Agencies Promote Tools to Shore Up Climate, Clean Energy Agenda
Author
David P. Clarke - Writer & Editor
Writer & Editor
Current Issue
Issue
5
David P. Clarke

Before the surprise news that Senator Joe Manchin (D-WV) had agreed to a $369 billion climate and tax package, federal agencies confronting significant legislative and legal setbacks were supercharging administrative tools to advance President Biden’s climate and clean energy agenda. As a for instance, responding to the Supreme Court’s ruling in West Virginia v. EPA, the agency’s administrator, Michael Regan, said it can still regulate climate pollution, and would “use all of the tools in our toolbox to do so.”

And a few weeks later, after legislative negotiations with Manchin seemed hopelessly derailed, Biden stated that if Congress won’t act he will take “strong executive actions” to “create jobs, improve our energy security, bolster domestic manufacturing and supply chains, protect us from oil and gas price hikes in the future, and address climate change.” Advancing these diverse goals will require Biden to go into “executive Beast Mode,” Senator Sheldon Whitehouse (D-RI) suggested.

Now that the Manchin deal could mean Biden’s climate agenda will be resuscitated, helping to take the world off what the UN has warned is a “fast track” to disaster, the panoply of tools that agencies are deploying remains highly significant. Among them, the Federal Energy Regulatory Commission’s “clean energy future” initiatives are critical, even if uncertainties lurk in the Supreme Court’s West Virginia ruling.

On June 16, FERC flagged threats to the electricity transmission system from extreme weather. It proposed that transmission providers submit reports on how they assess their vulnerability to cold snaps (remember Texas’s grid failure during the February 2021 winter storm?), heat waves, drought, and major storms. Providers should also identify their mitigation strategies. In a companion proposal, FERC recommended revising a current electric system reliability standard to strengthen long-term planning for extreme weather events. Acknowledging the climate writing on the wall, FERC Chairman Rich Glick commented that the proposals were “necessary to ensure that we are prepared for the challenges ahead.”

In a more far-reaching undertaking, FERC is taking steps aimed at fixing two of the biggest hurdles to building much-needed transmission lines that will be critical for, among other things, bringing online new wind, solar, and other clean energy technologies as they replace carbon-emitting fossil-fuel power plants. Those hurdles are, first, planning for new transmission and, second, paying for it.

Responding to broad support for addressing those and related issues—including support from nine former FERC chairs—the commission in a 4-1 bipartisan vote this April approved what Glick described as the “first effort at major transmission reform in a decade.” They propose replacing a piecemeal, lack-of-planning approach with a long-term, forward-looking transmission planning system that would require electric utilities to identify the transmission needed to accommodate changing resources, such as energy storage and renewable energy, and to consider extreme weather risks. FERC’s proposed new rules for deciding who pays for transmission facilities would draw on a broader definition of benefits that could spread the costs more widely by anticipating, for example, dispersed future generation.

According to Glick, the proposed reforms mark “a critical first step” as the United States “continues to aggressively transition to a clean energy future.” No doubt, FERC’s proposals could provide tools essential to Biden’s beleaguered agenda.

Look for the administration to take diverse measures to keep momentum going despite challenges, such as the Energy Department’s July 13 announcement of $2.6 billion in funding to “slash carbon emissions” through carbon capture and transport programs and DOE’s July 14 announcement of $56 million in funding for solar manufacturing and recycling innovations.

But look, also, for possible further roadblocks that could be thrown up under the West Virginia ruling’s use of the “major questions doctrine” that stipulates Congress must provide “clear” authorization for any broad regulatory action that could be “transformative” to the national economy.

Harvey Reiter, a partner with Stinson LLP, suggests it is premature to say whether anyone will, for example, challenge FERC’s transmission proposal, because the rule is not yet final. But, he adds, in its West Virginia ruling the Court struck down an Obama-era rule EPA had “no plans to implement.” In addition, the Court’s ruling is “virtually standard-less,” so a party could raise the major questions doctrine on appeal to any final FERC transmission rule, Reiter says. Indeed, what constitutes a “major question” is so broad that it “invites parties to make such challenges,” he says—though adding that whether such a challenge would succeed “is an entirely different question.”

Agencies Promise Tools to Shore Up Climate, Clean Energy Agenda.

Political Propulsion: Policy and the Rise of the Electric Vehicle
Author
G. Tracy Mehan III - American Water Works Association and Scalia Law School
American Water Works Association and Scalia Law School
Current Issue
Issue
5
book cover with a plug-in electric car on the front

Last May, Ford rolled out its first full-size electric pickup, the F-150 Lightning, retaining the name of its famous muscle truck that is the most popular vehicle in America year after year. According to Dan Neil, an admitted fanboy of electric vehicles and auto reviewer for the Wall Street Journal, “The Lightning represents an American manufacturing triumph, a brand resurrection, a win for working people, a vehicle segment out of the darkness into the light.” Raves Neil, “I can’t believe they got all those smart people to move to Michigan.”

The coming of the hard-working electric F-150 is a departure from the high-tech Tesla, the strongest brand in what the Germans call “electro-mobility,” catering to young, hip, and rich buyers. Whether or not this new plug-in all-American truck is the harbinger of mass commercialization is the subject of John D. Graham’s massive, comprehensive, thorough, enjoyable, and in-depth study The Global Rise of the Modern Plug-In Electric Vehicle: Public Policy, Innovation and Strategy.

Longtime readers of The Environmental Forum will recall Graham’s service as director of the Office of Information and Regulatory Affairs, within the Office of Management and Budget, during the George W. Bush administration, where he functioned as “regulatory czar” overseeing all rules promulgated by federal agencies. His portfolio, both in academia and government, encompasses public policy and health, relative risk, and benefit-cost analysis. Oliver Houck and this reviewer noted his book, Risk v. Risk, co-edited with Jonathan Wiener, in our survey of best books for ELI’s 50th anniversary issue (“Reading the Environment—1969-2019,” November/December 2019). He also led the Paul H. O’Neill School of Public Affairs at Indiana University, where he still resides as professor of risk and policy analysis.

It is hard to conceive of a more exhaustive, informed study of the history of electro-mobility than the The Global Rise of the Modern Plug-In Electric Vehicle. Its thirteen chapters contain one hundred to two hundred footnotes each, citing a vast literature on its subject. It is global in reach and granular in its technical, environmental, economic, and political analysis. The book explains how politics, i.e., “industrial policy,” is at the heart of the rise of electrified vehicles.

