragraph in a 1,000-page document could be “arbitrary and capricious.” The purpose of NEPA is to inform the decisionmaker, which creates an implied standard of materiality for every impact and alternative under consideration. Alas, federal courts have combined with the CEQ regulation of NEPA to require agencies to study impacts well upstream and downstream of the project—even if those impacts are entirely in the control of other governments, in much greater detail than is remotely relevant to the permitting decision. And because of the loose wording of the NEPA regulations, agencies devote hundreds of pages in EISs to studying alternatives to the proposed project when what the statute requires is consideration of alternatives to the proposed action, which in the case of an infrastructure project is just the up-or-down permitting decision.

It’s no surprise that agencies only win about 70 percent of cases in court. Defenders of NEPA tout this as evidence that agencies prevail “most of the time” so litigation isn’t that big a deal, but in reality it’s an atrocious figure, considering the endless time and resources agencies devote to complying with every last detail that the law might require. District courts face a similar rate of reversal on appeal, but of course only a tiny fraction of judgments get appealed, whereas the litigation risk for a final EIS is virtually 100 percent. And district courts don’t spend 4.5 years, tens of thousands of hours, and millions of dollars trying to make absolutely certain that they get everything right, and thankfully so because if they did you’d have a complete breakdown in the administration of justice—an apt description of NEPA litigation.

Many judges appear to be operating on an unstated and perhaps unconscious premise that environmental advocacy groups represent the public interest but agencies do not. This manifests in a damaging relaxation of procedural protections that defendants normally enjoy. Courts have bent over backwards to confer standing on virtually anyone who wants to oppose a project. NEPA creates no right of action, so courts had to find one in the stopgap enforcement provision of the APA. That requires “legal harm” for standing, but courts look past that for environmental advocacy groups, by resort to the “zone of interest” theory of “procedural standing,” piling one ancillary stopgap on another. So if you go boating on a lake you have standing to sue FERC over a transmission line that will be partly visible from the lake, despite that the transmission line is urgently needed to connect a small city to a renewable power source that is sitting idle after $100 million of investment.

Once in court, the red carpet treatment continues. When asking for a preliminary injunction, a plaintiff must normally post a bond to protect the defendant against losses resulting from the injunction should the plaintiff ultimately lose. Courts waive that for environmental litigants, because of the “public interest.” And when it comes time to balance the equities in granting the injunction, courts give short shrift to the public interest in effective agency action, or ignore it entirely. Indeed, in the 9th Circuit, stopping a project is considered to cause no harm to the agency because ipso facto stopping a project won’t harm the environment—as if environmental losses are the only losses we need to worry about when deciding to stop an infrastructure project of urgent national importance, where developers have invested tens or hundreds of millions of dollars.

Another major problem is the very existence of the CEQ regulation of NEPA, which dramatically increases the litigation target area of every project review. This is a fascinating issue, because CEQ has no rulemaking authority. The regulation is arguably nothing more than an executive order, like E.O. 12866, which establishes the Office of Management and Budget rulemaking process for federal agencies. Teleporting the “legal harm” and “procedural standing” doctrines into a document that creates no private rights or obligations, courts have transformed the CEQ regulation into a compendium of legally enforceable requirements. Hundreds of federal permits have been vacated by courts because of agencies’ failures to comply with supposed NEPA requirements that are not in the statute and that were invented by CEQ out of thin air. But without foundation in delegated rulemaking authority, the regulation of NEPA is just a set of directives to agency heads. Presidential directives such as executive orders have never been considered enforceable de jure and draw the entirety of their compelling force from the president’s removal power, which does not extend to independent agencies like FERC. In the key NEPA case of Public Citizen v. Department of Transportation, Justice Clarence Thomas wrote that “CEQ was established by NEPA with authority to issue regulations interpreting it,” but the statute doesn’t say that anywhere, and it’s simply not true. Plus, even if courts defer to the council’s statutory interpretations, it’s another thing entirely for CEQ to use purely presidential directive authority to instruct an agency to discuss “cumulative impacts” (a concept nowhere to be found in the statute) and then have courts treat that directive as if it were legally enforceable in a lawsuit brought by a private party. It’s the exact equivalent of the president instructing federal staff to observe a business dress code and a private citizen suing because some agencies have casual Friday.

