Declining Fossil Fuel Prices May Slow Progress in Decarbonization
Author
Joseph E. Aldy - Harvard Kennedy School
Harvard Kennedy School
Current Issue
March-April 2022
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

Most Cities Well Off Pace to Meet Needed Clean Energy Goals
Author
Linda K. Breggin - Environmental Law Institute
Environmental Law Institute
Current Issue
March-April 2022
Issue
2
Linda Breggin

The American Council for an Energy Efficient Economy recently released its annual City Clean Energy Scorecard, which ranks 100 large and mid-sized U.S. cities on their “efforts to advance clean energy goals through energy efficiency and cleaner fuels and electric grids.” While the ratings are attention-grabbers, the takeaways are also noteworthy.

It’s no surprise that the top scorers are predominantly large coastal cities—San Francisco, Seattle, Washington, Boston, and New York as well as Minneapolis. It is a bit jarring, however, that only 19 cities appear to be on track to meet their near-term greenhouse gas reduction targets based on available data—and 37 of the 100 largest cities have not even set targets.

The recent scorecard is not the first indication that cities are struggling to reach their goals. ACEEE’s 2020 report found that only about a third of the cities that had set goals were on track to achieve them. Similarly, a 2020 Brookings study concluded that “about two-thirds of cities are currently lagging their targeted emission levels.” The 2022 scorecard not only confirms limited progress but also indicates that cities are failing to accelerate their clean energy initiatives to get on track to meet their goals.

Nevertheless, the newest report identifies 177 actions taken by cities to advance clean energy between May 2020 and July 2021, despite a Covid-related dip in activity in early 2020. The scorecard evaluates five policy areas—community-wide initiatives, building policies, transportation policies, energy and water utilities, and local government operations. The most popular measures include “creation and adoption of a clean energy plan, partnership, goal, or government procedure” (adopted by 38 percent of the 100 cities), efforts to “improve energy efficiency during design, siting, construction, renovation, and operation of buildings” (34 percent) and development of clean energy infrastructure” (28 percent).

The report flags as problematic, however, the dearth of transportation-related actions, given the sector’s outsized footprint. Lead author Stefen Samarripas explains: “Most cities haven’t set a goal for reducing vehicle travel or transportation emissions, and of those that have, only a few show progress, so that points to a big area for improvement.”

ACEEE identifies key strategies that cities should take to advance clean energy. First on its list is “leading with a commitment to racial and social equity” by, for example, pursuing efforts to reduce energy use and costs in affordable housing.

The report also recommends adopting mandatory policies for bolstering the energy performance of existing buildings, such as requirements for benchmarking and transparency. It recommends setting future goals for community-wide reductions, as well as transportation-specific clean energy goals.

Kendra Abkowitz, Nashville’s chief sustainability and resilience officer, says the opportunity areas ACEEE highlights “align well with what we are seeing on the ground and plan to tackle in Nashville.” The city has a robust clean energy agenda, according to Abkowitz: “On the transportation front, we are highly focused on leveraging federal, state, and local dollars to increase use of alternative fuels, electricity in particular, and built infrastructure capable of supporting public and private sector fleet and residential transitions to EVs.” She also notes the mayor’s plans to introduce a city council resolution “to formally adopt a greenhouse gas emissions reduction target for municipal and community operations and develop an energy benchmarking program for the city’s large commercial buildings.” (The author serves as co-chair of the Nashville Mayor’s Sustainability Advisory Committee.)

The report recognizes, however, that even the best-laid plans can be waylaid—or bolstered—by outside actors, such as investor-owned utilities, transit authorities, and state governments. For example, a city may be subject to a state-wide building energy code. The scorecard nevertheless considers these outside actors’ actions in developing scores, reasoning in part that cities “can still advocate for them to adopt certain policies and programs and can further engage in their design and implementation.”