This is not a story of spontaneous free markets responding to consumer demand, although many enterprising people and companies are highlighted throughout. Nor is this a case of the supply creating the demand or an inventor, like Steve Jobs, creating something people want without prior knowledge—“People don’t know what they want until you show it to them.” Electrifying vehicles is a government-run show from end to end, be it in California, Japan, China, Europe, South Korea, or the United States as a whole. That said, absent outright bans on the internal combustion engine, unlikely at the federal level in the United States but not in California or Europe, “politicians will allow consumers to decide the rate of PEV (plug-in electric vehicle) penetration in the marketplace from 2021-2025.”

The marketing challenge of electric vehicles is illustrated by a study cited by Graham comparing the costs to drive a Hyundai Kona BEV, or battery-electric vehicle, and a Kona turbocharged gasoline vehicle over a 515-mile route in California. The gas vehicle “charged” twice, filling up at the pump while taking five minutes each time. The BEV recharged at Level 3 stations twice, but took 2.3 hours each time. “The cost comparison found that the energy costs of the BEV are more than twice the costs of the gasoline.”

Rachel Wolfe wrote of her trip in a Kia EV6 from New Orleans to Chicago and back for the Wall Street Journal. The title: “I Rented an Electric Car for a Four-Day Road Trip. I Spent More Time Charging It Than I Did Sleeping.” $7.5 billion has been allocated in the newly enacted Infrastructure Investment and Jobs Act for the deployment of 500,000 hopefully faster charging stations.

Graham describes how concerns with energy security, urban air pollution, and climate change have all motivated national governments to promote electro-mobility, although the relative weight of these motives has changed over time. Fracking, directional drilling, and the demise of “peak oil” theories and the success, say, of the Clean Air Act in the United States have shifted the focus to climate—as has happened decisively in California.

A word about terminology and acronyms and other abbreviations the reader will encounter in Graham’s magnum opus. Much of the technical discussion in the book revolves around batteries, specifically, lithium-ion batteries, (LIBs). They are the single largest cost item in a plug-in electric vehicle (PEV), and have been instrumental in the rise of electro-mobility. The verdict is still out as to future LIB improvements, which might enable mass commercialization. Breakthroughs are needed.

The hybrid electric vehicle (HEV), think Toyota Prius, combines electric power and the internal combustion engine, allowing the batteries to be constantly recharged during “regenerative braking” or by the gasoline or diesel engine. “The plug-in hybrid vehicle (PHEV) is different because the battery charges from a standard electrical wall socket,” reports Graham. Since the PHEV does not unduly limit driving range, it reduces customer “range anxiety” over finding charging stations or the length of time that it takes to charge, which is a concern with battery-electric vehicles (BEVs) as well as PHEVs.

There are also fuel cell electric vehicles (FCEVs or FCVs) utilizing hydrogen instead of a battery to store electricity. Drive trains are the same in both fuel cell vehicles and BEVs.

Plug-in electric vehicles (PEVs) is an umbrella term covering both BEVs and PHEVs, since both have plug-in capability for charging, unlike HEVs. The phrase “electrified vehicles” includes HEVs, PEVs, and FCVs.

According to Graham, “We may be standing on the precipice of a revolution in propulsion not seen since the horse and buggy.” Still, “the pace of the transition to PEVs will be determined as much by politics as by markets.”

Thus, he discusses subsidies, tax credits, protectionism, manipulation of markets, feebates, limits on cars in city centers, and other creative interventions by governments around the world. Clearly, Norway and California are in the vanguard of these efforts, with the former way ahead of the latter.

Germany was committed to diesel engines until the Volkswagen cheating scandal, described at length by Graham in a very interesting chapter. VW viewed the California zero-emission vehicle (ZEV) standards as more protectionist than protective. German Chancellor Angela Merkel even met with Governor Arnold Schwarzenegger and California Air Resource Board Chair Mary Nichols over breakfast at the Four Seasons Hotel in Beverly Hills to argue the benefits of diesel in reducing carbon dioxide levels, but to no avail. This trauma transformed Germany, and, hence, the European Union, from laggards to enthusiastic supporters of electrification. As another bit of good news, Japan has made hybrid vehicles work and is hoping, eventually, to move to a “hydrogen society.”

Each jurisdiction discussed in this volume has a unique story or history behind its governmental approach to electric vehicles, batteries, supply chains, subsidies, and regulation. To take another country and only one aspect of the topic, China, deciding it could not compete with traditional auto companies worldwide on the internal combustion engine, has sought to “leapfrog” to electric vehicles, as well as controlling the essential minerals and supply chains.

“China has been successful in manipulating the global price to discourage private investments in competitive mining and processing activities,” writes Graham. “Since the central government of China is willing to use rare earths as a geopolitical weapon, it will take coordinated governmental policies of multiple countries to neutralize China’s power.”

At the end of his tome, Graham revisits his earlier claim that we are on the “precipice of a revolution in propulsion not seen since the horse and buggy,” declaring that “we are, but the transition will move faster in some parts of the world than others.” He notes a study by the Boston Consulting Group, pre-Covid, estimating that “the 29 largest automakers in the world will invest more than $300 billion over the next ten years on new offerings of electrified vehicles. More than 400 new models (MHEVs, HEVs, PHEVs, and BEVs) should appear in 2025.” 78 will come to the U.S. market alone; six will be pickup trucks. A MHEV is a “mild” hybrid electric with a small, higher-voltage LIB, usually 48 volts supplementing the 12-volt lead-acid battery.

Despite this impressive investment, the future is uncertain, given the great unknown: consumer reaction. So Graham sets out four different scenarios which may, or may not, play out between now and 2030: BEVs are restricted to niche markets; a decade of robust competition between MHEVs, HEVs, and PEVs; PHEVs share the limelight with BEVs; and, finally, BEVs share the limelight with FCVs. He then goes on to discuss the variables of consumer appeal, CO2 regulation, and other policy that might tip the balance, one way or the other, among the various technologies.

While “some politicians may be inclined to make the decision for consumers by banning, restricting, or taxing heavily (as does Norway) the use of conventional powertrains,” again, it is unlikely to happen in the United States as a whole, California excepted. China and Europe are a different case entirely.

For electric vehicles, the consumer is still king in America, at least for the foreseeable future.

G. Tracy Mehan III is executive director for government affairs at the American Water Works Association and an adjunct professor at Scalia Law School, George Mason University. He may be contacted at gtracymehan@gmail.com.

On the Plug-in Electric Car Movement.