Another major problem with the permitting process is the hydra-headed nature of agency permitting authorities. The description is not totally apt because the hydra at least had a single body, whereas the permitting processes of federal agencies are almost completely disconnected—despite manifold interdependencies. Efforts by multiple administrations to establish a coordinated process quickly run up against the reality of statutory structure, a problem that only Congress can fix. The CEQ regulation’s provisions on a “lead agency” to prepare a single NEPA document in coordination with “cooperating agencies” doesn’t relieve the project developer of basically having to create an interagency process from scratch among a bunch of agencies that often couldn’t care less what the developer has to say on any subject.

A related problem is the fact that agencies take it on themselves to prepare environmental documents that the developer could prepare instead, much faster and just as well, subject to agency verification and approval, as is done in Australia for example. That is one of the most important changes in the 2020 Trump revisions to NEPA, which were partly pulled back by the Biden administration to placate environmental advocacy groups, despite the fact that renewable energy companies were the disproportionate beneficiaries of the Trump reform.

The problems I’ve described create a mountain of obstacles to any clean energy transition, and only Congress can remove them. Although polls show significant public concern with the effects of climate change, the issue is not the most important for most Americans, who are primarily worried about inflation and other issues. Perhaps that explains why Congress has failed thus far to enact comprehensive reforms of the sort that would be needed for a successful clean energy transition. TEF

COVER STORY I The federal project review process is a daunting obstacle to any clean energy transition. Until Congress reforms the entire permitting system, the goal of a renewable energy economy is almost certainly beyond reach.

Space Objects a Real Hazard to People, Property
Author
Stephen R. Dujack - Environmental Law Institute
Akielly Hu - Environmental Law Institute
Environmental Law Institute
Environmental Law Institute
Current Issue
Issue
6

An environmental threat of very real proportions concerns celestial objects such as asteroids that hit the Earth—as everyone knows, one did in the dinosaurs. The same applies in a less dangerous but more frequent manner to unwanted “de-orbiting” of artificial satellites, and to the careless discarding of the boosters used to get them aloft.

As to the first, debris left over from the formation of the solar system pummels our planet on a constant basis—we call these asteroid or comet fragments meteors when they burn up in the atmosphere and meteorites if they hit the ground. As to human-made space debris that can fall to our planet’s surface, “More than 1,000 rocket bodies are estimated to have uncontrollably re-entered the atmosphere in the past 30 years,” according to New Scientist.

Last April, a piece of such artificial space debris, reportedly from a Chinese Long March rocket, hit near a village in India. Two years earlier a part of another Chinese rocket landed in a village in Ivory Coast. No one was harmed in either incident. And readers of a certain age will remember Skylab, the first space station, which fell from orbit in 1979, scattering debris over Western Australia and the Indian Ocean.

Skylab weighed 100 tons and would have caused real damage if it had landed in a populated area. The last few weeks of its existence were met with a worldwide response finding humor in the event—painting rooftop targets, for instance—as technicians desperately succeeded in using the huge satellite’s fuel reserves to wrest it to a safe demise.

But in fact had Skylab landed in Mombasa or Mumbai or Quito, the death toll would have been unimaginable. Because most satellites orbit near the equator and not high up, their debris when atmospheric drag forces them down can land on the largely poor countries of the tropical zone, raising a real environmental justice issue.

So far there have been no casualties from falling artificial space objects, but there are bound to be. Rocket launches have, well, skyrocketed, escalating to well over one hundred per year, and many loft multiple satellites. Scientists at University of British Columbia, New Scientist reports, calculate that the odds are one in ten of “casualties being caused by falling debris over the next decade.”

How can at-risk societies fight back? According to Ram Jakhu of McGill University in Montreal, the United Nations Liability Convention of 1972 comes into play here. The convention has only been used once in this manner, when Ottawa won $2.3 million from the Soviet Union after one of its satellites crashed in Canada in 1978. “I have no doubt there is going to be another serious incident,” according to Jakhu. “There’s a strong probability of hurting somebody or damage to property.”

There is a solution: an international agreement or arrangement such that rocket boosters and satellites contain sufficient surplus fuel—a rounding error in their total mission costs—so they can be brought down safely or be put into a benign orbit. These sort of “best practices” would be easy to put into place on a voluntary basis or by making the liability convention’s provisions dissuade slackers—sort of an astronomic Superfund. It’s not rocket science.

Chances are you won’t have a satellite fall on your head. But humans have in fact been injured by pieces of meteors entering Earth’s atmosphere or by the flash and shock waves they produce. There was the 2013 event in Siberia, mirroring a much more destructive meteorite that hit an uninhabited region in that wilderness in 1908. The recent event did hospitalize people and cause property damage. And it was caught on video by numerous observers.

According to an account on Space.com, the “meteor was a small asteroid—about the size of a six-story building—that broke up over the city of Chelyabinsk, Russia. . . . The blast was stronger than a nuclear explosion. . . . The shock wave it generated shattered glass and injured about 1,200 people.” But, as the Daily Beast reports, “Perhaps the most disconcerting thing about it aside from the damage and injuries it caused to the city was that it went largely undetected by astronomers and asteroid surveyors on the ground.”

In 2002 a small asteroid large enough to cause mass casualties should it hit Earth was given “about a 1 in 9,300 chance of an impact in 2049,” Wikipedia relates. Compare such a risk estimate, in which large swaths of humanity are seemingly at stake, with the response we give to the excess cancers expected at Superfund sites. The asteroid was later found to be benign, but it was a wakeup call to events that are low probability but high impact.

Three years later, Congress mandated that NASA monitor all Near Earth Objects of a dangerous size. In 2016, the Daily Beast notes, “NASA launched the Planetary Defense Coordination Office to identify and respond to any potential comet or asteroid impact endangering Earth.” But, “The task remains undone.”

Just in case, in September NASA impacted a refrigerator-size satellite into an asteroid as big as the Great Pyramid at Giza in an attempt to alter its path. “The target was Dimorphos, a rock orbiting another, much larger asteroid called Didymos,” according to the Washington Post. Scientists picked such a pair because it would be easy to evaluate the effect on the smaller space rock’s trajectory. And Dimorphos was not in danger of hitting Earth, nor could the collision produce a dangerous orbit.

—Stephen R. Dujack

Counting Sheep

A longstanding problem for solar farms has a surprisingly cute solution. “Sheep are the solar industry’s lawn mowers of choice,” writes Amrith Ramkumar in the Wall Street Journal. Farmers maintaining thousands of acres of panels need to contend with tall grasses, which, unabated, can obstruct sunlight. Enter the star of nursery rhymes and an unexpected hero of renewables. Hard-working flocks are now generating millions of dollars in annual revenue by helping to chomp on pesky weeds.

Many grazing animals were initially considered for the role. But some, like cows and horses, were too tall to tidy up grass underneath low-hanging panels. Others, like goats, strayed from the assignment—“chewing on wiring and climbing on equipment,” Ramkumar writes. “Sheep—docile, ravenous, and just the right height—easily smoked the field.”

The recent boom in solar has unexpectedly shot up demand for shepherds, “centuries after [their] breakout roles in the Bible,” Ramkumar writes. He reports that in just four short years, an estimated five thousand acres of solar fields employing sheep in the United States has now grown to tens of thousands, though there doesn’t appear to be an official head count yet.

Finding enough sheep has posed challenges. The Journal notes that while some advanced courses for solar grazing are offered through North Carolina State University and Cornell University, entry-level classes are scarce. Meanwhile, shepherds are already taking out loans to buy more sheep. One shepherd interviewed by Ramkumar spent $500,000 to purchase additional ewes to secure a contract with an energy farm.

The American Solar Grazing Association, a society that this editor is delighted to find exists, touts many other perks for the practice beyond clearing grass. “Solar grazing contributes dairy, meat, and wool to regional markets,” the group’s website notes. “Farm incomes are down, and solar grazing allows farmers to increase and diversify revenues without taking land out of food production.”

The sheep reap benefits too. “The vegetation at solar sites becomes a source of nutrition and a pasture” for these “resourceful foragers,” who “enjoy the shade of the solar panels on hot days, napping and grazing where humans would struggle to reach,” the association notes. “Some of the animals like being petted while they graze,” notes the Journal—adding up to a seemingly ideal workday for these high-in-demand flocks.