Addressing Global Energy Crisis While Fighting Climate Change
Author
Bob Sussman - Sussman and Associates
Sussman and Associates
Current Issue
Issue
4
Bob Sussman

The war in Ukraine and an alarming spike in oil and gas prices are posing a seemingly insoluble conflict between climate goals and the geopolitics of global energy markets. Up to now, reducing dependence on oil and gas has been the lynchpin of decarbonization strategies in developed countries, and industry giants have been under pressure to curtail oil and gas investment and shift capital to low-carbon businesses. But the world is now confronting acute oil and gas shortages, with European economies cutting ties with Russian suppliers, energy demand surging as countries rebound from the pandemic, and inflation driving up prices at the pump.

On the defensive politically, the Biden administration has become a reluctant proponent of boosting oil and gas supplies. It has urged the industry to increase its rig count on leased federal lands and retreated from its opposition to new oil and gas leasing. It has also signaled openness to approving new pipelines that have been stalled because of environmental concerns. Most importantly, to help our allies replace Russian natural gas, the president has pledged to increase LNG exports to the European Union. This will necessarily mean increases in U.S. gas production, building of new export terminals, and additional pipeline capacity.

Despite bipartisan support for helping our beleaguered European allies, undercurrents of concern have rippled through the advocacy community and its allies on Capitol Hill. They fear that greater natural gas production will result in higher methane releases, jeopardizing achievement of U.S. emission reduction goals, and will prolong dependence on fossil fuels, slowing adoption of carbon-free energy sources.

It would be unwise to dismiss these concerns and downplay the threat of climate change. The science of global warming remains compelling and the disruptive impacts of rising temperatures are becoming ever more severe. The Russian invasion of Ukraine is an economic and humanitarian disaster, but unmitigated climate change would be a disaster as well. Steep reductions in burning of fossil fuels offer the only protection against the worst impacts of climate change, and cannot be postponed indefinitely.

However, oil and gas remain deeply embedded in the global economy and it is simply not possible to ease energy supply shortages and soaring prices by immediately transitioning to renewable power. With U.S. allies putting their economies at risk to demonstrate solidarity with Ukraine and punish Russian aggression, finding alternate sources of fossil fuels is a moral imperative. The United States has abundant shale resources and world-class production technology and should do its part. Replacing Russian gas with supplies from the United States, Qatar, or the North Sea would not increase total production but simply shift output from one region to others. As a result, global emissions should not increase. If high-emitting operations in Russia are replaced by better-controlled facilities in the United States, emissions could in fact decline.

The European Union, where climate policy is less contentious than in the United States, has announced an energy plan that emphasizes more support for energy efficiency, wind and solar coupled with increased purchases of LNG from non-Russian suppliers. The plan includes financing for new import terminals and pipelines to replace obsolete Russian-linked infrastructure. However, it envisions that overall gas consumption would decline over time as growth in renewables reduces demand.

In the more polarized United States, energy politics is often a zero-sum game, with competing factions advocating either strong climate policies or increased support for fossil fuels but never both. Thus, Republicans have blamed Biden climate policies for oil and gas shortages and high prices, while Democrats have sought to curtail production of these fuels to accelerate adoption of renewables and electric vehicles. These competing agendas have largely canceled each other out, creating gridlock in U.S. climate and energy policy. Even modest measures to reduce emissions remain on the drawing board and ambitious climate goals are now effectively out of reach.

The current crisis, however, may provide an opportunity to combine elements of both agendas. The highest priority for reducing carbon emissions is enacting the clean energy tax incentives in the president’s stalled Build Back Better package. To secure support for this legislation from Senator Joe Manchin (D-WV) and some Republicans, Democrats could agree to incentives for new oil and gas infrastructure to replace Russian sources of supply in world markets and lower energy prices at home by better balancing supply and demand. This tradeoff would not be a complete win for die-hard climate or fossil fuel advocates but would be far better than the status quo.

Addressing Global Energy Crisis While Fighting Climate Change

Utility Initiatives Aim to Accelerate Electric Vehicle Adoption and Use
Author
Linda K. Breggin - Environmental Law Institute
Environmental Law Institute
Current Issue
Issue
4
Linda Breggin

Utilities around the country are fostering adoption of electric vehicles, including investments in charging infrastructure, incentives and rebates, and customer education. These moves complement federal, state, and local plans and programs aimed at realizing an epic transition to electrification of the transportation sector, which accounts for over a quarter of U.S. carbon emissions.

Front and center are utility investments in much-needed EV charging infrastructure. McKinsey & Company projects that to achieve the federal sales target for zero-emission vehicles —50 percent by 2030—about 30 million new chargers will be needed to provide the requisite electricity. The estimated cost is a staggering $35 billion for hardware, planning, and installation for the public charging infrastructure alone, which is essential to alleviate consumer “range anxiety” and for EV owners without home charging options.

PWC’s Hugh Le opines that “utility players are in a unique position to fill the gap between the deployment of EV charging stations and mass EV adoption.” Environmental groups also welcome utility infrastructure investments, particularly in low-income communities and communities of color that may not realize the full benefits of transportation electrification due to inadequate charging infrastructure. Furthermore, as the Natural Resources Defense Council observes, utility investments in charging infrastructure can provide “a broader, more diverse, mass EV market” and displace diesel pollution from trucks and buses that disproportionately impacts low-income communities.

Utility investments are not without critics, however, including those concerned about the competitive impacts vis-a-vis private companies—particularly if utilities are allowed to recover their investments from ratepayers. Others worry about burdening electricity consumers; as a study by M.J. Bradley & Associates and Georgetown Climate Center notes: “The potential [exists] for stranded assets, given the early stage of the market and the fast-paced evolution of charging technology.”

The result is a still-evolving regulatory tableau. Investor-owned utilities, which serve 75 percent of customers nationwide, require regulatory approval for their initiatives—and rulings have been mixed on the permissibility of rate-basing infrastructure investments. Some states, such as Washington, have enacted laws that remove barriers and specifically sanction cost recovery by utilities.

In addition to infrastructure investments, research conducted by the National Council of State Legislators identifies a multitude of customer incentives and rebates provided by investor-owned utilities, rural electric cooperatives, and municipal generators. These include, for example, providing free chargers, financing charging installation, offering cash incentives for electric equipment, providing rebates on EV purchases, and time-of-use rate reductions or billing credits for residential, commercial, and multi-unit customers.

To accelerate the uptake of EVs, many utilities are providing information to customers about the benefits of EVs and the availability of charging stations. Complementary efforts focus on educating customers about the most economical EV charging times, which has the attendant benefit of helping utilities manage their load by deterring EV charging at peak periods of electricity demand.

In addition to these direct interventions, utilities are supporting transportation electrification through system upgrades, such as grid infrastructure improvements that will address the increased EV charging load.