The phenomenon brings full circle the use of once arable farmland now occupied by solar panels. From up above, grazing sheep look like fluffy white clouds slowly moving under huge, sleek mirrors. Just like old times, shepherds use dogs to fend off predators and herd the sheep when necessary. They haul in food, pump water, and even set up enclosures for the sheep to sleep in. For those in the business of renewable energy and sheep, “It’s changing all of our lives,” says farmer Ely Valdez.

—Akielly Hu

Notice & Comment is the editors’ column and represents each writer’s views.

Greenhouse Carbon Dioxide Now Legally an “Air Pollutant”

When the Supreme Court restricted the ability of the Environmental Protection Agency to fight climate change this year, the reason it gave was that Congress had never granted the agency the broad authority to shift America away from burning fossil fuels.

Now it has.

Throughout the landmark climate law, passed this month [August], is language written specifically to address the Supreme Court’s justification for reining in the EPA, a ruling that was one of the court’s most consequential of the term. The new law amends the Clean Air Act, the country’s bedrock air-quality legislation, to define the carbon dioxide produced by the burning of fossil fuels as an “air pollutant.”

That language, according to legal experts as well as the Democrats who worked it into the legislation, explicitly gives the EPA the authority to regulate greenhouse gases and to use its power to push the adoption of wind, solar, and other renewable energy sources.

—New York Times

In 2020 and 2021 alone, the world added 464 gigawatts of wind and solar power-generation capacity, which is more power than can be generated by all the nuclear plants operating in the world today.

—Farhad Manjoo in
the New York Times

Dodging Falling Rockets and Errant Minor Asteroids.

What We Can Learn From Joe Manchin and the Climate Law
Author
Bob Sussman - Sussman and Associates
Sussman and Associates
Current Issue
Issue
6
Bob Sussman

After prolonged gridlock in Congress, most observers had written off President Biden’s ambitious climate agenda as a lost cause. However, in late July an improbable agreement between Democratic Senators Chuck Schumer of New York and Joe Manchin of West Virginia gave it a new lease on life—just three weeks later, the historic Inflation Reduction Act was signed into law.

Manchin had kept the country off balance for months, wavering between support for the proposed reconciliation bill that became the IRA and strong denunciations that left his colleagues exasperated and increasingly pessimistic that he would make a deal. During the months of tortured negotiations, the West Virginian was reviled as an opportunist, a master of double-speak and traitor to his own party. But in the end, he provided the decisive vote that put the biggest climate legislation in history over the top.

Manchin’s agonized deliberations mirror the fault lines and contradictions that have made a national consensus on climate policy so elusive. A Democrat from a conservative coal state, he had a life-long allegiance to fossil fuels, a distrust of mandates, and deep concern about runaway government spending. His stubbornness forced a radical downsizing of the $3 trillion legislative behemoth initially proposed by Democrats and substitution of a much smaller package that would pay for itself and reduce the deficit.

Manchin also blocked a centerpiece of that bill’s climate provisions, the Clean Electricity Performance Program, which would have imposed a system of penalties and payments to force the power sector to achieve 80 percent clean electricity by 2030. And he fought for and obtained benefits for fossil fuels, including a guarantee of continued leasing of federal lands and offshore waters for natural gas and oil production and a commitment to permitting reform. Ultimately, however, Manchin embraced the core of the climate package—$369 billion in tax credits, loans, and grants for solar and wind energy, electric vehicles, nuclear power, carbon capture and storage, and clean manufacturing.

We don’t know exactly why Manchin supported these sizable incentives for clean energy. But he may have understood that the fossil fuel economy that had long sustained his state is on life support, and beleaguered communities need investments in clean industries that government programs can deliver. At the same time, the senator drew the line at the forced curtailment of fossil fuel production, recognizing that premature reductions in supply could both hurt consumers and punish communities where oil and gas remain a source of good jobs. Following Manchin’s lead, the IRA as enacted provides a strong boost for renewables and electric vehicles without directly curbing oil and gas production.

This reliance on financial incentives to drive the clean energy transition reflects a steady drift in climate policy away from command-and-control. Despite continuing support for regulatory action, options have grown more limited at the national level in the face of political pushback and constraints on agency authority from the Supreme Court’s recent West Virginia v. EPA decision. The implicit premise of the IRA is that clean energy will succeed in the marketplace through technological and economic advantages gained from strong government support, not by eliminating competing fuel sources. There is both political and economic logic to this approach. Squeezing fossil fuel producers at a time of worldwide energy shortages and high prices will give more fodder to right-wing critics of “radical environmentalism” and further polarize the electorate. But if clean energy succeeds in creating jobs and spurring growth without directly threatening fossil fuel interests, confidence will grow across the political spectrum.