The enthusiasm among utilities for EV-fostering initiatives is explained in part by what ICF’s Stacy Noblet calls a “golden opportunity” to boost revenue growth. To emphasize the point, she notes that a Chevy Bolt uses about 3,500 kilowatt-hours of energy per year, as compared to an entire household of three that uses only about 6,000 kilowatt-hours annually.

Other benefits may not be as immediately tangible but include, according to Noblet, favorable public relations opportunities, early compliance with potential climate mandates, and serving as “a valuable partner to local governments that need to hit decarbonization goals.”

Fortunately, benefits also can inure to customers who reap the health and environmental improvements of climate change mitigation and improved air quality. But, as the Bradley/Georgetown study points out, there are more immediate pecuniary benefits: “Higher utility revenues due to increased electricity sales and improved overall system utilization. . . puts downward pressure on electricity rates for all utility customers.”

Utility Initiatives Aim to Accelerate Electric Vehicle Adoption and Use

A New Version of Russian Roulette
Author
Stephen R. Dujack - Environmental Law Institute
Akielly Hu - Environmental Law Institute
Environmental Law Institute
Environmental Law Institute
Current Issue
Issue
3

When Russian troops swarmed over the border last February, Ukraine became the first country possessing nuclear power plants to be invaded. The attackers seized several of the generating facilities and temporarily entrenched around the mothballed reactor at Chernobyl. At this writing, Moscow’s intentions with regard to the operating power plants was unclear.

But the moves raised a red flag with regard to the claims of a large section of the environmental community that nuclear power is a difficult but necessary technology in the transition to carbon-free energy. We have no choice but to accept it, goes this line of reasoning, if we are to avoid dangerous climate change. However, as we are seeing in Ukraine, these facilities are uniquely vulnerable in war time; thus we need to add a national security component to the environmental calculation.

My views on nuclear power, and eventually plants’ attraction as military targets, were shaped by several dramatic encounters early in my career. The first was a speech I attended at Princeton in 1975. Ralph Nader would give a fiery address condemning this source of electricity, citing the environmental and weapons proliferation risks. But just before the start of the lecture, Henry D. Smyth sat down behind me. The author of Atomic Energy for Military Purposes, Smyth had worked back stage on the Manhattan Project, whose history first received an audience in what became known as the Smyth Report, and he also had a starring role in the subsequent global spread of atomic power for electricity generation.

I recognized Nader’s prominent antagonist­ on the nuclear stage—and was treated to a Greek dialogue. Aeschylus is credited with the introduction of the second actor in a play, “making the dramatization of a conflict possible,” according to Wikipedia. And conflict there was. Smyth launched a stream of soto voce rebuttals of the speaker on all points of fact. I thus was schooled on the two sides of the debate by top experts who were poles apart.

I concluded that Smyth hadn’t been able to upstage Nader. Fission was a technology that we had yet to master, including overlapping issues of dangerous long-term waste; weapons proliferation; and environmental safety.

Just four years after this scene, a reactor nearly caused a serious radioactive release 110 miles upwind of my apartment in Princeton. The containment at Three Mile Island (barely) worked, but the partial meltdown so nearby—reaching a lengthy climax with a potentially explosive hydrogen bubble—made real the dangers of this power source.

Finally, reactors’ extreme vulnerability in time of war entered my thinking precisely two years later, when I was editor of the U.S. diplomats’ professional magazine, the Foreign Service Journal. Sigvard Eklund stopped at the State Department prior to visiting the disabled reactor on the anniversary of the accident. I was invited to meet him.

Eklund was director general of the International Atomic Energy Agency, and for 20 years had been promoting “Atoms for Peace,” the slogan President Eisenhower had used in establishing IAEA within the UN system. Eklund was known as the father of nuclear safeguards, an accounting and security system that is supposed to prevent signatories of the Nonproliferation Treaty from diverting fuel or waste to bomb use—a condition to receiving IAEA assistance in building power plants.

We talked on the record for over an hour. Eklund was like a bulldog: He denied that weapons programs had been enabled by countries first gaining reactor technology. Indeed, the safeguards system had never failed humanity. “There is no direct connection between nuclear power and nuclear weapons,” he insisted. As a physicist, he felt that on the issue of safety, there would never be another TMI. “We have not had a single case of a fatal accident,” he reminded. Further, the engineering for long-term storage of fission byproducts had also been solved. On these three key issues, he said in emphasizing a steady saga of progress, the public needs “a much more positive attitude.”

We then discussed an article in the just-published April 1981 issue of Scientific American, titled “Catastrophic Releases of Radioactivity.” The authors’ worst-case scenario was an atomic warhead detonated on a reactor. “The nuclear attack turns the reactor into a devastating radiological weapon,” they wrote. “Because the radioactivity from the reactor is relatively long-lived . . .
the time a given area would remain contaminated is significantly greater.” One such shot could make uninhabitable thousands of square miles—an entire region—for generations to come.

Eklund agreed with the authors and quickly added that despite the ban on atmospheric tests, humanity would benefit from an occasional atom bomb test blast so people could witness the gravity. “I regret very much that the experience of these explosions has been forgotten by the public,” he lamented.

Before I was able to write up the interview, Israeli F-16s took out Iraq’s newly built Osirak reactor—lest it be used to produce weapons material, Israel said. It was a huge sign of disrespect for the safeguards system. There was no release of radioactivity—the bombs were TNT and the reactor had yet to be fueled.
But it was a vivid demonstration of vulnerability. As a shaken Eklund told reporters, “I do not think we have been faced with a more serious question than the implications of the Israeli raid.”

For me, the war in Ukraine brings up to date a drama older than these long-ago events, one as ancient as Prometheus, the god of fire but also of trickery. If nuclear power is needed to achieve net-zero goals, society is going to have to accept the national security “implications.” — Stephen R. Dujack

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

Countering Russia-Ukraine War's Effect on Critical Minerals

The White House is weighing using wartime executive powers to boost U.S. battery production to help secure supplies for the growing market for electric vehicles and power storage on the electric grid....

President Joe Biden would use the Defense Production Act to help secure U.S. sources of critical minerals that are deemed key components of clean energy technology. While the U.S. possesses many of those minerals, industry and some lawmakers of both parties contend regulations have deterred development and forced the U.S. to rely on supplies from nations like China, Russia, South Africa and Australia....

The move to use an emergency national defense law dating to the Cold War comes as the prices of battery minerals like nickel, lithium, and cobalt have surged during Russia’s war in Ukraine....Prices were already rising before Russia’s invasion because of forecasts that global supply won’t keep up with surging demand expected from electrifying economies.