Manchin was also an architect of the IRA’s strong financial inducements for investing in our domestic manufacturing infrastructure and supply chain for the production of clean products. Along with others, Manchin understands that increased sales of electric vehicles and solar power to American consumers will not strengthen job growth and domestic investment if the core components of these products are sourced from China and other unfriendly foreign suppliers. As he commented, “I don’t believe that we should be building a transportation mode on the backs of foreign supply chains.” Thus, the IRA’s tax credits for purchases of electric vehicles are designed to reward auto companies who assemble them in the United States using batteries containing metals and other components produced in this country or by our major trading partners.

This approach links the climate agenda with the revival of the U.S. manufacturing base and growing bipartisan support for industrial policy initiatives for semiconductors and other critical sectors. Here too, the IRA provides a strong rejoinder to naysayers who portray climate policies as leading to economic decline.

What We Can Learn From Joe Manchin and the Climate Law.

Work to Do as Inflation Reduction Act Now Pivots to Implementation
Author
Ethan Shenkman - Arnold & Porter
Arnold & Porter
Current Issue
Issue
6
Ethan Shenkman

As the White House celebrated passage of the Inflation Reduction Act last summer, President Biden was effusive. “We are going to take the most aggressive action ever, ever, ever to confront the climate crisis and increase our energy security. . . . And that’s not hyperbole.” With $369 billion in spending and incentives for a vast array of clean energy technologies—from wind, solar, and hydrogen, to electric vehicles, sustainable aviation fuel, and carbon storage—the administration claims the IRA will “reduce greenhouse gas emissions by about 1 gigaton in 2030.” That amount is “10 times more climate impact than any other single piece of legislation ever enacted.”

But it’s one thing to pass legislation designed to turbo-charge the energy transition. It’s another to make it a reality. To that end, Biden recently established a new White House Office on Clean Energy Innovation and Implementation, to be headed by former Obama climate adviser John Podesta.

Legal practitioners will play a critical role as the federal government and its clients pivot to implementation of the sprawling new law. Specialists in environmental, regulatory, permitting, tax, energy, and corporate law will be needed in an “all of the above” effort, to borrow a phrase.

Federal agencies—including Treasury, Energy, Transportation, Interior, and EPA—will be busy promulgating regulations, issuing guidance, and awarding funding. With sparse legislative history, novel issues of statutory interpretation will need to be resolved. As one example, the IRA amends the Internal Revenue Code to create a new Section 45V, which introduces a production tax credit for “qualified clean hydrogen.” A process must result in four kilograms of CO2-equivalent or less per kilogram of hydrogen produced, but the devil will be in the details in terms of how the life-cycle GHG emissions of various hydrogen processes will be measured. Treasury will be looking to expert agencies like DOE and other stakeholders for input on many such issues.

As another example, the IRA revamps the existing system of renewable energy tax credits, providing higher-level credits for companies that meet “prevailing wage” and “apprenticeship” requirements for their workers; satisfy “domestic content” standards; and/or agree to locate a project in a specially defined “energy community” (including those that are transitioning from fossil fuel-related industries) or other low-income or tribal areas. These concepts, which also appear in other provisions of the IRA, will need to be further defined.

EPA’s air office will be gearing up to spend over $40 billion, while seeking to harmonize new IRA programs with EPA’s forthcoming climate regulations. “We are convinced that part of our job is to create synergies” between the IRA and regulatory actions, said Joe Goffman, acting head of the air office. One area in particular that practitioners will be watching is how EPA will reconcile its forthcoming regulations to control methane emissions from the oil-and-gas industry with the IRA’s creation of a new methane emissions fee.

Senator Joe Manchin (D-WV), key to the IRA’s passage, has made clear that the new law “invests in the technologies needed for all fuel types—from hydrogen, nuclear, renewables, fossil fuels, and energy storage.” It “does not arbitrarily shut off our abundant fossil fuels,” he explained, but rather “invests heavily in technologies to help us reduce our domestic methane and carbon emissions and . . . displace dirtier products” around the world. Indeed, the law expressly requires the government to move forward with a certain amount of oil-and-gas lease sales as a condition for the use of federal lands and waters for new wind and solar projects. Expect legal battles over how this compromise is construed, along with ongoing disputes over analysis of NEPA oil-and-gas leasing decisions.

Meanwhile, practitioners eagerly await whether Congress will enact permitting-reform legislation—also at the insistence of Manchin. The administration, for example, predicts the IRA will spur construction of 950 million solar panels, 120,000 wind turbines, 2,300 grid-scale battery plants, and this is only the tip of the iceberg—vast new networks of CO2 and hydrogen pipelines, electricity transmission lines for renewables, underground carbon dioxide sequestration facilities, and charging stations for electric vehicles will also be needed. But what if this massive new energy infrastructure cannot be sited and permitted in a timely fashion?

The Washington Post recently called for legislation to “ease the seemingly endless permitting delays that energy projects face.” Noting, for example, that “environmentalists have opposed efforts to deliver clean electricity to American homes because they would require new wires run through forests, ” the paper cautioned that “some of those calling loudest for addressing climate change could become enemies of that very effort.”

Work to Do as Inflation Reduction Act Now Pivots to Implementation.

The Risks—and Opportunities—of Guaranteeing Clean Energy Loans
Author
Joseph E. Aldy - Harvard Kennedy School
Harvard Kennedy School
Current Issue
Issue
6
Joseph E. Aldy

The Inflation Reduction Act represents the largest climate change law in U.S. history. While nearly three-quarters of the statute’s $369 billion in clean energy spending will operate through credits and related tax code provisions, the law also expands and authorizes new loan guarantee programs. This spending provides additional subsidies for clean energy deployment—which represent risks as well as opportunities for the government in advancing its decarbonization agenda.

A loan guarantee reduces the borrowing costs for an investor. The federal government guaranteeing a loan for a clean energy project effectively operates as insurance for the bank that is lending to the proposed project. With the loan guarantee, the bank recognizes that it will be paid back, either from the borrower if the project succeeds financially or from the government in the event that the borrower defaults. As a result, the bank either offers a lower interest rate on the loan or, in common practice, the Federal Financing Bank offers a low-interest loan backed by a Department of Energy guarantee.

Under the 2005 Energy Policy Act’s Title 17 loan guarantee program, a clean energy project developer seeking a guarantee had to pay for the credit subsidy. Effectively, the developer paid the premium for the insurance reflected in the loan guarantee.

In Title 17, there is little subsidy for the clean energy developer. In several subsequent spending bills, however, including a $6 billion appropriation to DOE in the 2009 economic recovery legislation, the government paid for the credit, which represented a subsidy equal to at least 10 percent of investment costs for many projects.

In the new Inflation Reduction Act, Congress appropriated about $12 billion for loan guarantees under the Title 17 program, for advanced vehicle technology manufacturing, to support tribal communities, and for a new energy infrastructure reinvestment financing program. In addition, Congress caps the total amount of loans that can be guaranteed by DOE.

For example, the new reinvestment program, with $5 billion in appropriations for credit subsidies, is capped at $250 billion—which some in the media have interpreted as $250 billion in new government spending; rather, it is the maximum quantity of loans it may support. It is unlikely, however, that $5 billion could cover the credit subsidies for $250 billion in clean energy loans. This would reflect an expected default rate of only 2 percent across the entire portfolio, which implies a large number of subsidized loans for projects that would have happened anyway.

This prospect raises an important question about an energy loan guarantee program’s objective and related risk management strategy. The government could take a high-risk, high-reward approach to supporting novel technologies, especially in cases where a project proposal represents the first commercial-scale application. There may be fewer projects supported by the program—because each one is high risk and may require a larger credit subsidy—but a small number of positive outcomes could enable more dramatic transformation of our energy economy.

The administrative challenge in these cases lies in tailoring what are effectively bespoke financial contracts, which are time and personnel intensive. Such custom loan guarantees can raise the transaction costs for project developers, and may have a chilling effect on DOE’s project pipeline. For example, in the two and a half years of the 2009 recovery act’s program that paid for the credit subsidies, the department used less than $2 billion of its appropriated funds before a sunset provision cut off the flow.