—Politico

The coldest location on the planet has experienced an episode of warm weather this week unlike any ever observed, with temperatures over the eastern Antarctic ice sheet soaring 50 to 90 degrees above normal.

—Washington Post, March 18

Some Deductions on Induction

I encountered an induction cooktop for the first time recently, and my life has never been the same. Boiling water, which usually bores me to tears, took half as much time as it did on a gas stove. Garlic sizzled in seconds; broccoli softened in a minute or two. With a press of the on button, I sped up time itself, whizzing through a recipe that would take me an hour on a traditional electric stove, 45 minutes on a gas cooktop.

I felt as if I had been catapulted into the future of cooking, one free of accidental burns and those stressful mornings when the stove just won’t light. And I’m not the only convert. An article in March in the New York Times, “The Case for Induction Cooking,” sung the technology’s praises. The magic is in the electromagnets, which heat your pots and pans directly rather than heating the stovetop first. This prevents your kitchen from becoming a sauna in the summer—and it can also be better for your health.

Unlike gas stoves, induction doesn’t require the active combustion of natural gas, meaning it emits fewer air pollutants. A 2020 study led by the Rocky Mountain Institute on indoor air pollution from gas stoves claims, “Burning gas in buildings is not only a threat to climate action but also to human health.” The experts raised concerns over elevated levels of nitrogen dioxide in particular, a toxic gas linked to respiratory and cardiovascular problems, especially in children and other vulnerable populations.

It turns out that induction stoves are also a boon to the environment. Compared to gas stoves, induction cooktops don’t inherently involve the release of methane, a potent greenhouse gas. Methane, as noted in this issue’s Debate, is over 80 times more effective at trapping heat than carbon dioxide in the short term. That means eliminating methane could make a crucial dent in the race against climate change.

A recent Stanford University study found that even when turned off, gas stoves can still emit methane. In fact, researchers found that 80 percent of the methane coming from stoves happens when the stoves are not in use—“from loose couplings and fittings between the stove and gas pipes,” as reported by NPR. Their findings were consistent regardless of the age or brand of the stove.

Induction’s instant-heating technology taught me that I could, in fact, fry a perfectly crispy egg. How did it take me so long to live up to my culinary potential?

For one, I had to travel abroad to even find such a stove. The Times reports that under 5 percent of homes in the United States use induction. They’re currently more expensive than other stove options, though “industry experts agree that, as demand increases, prices will fall.” There’s also a culture of cooking with gas in this country that NPR says is influenced by “a decades-old ‘cooking with gas’ campaign from utilities.”

Despite some roadblocks, induction’s future is just starting to heat up. New York City, Seattle, and other cities have recently enacted bans on gas-powered heating and cooking in new buildings. The policies arise in a wave of campaigns to electrify buildings on the path to net-zero carbon emissions, potentially expanding the market for induction. In the meantime, you can find me sautéing in the fully electric kitchen of my dreams.

—Akielly Hu

Unspoken Security Dimensions to Nuclear Power

Climate ‘Madness’: Public Finance Abetting Gas and Oil in Suriname
Author
Bruce Rich - Attorney and Author
Attorney and Author
Current Issue
Issue
6
Bruce Rich

On March 21, UN Secretary General Antonio Guterres offered a bleak assessment in the aftermath of the 26th Conference of the Parties to the U.N. Climate Convention. Glasgow offered a ray of hope that governments and the private sector might take stronger actions to promote a climate-friendly world economy. Guterres said that these hopes were “naïve optimism,” that virtually no concrete follow-up has occurred, and that the world is “sleepwalking to climate catastrophe.” Worse, the Russian war in Ukraine is pushing governments to seek other sources of oil and gas, with the effect that they “kneecap policies to reduce fossil fuel use.” “This is madness,” he lamented.

An example of sleepwalking to climate catastrophe is the massive international public finance abetting exploitation of the world’s largest newly discovered offshore oil and gas deposits, along the coast of Guyana and Suriname. At the very least one would expect development institutions supported by richer nations to encourage reduced fossil fuel production. This column examined in early 2021 investments of ExxonMobil and the Chinese oil company CNOOC off the coast of Guyana, facilitated in part through loans by the World Bank and Inter-American Development Bank. Rather than reconsidering this approach, these institutions have doubled down, as if the Glasgow agreements took place on a different planet.

Next door to Guyana, oil exploration off the shore of Suriname has found so far an estimated 3 to 4 billion barrels of reserves. Last year the New York Times reported that Exxon, Shell, Total, and Apache (now APA corporation) were “gearing up operations” in Suriname. Chevron and Petronas, the Malaysian oil giant, are also involved. Fifteen or more new wells are planned for development over the coming months.

Since 2019 the IDB, International Monetary Fund, and World Bank approved $805.5 million in government budget support and specific fossil fuel-related investments in Suriname, whose population is only 596,000. These loans included $34.5 million from the IDB for technical assistance in the natural gas sector and port expansion for offshore oil services, a $23 million World Bank loan for extractive industries technical assistance, and another IDB loan of $50 million for budget support last March.

The IDB and World Bank are preparing another $280 to $550 million to be approved in the near future, to support the debt-ridden nation’s government. Suriname defaulted on its sovereign bond payments last year. The IMF approved a 36-month $688 million budget support loan last December, to be disbursed over exactly the period of the most intensive oil and gas development. Such “non-project” loans have no provisions for excluding their use for oil and gas development.

This multilateral funding is oriented to sustain the Suriname government until fossil fuel revenues start flowing in 2025. A study by the German NGO Urgewald notes that the IMF and IDB lending programs impose austerity measures to raise income, such as increasing electric tariffs (“which has led to social unrest in the past”), a new value-added tax, and reducing public employment costs—measures which all disproportionately affect the poor.

The IMF claims its bailout has nothing to do with oil and gas development, and that its program will “soften negative impacts from program adjustments on the most vulnerable,” inter alia, through a 0.5 percent increase in government payments to the poor. But the IMF and IDB loans do not address what is fiscally much more important—the bad financial deal of the fossil fuel contracts offered by the government. The royalty rate is 6.25 percent, while the average rate in developing nations, according to the New York Times, is around 16 percent. The foreign contractors are exempt from Suriname import and export taxes. As in the Guyana contracts, most of the income—80 percent—goes to the fossil fuel companies until exploration and development costs are paid back. The remaining 20 percent is divided between the companies and the Suriname government by a “recovery ratio” which gives little to the Suriname government at the outset. In desperate financial straits, Suriname offered the world’s major fossil fuel companies one of the cheapest new extraction deals on the planet.

The over $1.3 billion which the international financial institutions are lending Suriname amount to more than $2,300 in additional official debt for every inhabitant of the country. These loans are de facto subsidies to accelerate climate change, and multinational gas and oil profits, with few long-term sustainable benefits for the country’s inhabitants. This indeed is madness.

Climate ‘Madness’: Public Finance Abetting Gas and Oil in Suriname

Legal Issues Dominate Intersection of Climate and Energy Transition
Author
Ethan Shenkman - Arnold & Porter
Arnold & Porter
Current Issue
Issue
3
Ethan Shenkman

“I’m all for providing further clarity, not only for industry but all stakeholders in our proceedings,” said Richard Glick, chairman of the Federal Energy Regulatory Commission, soon after FERC announced that it was backtracking on its new climate policy under the National Environmental Policy Act. The new measure addresses large natural gas projects and provides a framework for assessing how pipelines and other facilities contribute to climate change. Following a grilling of the commissioners by members of the Senate Committee on Energy and Natural Resources, FERC decided to take a step back and solicit further public input before issuing a revised policy.

This was only the latest bump in the road as the Biden administration attempts to move forward with new climate and energy policies and regulations. Environmental practitioners advising their clients in this space are confronting a volatile policy landscape, where Congress, litigants, and the courts are pushing federal agencies in different, sometimes contradictory, directions. Not only do practitioners require special expertise in the emerging legal issues underlying the energy transition, they are finding that they need to follow developments on a continuous basis and must be prepared to advise clients on how to proceed in an uncertain regulatory environment.

FERC’s recent interim policy statement, for example, which had been approved by its three Democratic nominees and voted against by its two Republican nominees, detailed how the commission would consider the greenhouse gas emissions of facilities that transport natural gas in interstate commerce, or import or export natural gas internationally. Among other things, it stated that an Environmental Impact Statement will be required any time a proposed project exceeds emissions of 100,000 metric tons of carbon dioxide equivalent annually, considering both the construction and operation of the project and, in appropriate circumstances, the downstream combustion of transported gas. Using project data from the last four years, approximately 72 percent of projects would have required an EIS had the policy been in effect during that time frame.

Senate Minority Leader Mitch McConnell, echoing criticisms of others, including Senate Energy Chair Joe Manchin, asserted that FERC’s climate policy would complicate approvals with “new ill-defined ‘environmental justice’ factors” and considerations of climate impacts. “At a time when we should be looking for ways to expedite the approval of these important projects,” he said, “erecting new roadblocks to affordable, abundant energy makes no sense, particularly in this tenuous time.”

Meanwhile, the courts are keeping up the pressure on the commission. Earlier this month, the D.C. Circuit ordered FERC to complete a supplemental environmental review for a natural gas upgrade project in Massachusetts, in response to a challenge filed by two environmental groups. The court agreed that the commission’s environmental assessment failed to account for the reasonably foreseeable indirect effects of the project—specifically, GHGs attributable to burning the gas to be carried in the pipeline. The court rejected FERC’s finding that the project would have no significant environmental impact, reasoning that “the end use of the transported gas is reasonably foreseeable, and the commission, in response, invokes nothing more than a mere possibility of offsetting reductions.” Quoting an earlier decision, the court held “the commission is wrong to suggest that downstream emissions are not reasonably foreseeable simply because the gas transported by the project may displace existing natural gas supplies or higher-emitting fuels.”

The roller coaster for lawyers in the energy and climate space did not stop there. Earlier this year, a federal district court judge in Louisiana issued an injunction against the federal government’s reliance in rulemaking proceedings on the social cost of carbon, an economic metric which places a monetary value on the societal benefits of reducing GHG emissions and avoiding climate impacts. The nationwide directive caused federal rulemaking to go topsy turvy. According to the White House Office of Information and Regulatory Affairs, at least 38 regulations would need to be postponed or rewritten if the temporary ban stayed in place. The Department of Justice, however, filed a successful emergency appeal with the Fifth Circuit, which issued a stay of the injunction and allowed the government, for now, to continue to rely on the metric in its rulemakings.

The Fifth Circuit’s intervention had real impacts. Notably, the Department of the Interior had planned to hold an onshore oil and gas lease sale in March, but hit the pause button after the judge ruled that it couldn’t use the social cost of carbon in its environmental review. Now that the appeals court has blocked that decision, stakeholders are awaiting Interior’s next move, with environmental and energy lawyers watching closely.

Legal Issues Dominate Intersection of Climate and Energy Transition

Local Governments Tackle Energy Efficiency of Rental Properties
Author
Linda K. Breggin - Environmental Law Institute
Environmental Law Institute
Current Issue
Issue
3
Linda Breggin

Rental property energy use is emerging as a key challenge for cities in meeting carbon reduction targets. About 20 percent of all U.S. carbon emissions is attributable to home energy use, and rental properties constitute more than 30 percent of the nation’s housing stock—often a larger portion in major urban areas. These apartments and houses typically have a larger carbon footprint than owner-occupied homes, consuming 15 percent more energy per square foot and incurring 30 percent higher energy costs, according to the American Council for an Energy-Efficient Economy.

The problem is driven in part by the lack of incentive on the part of property owners to pay for energy-efficiency upgrades. Not only are renters responsible for paying energy bills in the vast majority of cases, but the problem is compounded by energy-inefficient housing stock in low-income neighborhoods due to structural issues, poor insulation, and older, energy-wasting appliances.

As a result, almost one-third of renters bear a high energy burden—over 6 percent of their income is allocated to energy bills. Furthermore, ACEEE research indicates that the energy burden borne by renters is disproportionately higher than the national median household, a problem particularly affecting people of color. Furthermore, the Rocky Mountain Institute reports that energy insecurity, which can include the need to reduce food and medicine to pay energy bills or maintain homes at unhealthy temperatures, disproportionately impacts renters.

Local governments are taking a variety of approaches to reducing emissions from existing, privately owned rental properties. Many efforts are documented in a report by the Urban Sustainability Directors Network and ACEEE that focuses on how to reduce energy use while preserving or expanding access to affordable housing.

Rental energy disclosure policies are among the tools used by cities such as Minneapolis and Chicago. The mandated disclosures provide prospective renters with information about prior energy use and the cost of utility service. ACEEE’s Reuven Sussman explains that soon-to-be-published data confirm that disclosures can affect decisions about which properties to rent and willingness to pay for energy-efficient units—with an important caveat that should inform local disclosure programs: “Our data show that when only the most efficient homes are labeled, renter decisions are less affected than when all homes are labeled.”