The government could also use its authorities to target clean energy investment by lower-income households who may face barriers in accessing credit. For example, the federal government could create a standard loan instrument—subsidized by the loan guarantee program—that local banks could offer for residential solar investment in low-income and disadvantaged communities. This would build on some related experiences by state green banks.

Pursuing such objectives could be politically riskier than a strategy focused on projects with low financial risk that would otherwise move forward with private-sector financing. Given the potentially high political costs associated with a default on a loan guarantee, as reflected in the so-called “Solyndra scandal,” a loan program manager may opt for “safer” investments. Such a strategy could enable political leaders to highlight the “money made” through the loan guarantee program, but this would only occur by subsidizing projects that would have happened anyway.

And it would represent a major missed opportunity to drive new technologies or open up credit markets for clean energy to households who have otherwise been shut out.

The Risks—and Opportunities—of Guaranteeing Clean Energy Loans.

Designing Energy Tax Credits to Drive Greater Emission Reductions
Author
Joseph E. Aldy - Harvard Kennedy School
Harvard Kennedy School
Current Issue
Issue
5
Joseph E. Aldy

Governments may choose among three types of policies to promote carbon dioxide emission reductions. They can prescribe specific low-emission technologies through regulatory mandates. They can raise the price of fossil energy through carbon tax and cap-and-trade systems. And they can subsidize investment and operation of low- and zero-emission technologies. In the United States, the most politically viable of these types have been subsidies, especially through the tax code.

Since 1992, the federal government has subsidized the electricity output of wind farms and other renewable power plants through the production tax credit, ranging up to about 2.5 cents per kilowatt-hour. In recent years, this subsidy is equal to about half of the average price the wind farm receives from selling its power. The federal government has also used investment tax credits, such as subsidies equal to 30 percent of the costs of installing solar panels and $7,500 for a new electric vehicle.

Subsidies for clean energy technologies have historically faced challenges in delivering the biggest bang for the climate buck. In order to claim tax credits, a business typically needed to have tax liabilities at least as great as the value of the tax credits.

To unlock access to these tax credits, financial companies began providing “tax equity”—financing for a renewable project in which the equity supplier gains returns by claiming the project’s tax credits. A large bank, such as JP Morgan or Bank of America, would then become a financial partner for the project and effectively monetize the tax credits to enable the project to move forward. Providing this financial service comes at a cost: as much as 15 cents of each dollar of taxpayer subsidies for renewable power went to a large bank for this financial engineering instead of the renewable developer.

In the wake of the 2008 financial crisis—and of banks, such as Lehman Brothers, exiting the tax equity market—the American Recovery and Reinvestment Act gave renewable power developers the option of claiming a grant equal to 30 percent of investment costs—effectively equal to the value of the investment tax credit without the need for tax liability to monetize the subsidy. For the first time, wind project developers could claim a subsidy for their investment, instead of their output.

This policy innovation jump-started a decade of unprecedented growth in U.S. wind and solar power investment. On the downside, subsidizing wind power investment, as opposed to wind power output, weakened incentives for wind farm maintenance and optimization necessary to maximize electricity generation. In my research with Todd Gerarden and Rich Sweeney, we find that investment subsidies caused wind farms to produce about 10 percent less electricity than they would under output subsidies.

Recent legislative proposals have attempted to circumvent the need for tax equity without such adverse incentives for output through “direct pay” of tax credits. Under these proposals, a firm with a qualifying renewable project would be deemed as having sufficient tax liability such that the government would directly pay the subsidy under the applicable tax credit. As a result, a wind farm would receive its subsidy for production without having to give up some of its value by entering into a financial arrangement with a tax equity supplier.

The other barrier to maximizing the climate bang for the taxpayer buck lies in the uncertainty about what these subsidized renewable projects displace in the electricity system. If a new wind farm’s output substitutes for electricity generated by a coal-fired power plant, then that delivers twice the emission reductions than if it displaced power from a gas-fired power plant. And if the wind farm displaces power from a nuclear power plant, then it would deliver no incremental emission benefits. Exploiting high frequency, high-resolution spatial data and power system modeling tools could enable the design of modified subsidies that target and value power generation that delivers the greatest emission reductions.

In the absence of more ambitious carbon pricing legislation and in the wake of the Supreme Court’s West Virginia v. EPA decision, constraining Clean Air Act regulations, subsidies may be the most viable near-term policy tool for decarbonization. Modifying such subsidies to be more cost-effective will contribute to deeper decarbonization for a given amount of federal spending, which is critical given the political constraints—especially in a period of relatively high inflation—on public spending.

Designing Energy Tax Credits to Drive Greater Emission Reductions

No Longer a Major Question About the Court’s New Direction
Author
Bethany A. Davis Noll - NYU Law
NYU Law
Current Issue
Issue
5
Bethany A. Davis Noll

This past term, the Supreme Court had a chance to remake environmental law—and it took that opportunity. In West Virginia v. EPA, the Court decided whether a rule that the agency had promulgated during the Obama administration—aimed at reducing greenhouse gas emissions from power plants—was legal.

There were many twists and turns that got us to this point. The Clean Power Plan had used “generation shifting”—a common practice companies use to meet emissions standards—shifting generation from coal to gas, or gas to renewables. The Trump administration repealed and replaced the Obama-era regulation with the Affordable Clean Energy rule, in so doing asserting that generation shifting was unambiguously illegal.

But a day before Biden’s inauguration, the D.C. Circuit struck that Trump-era rule down, holding that this assertion was wrong. Rather than do anything to repeal the ACE Rule, EPA asked the D.C. Circuit to stay the mandate instead—a tactic that made sure that the Clean Power Plan did not spring back into life. Now under Democratic control, the agency did not appeal the loss, but intervenor states, led by West Virginia, did.

EPA’s decision not to propose and finalize a new rulemaking left the Supreme Court with an opportunity to grant that cert petition. On June 30, the last day of the term, the Supreme Court held that EPA did not have the authority to set the Clean Power Plan’s standards based on generation shifting.

It could have been much worse. The Court could have used the opportunity to tell EPA exactly how to interpret the statute to regulate greenhouse gas emissions—undermining the executive’s authority to make decisions and interpret statutes. It could have told EPA that regulating greenhouse gas emissions at all requires specific authorization from Congress—undermining a number of other greenhouse gas emissions rules. It could have said that Congress had not delegated that authority to EPA at all—threatening all of the regulatory state. The Court avoided this parade of horribles.

What it did instead was to explicitly adopt the major questions doctrine to hold that EPA lacked authority to use generation shifting. In other words, the Court determined the rule’s limits. It first adopted West Virginia’s characterization of the Clean Power Plan: as a rule that intended to remake the power sector by shifting states away from coal. It then held that any rule that sought to do something that ambitious was subject to the doctrine, which requires the agency to point to a clear statement granting it the authority to answer that question.

That doctrine has been percolating for some time, but this decision marks a new era. There is no real standard governing what constitutes a major question. It isn’t just that any new rule has to cost a lot. It could be that the policy is ambitious, the statute little-used, or the regulatory strategy new-ish or novel.

The doctrine is bound to come up in pretty much every regulatory and environmental case to come. An attorney general coalition, led by Texas AG Ken Paxton, has already argued in comments that a new policy banning asbestos is subject to the major questions doctrine. In writing for the majority, Justice Roberts describes the West Virginia petition as an extraordinary case. But it is hard to see that this doctrine will be at all limited.

There are two cases on the docket for the 2022-23 term that could bring about even more seismic changes. In Sackett v. EPA, petitioners are challenging a decision that wetlands on their property are subject to regulation under the Clean Water Act. The Sacketts hope to use the opportunity to convince the Court to restrict EPA’s jurisdiction severely under the Clean Water Act. They have argued that EPA’s jurisdiction extends only “to traditional navigable waters and intrastate navigable waters that link with other modes of transport to form interstate channels of commerce.”

In National Pork Producers Council v. Ross, petitioners are challenging a California proposition that requires pork products sold in the state to have been raised under certain conditions judged to be humane and healthier by the state. The producers have argued that California is improperly reaching beyond its borders to regulate pork production in other states, because only a small proportion of the country’s pork production is in California. But many states regulate the quality of products that can be consumed in state, from energy to food and beyond.

States’ rights doctrines and environmental law are here in conflict, and both changing in response, right before our eyes.

No Longer a Major Question About the Court’s New Direction.