Other localities have granted renters the right to make limited efficiency improvements, such as adding removable weather-stripping, interior storm windows, or hot water tank insulation wrap. The Hartford, Connecticut, housing code allows renters to implement certain types of energy-saving measures even without owner consent.

In addition, several cities, including New York, St. Louis, and Boulder, have adopted energy performance standards for rental properties. These standards vary with respect to the entities covered and requirements imposed but can include mandated emissions targets or adoption of specific energy-efficiency measures. RMI explains that new standards are needed, in part, because building energy codes establish efficiency requirements for new construction only—even though many residential properties were built prior to the establishment of codes.

Another option adopted by cities, including San Francisco and Salt Lake City, is to require energy-efficiency upgrades upon the occurrence of an event such as a property sale or renovation. The required upgrades often are limited in scope to help ensure costs are not passed through to renters. Examples of required upgrades include pipe and exterior wall insulation and cleaning and repairing boilers.

Finally, numerous local governments, such as Cincinnati, Milwaukee, and Washington, D.C., have established loan and grant programs that support energy-efficiency upgrades to rental properties. These programs often require recipients to maintain affordable rent levels for a designated period after receiving the funding. Local government programs are structured and funded in a variety of ways and, for example, may rely on federal funds, local taxes and fees, or utility franchise fees.

Not only local government-sponsored initiatives, but also state and utility energy-efficiency incentive programs, provide support for rental property upgrades. The Urban Sustainability Directors Network and ACEEE emphasize that localities should advocate to expand these programs and promote them with renters and property owners. Moreover, in addition to policies aimed at existing, privately owned properties, local governments are adopting measures focused on achieving energy efficiency in new affordable housing construction and public housing.

These approaches show promise for making headway on a challenging aspect of municipal carbon emissions reduction, where ownership and efficiency benefits don’t always coincide.

Local Governments Tackle Energy Efficiency of Rental Properties

Energy Transition
Subtitle
A Lawyer’s Love Letter to the Disenfranchised
Author
Lisa Benjamin - Lewis & Clark Law School
Lewis & Clark Law School
Current Issue
Issue
3
A wind turbine held by a dark skinned hand and other hands held up in fists

The urgent need to move away from fossil fuels can encourage us to overlook what that transition will actually look like—or even should look like. Who will be the architects and beneficiaries of this new energy system? How can democratic and just energy systems be built and supported?

Shalanda H. Baker’s book Revolutionary Power: An Activist’s Guide to the Energy Transition provides us with some answers to these questions. Formerly a professor at the William S. Richardson School of Law at the University of Hawai’i, Baker now serves in the Biden administration as the Department of Energy’s deputy director for energy justice. Her book, per its title and subtitle, is written explicitly as a guide for activists, and implicitly draws on her personal history.

Revolutionary Power has three aims: first, to articulate the pervasive socioeconomic impacts of existing energy systems. Second, to illustrate the opportunities that the energy transition holds to upend existing inequality. Finally, to situate the fairly technical area of renewable energy policy within a broader discourse of civil rights, inequality, and access to justice.

Deputy Director Baker’s work is powerful and inspirational. It is a refreshing reminder of what bright promise the energy transition can hold to right historic wrongs, even if the transition is delayed or frustrated. As Baker notes, the energy system will change; the only disagreement is how much the system will change, and who will benefit from those changes.

The book opens with a personal history of how Baker came (in her own word, “improbably”) to work in energy law and policy. As a Black, young, queer cadet in the United States Air Force Academy, who experienced intimate partner violence, she left the military and decided to dedicate the rest of her professional life to social justice. She entered law school. After graduation, she found herself working on project finance for both fossil fuel and renewable projects at a large, international law firm. As she watched the 2008 financial crisis unfold, with consequential public bailouts of large financial institutions, her role in a law firm where senior partners were actively working to shield wealthy clients from the fallout of the crisis became untenable. The emerging climate crisis, combined with the financial crisis, were, in her view, intimately related—two sides of the same coin, if only we care to view both sides at the same time.

These macro events propelled her to leave private practice and spend time in Mexico working with Indigenous communities struggling with the impacts of mega renewable energy projects. This experience cemented her commitment to energy justice as an activist and scholar, and led to the writing of this book.

Her work interweaves growing up in her family with the story of living in an environmental justice community marred by the fossil fuel industry—and this makes the work so powerful. Revolutionary Power posits early on that while the climate emergency has and will continue to disproportionately impact the most vulnerable, those populations—namely low-income communities and communities of color—are positioned by the very same crisis to become both architects and beneficiaries of the new energy system. The book lays out a pathway to get us to that goal, so Baker dedicates her work to the most vulnerable. The book is specifically designed to arm the climate vulnerable with tools to remake the current energy system so that the new system that emerges can—instead of discriminating against the vulnerable—be put in service of their humanity.

The climate and energy policy space is often dominated by voices from the global North, and the discipline is not diverse. Baker confronts this directly by acknowledging for whom she wrote Revolutionary Power:

“I write for those so frequently shut out of decisionmaking that affects them, whose skin might be brown or black, and whose ancestors labored on plantations and in factories made prosperous by their cheap labor. I write to honor my own people, whose histories, hopes, and dreams are embedded upon the oil fields and bayous of Louisiana and Texas and whose blood courses through my veins.”

Her writing is both deeply personal and almost revolutionary in its hopefulness and dedication to radical system change. She pushes back against what she calls “climate fundamentalism,” which as she describes it advocates that, due to the pressures of time, structural inequality has to be replicated in the new energy systems. Her approach is unabashedly justice first.

The first section of the book situates existing energy structures and their effects within civil rights discourse. Baker describes the impacts this industry had on her family, particularly her father, who lived in Port Arthur. The Texas town is a small environmental justice community of approximately 55,000 people, with certain census tracts being 77 percent African American and others 30-65 percent Latinx. It is one of the poorest communities in Texas.

Despite the vast fortunes made by the oil industry, the region is still marred by tremendous inequality, not just in terms of economics but also health disparities. The area is called the “Cancer Belt” for a reason. The rates of cancer in the Black community there are described as “devastating”—nearly 40 percent higher than the state average. Baker writes that the refineries, and the poverty, of Port Arthur shaped her father’s life, as it did his father’s. To read her book, it clearly shaped hers.

She uses Port Arthur to illustrate larger national patterns. While these industries promise jobs and wealth, they are also accompanied by environmental and racial inequalities illustrated by workplace injuries, and implications for public health in the community. As she notes, the current energy system routinely sacrifices Brown, Black, and Indigenous bodies “to keep the lights on for the majority.”

The book illustrates the power dynamic inherent in existing energy systems, which concentrate wealth and influence in the hands of utility companies and their investors, often at the expense of ratepayers, and those on the sharp end of climate extremes. Yet energy policy is often discussed in highly technical language, with no consideration of the justice implications of energy choices. Baker’s work seeks to shift this discourse, and center the goals of new energy systems squarely around, and for, those marginalized and sidelined by the current energy system.

Energy justice advocates focus on four main areas: procedural, distributional, recognition, and restorative justice. Baker adds a fifth dimension—centering the voices of the marginalized communities by putting their needs first. This importantly includes reducing the burdens experienced by these communities and then ensuring their social and economic participation in new energy systems. In her view, each energy policy decision should be filtered through the lens of equity, ensuring policymakers take into account past harms when designing new energy systems.

A central plank of an energy justice approach, articulated in the second part of the book, is electric utility reform. This involves decentralization of the energy system from investor-owned utility companies to households and communities. Localization of technology comes with localization of control and wealth—energy justice becomes an element of civil rights through the more equal distribution of energy benefits. In this section of the book, Baker uses recent experiences in Hawaii’s electricity reform initiatives as illustrative of some of the opportunities, and pitfalls, that may arise in creating this new energy future.

In 2014, the Hawaiian public utilities commission rejected the integrated resource plan of Hawaiian electric companies. The PUC’s order was revolutionary in requesting the utility to be more responsive to changing energy markets, to modernize the generation of electricity on each island, to integrate rooftop solar, and to fundamentally rethink its relationship with its customers.

As Baker tells the story, the PUC order sent chills down the spine of other national utilities. She also charts the decades-long fight against distributed energy systems by utilities, in what she calls “the playbook to systematically dismantle rooftop solar.” In her telling, utilities, along with the American Legislative Exchange Council, proposed legislation which attacked community-friendly net-metering compensation systems, using racially divisive tactics.

Baker ends with a focus on community energy programs, which create pathways for localities to design, own, and manage their energy sources. While community energy can mean different things to different folks, it focuses on ownership and energy distribution by and for the people. It can be used as a mechanism to create tangible benefits and build wealth in and for communities.

Baker provides a vision of what democratic energy systems could look like, and what these systems could do to rectify past harms. She provides a hopeful and equitable vision of our energy future.

She ends with a word that lawyers—and academics—rarely use in their work, love. She reminds us that revolutionary power is about a love that looks forward and is hopeful, as well as a love that looks backward, to ancestors who were hoping and praying that this possible future, and those who shape it, may come into existence. Her work is effortlessly hopeful, and an inspirational read for all of us working for a better energy and climate future.

On a Lawyer and the Disenfranchised

Declining Fossil Fuel Prices May Slow Progress in Decarbonization
Author
Joseph E. Aldy - Harvard Kennedy School
Harvard Kennedy School
Current Issue
Issue
2
Joseph E. Aldy

In the last issue, I addressed the recent run-up in fossil fuel prices resulting from demand outpacing production of oil and gas. In the longer term, however, as governments pursue more ambitious energy policies and consumers shift to new, climate-friendly technologies, the demand for fossil fuels will decline. As a result, energy costs will likewise decline. In the presence of falling fuel prices, how governments design climate policies will have important implications for the pace of decarbonization.

The vast majority of energy and climate policy in the United States focuses on the carbon intensity of new products. Tax expenditures subsidize new wind and solar power, new electric vehicles, and new energy-efficient windows. Regulations imposing the latest fuel economy and appliance efficiency standards apply to new items. As households and businesses buy new products and equipment subject to these subsidies and standards, they reduce their demand for fossil fuels.

These policies, however, do not influence the use of existing fossil fuel-reliant technologies. Indeed, absent policies directly targeting the price of gasoline, for example, as electric vehicles take over a larger fraction of the new-car market, someone who already owns and drives an internal combustion vehicle may soon find it cheaper to operate over time. This could slow the electrification of transportation, and reduce the scrappage rate of old, polluting gasoline-powered cars. This bifurcated market—a fast-growing new EV market and a used gas-engine market —could occur in the United States, with larger public health benefits accruing to those communities taking up EVs—typically those composed of higher-income households.

This phenomenon could also occur across countries, if one set of governments moves rapidly with policies that drive down their fuel demand while a second set does little to promote vehicle electrification. As a result, a form of emission leakage occurs—the emission reductions associated with the set of countries pursuing ambitious policies are offset some by drivers in the second set of countries who may drive gas cars more intensively and for a longer time in response to lower fuel prices.

In the meanwhile, the potential for long-term declines in natural gas prices—resulting from the transition toward building electrification—has a more complicated impact on residential consumers. Rapid electric heat pump adoption could reduce demand for natural gas and depress the price for the fuel. This could lower the cost to keep a house warm for those relying on natural gas furnaces or boilers.

Heat pump adoption, however, would reduce the number of gas customers on a given distribution network. Over time, the natural gas utility would likely need to increase rates per customer to cover the fixed costs of the local system. This could offset the fall in fossil fuel prices. The question is whether those slow to adopt heat pumps have the resources to make a large up-front investment in a new unit. Households with financing constraints may bear the higher costs of being the last movers to the new technology, and these costs could be regressive, given the socio-demographics of early heat pump adoption.

The functioning of energy markets coupled with incomplete climate policy that focuses primarily on new investment highlights two decarbonization challenges. First, those slower to adopt new technologies may find it economic to continue to delay clean energy adoption as fuel prices fall. This would slow the transition away from fossil fuels. Second, the distribution of the net benefits of decarbonization may continue to skew toward higher-income households and communities. This could weaken public support for an aggressive decarbonization program.

Policymakers could expand the climate policy toolkit to address these challenges. First, directing electric vehicle and heat pump subsidies to lower-income households could enhance the progressivity of decarbonization and target slow adopters of zero-carbon technologies.

Second, an economy-wide carbon price—through a cap-and-trade program or a tax—would ensure that fossil fuel markets don’t work against decarbonization. Carbon pricing provides incentives to decarbonize both new technology and existing technologies. This is in contrast to subsidies and regulations for electric vehicles and heat pumps—which influence only the carbon intensity of new investment.

Carbon pricing can also accelerate the timing of new investment and facilitate the transition away from fossil fuels. This occurs because the carbon price raises the retail price for fossil fuels, while decreasing the price paid to fossil fuel producers. In contrast to subsidies and regulations, which do not raise revenues, a carbon pricing policy could raise significant monies. Returning these revenues to households would promote progressivity and public acceptance of higher fuel costs.

Declining Fossil Fuel Prices May Slow Progress in Decarbonization