The extent that cities can influence outside actors will vary considerably, of course, and challenges are likely greater for blue cities in red states. But Abkowitz, whose city jumped 12 spots in the recent rankings, advises that “recognizing the benefits and co-benefits” associated with the measures needed to reach carbon reduction targets “can be a real win-win and one way to work around potential barriers.” She also exhorts cities to “leverage partnerships,” explaining that “it is a tall mountain to climb alone. And leveraging private sector and community partnerships and the financial, technical, and other resources they can bring to bear will help achieve goals better and faster.”

Most Cities Well Off the Pace to Meet Needed Clean Energy Goals 

Role of NERC and Engineering Standards in Grid's Reliability
Author
Craig M. Pease - Scientist and Former Law School Professor
Scientist and Former Law School Professor
Current Issue
January-February 2022
Issue
1
Craig M. Pease

Electricity defines everyday life in the United States. Our power grid is a huge achievement of engineering, technology, and infrastructure. In this country, we just assume electricity will be available anytime and practically everywhere — and overwhelmingly, it is.

This reliability of the electric grid does not arise spontaneously. It must be engineered. Over 3,000 diverse institutions compose the U.S. grid, including those that generate, transmit, and distribute power, and those with overarching regulatory and coordination responsibilities. These include for-profit public corporations, municipal utilities, cooperatives, federal power agencies, federal regulatory agencies, state regulatory agencies, non-profits responsible for reliability, and professional societies. Grid reliability emerges from all this institutional and technological complexity, and is a commons.

Pursuant to the Energy Policy Act of 2005, the Federal Energy Regulatory Commission has considerable authority over electric grid reliability, which it has delegated in considerable part to the non-profit North American Electric Reliability Corporation, or NERC. It in turn relies on, among others, Regional Reliability Organizations, and the Institute of Electrical and Electronics Engineers, a professional society.

NERC is a deeply technological institution. As an example of a tiny sliver of its purview and approach, consider its recently released report “Joint Review of Protection System Commissioning Programs.” NERC estimates that 18 to 36 percent of “misoperations” (within the rather narrow scope of that report) were due to issues that could have been caught in testing, before components were placed in service. In turn, it relies on IEEE WG I-25, a reference document containing a number of best practices, esoterically titled “Commissioning Testing of Protection Systems.”

From its very pores, this IEEE document seethes integrity. In its overview, we find a prominent list of six major attributes of the engineering system the institute seeks. They are, in rank order: safety, training and experience of professional personnel, and three other human factors, with the sole engineering issue, bulk electric system integrity, listed dead last. These folks know how troubles arise in complex engineering systems. They focus on people.

At the broadest level, I crudely divide “the law” into means to resolve conflicts (e.g., litigation and mediation), versus means to promote cooperation (e.g., creating and managing institutions, norms of behavior, and formal standards). Electric grid reliability must necessarily be grounded in cooperation, trust, and human and engineering integrity, for a couple reasons.

First, technical aspects of grid reliability are a galaxy beyond the ken of essentially all attorneys and policymakers, and indeed of any scientist or engineer without deep subject matter expertise. This IEEE reference document, for example, refers to a bewildering array of technical concepts, including electricity schematics, relay diagrams, phasing, and loading of circuits. Even when the law allows it, litigation is a wholly unsuitable way to challenge, amend, or alter an engineering standard, or indeed any highly technical subject matter.

Second, in a complex system such as the electric grid, any conflict or litigation will have unwanted reverberations, just as a storm in one state can cause power outages hundreds of miles away. The grid exists because it is interconnected — hence it must be grounded in cooperative behavior. More generally, IEEE and other professional engineering society standards promote cooperation and integration, not just for the grid, but throughout our interconnected economy. Continuing disputes and fighting would not allow us to reap the benefits of integration.

Alas, there are bad actors. Consider Pacific Gas and Electric Company, convicted in 2016 of violations of the Natural Gas Pipeline Safety Act of 1968, and for obstructing a National Transportation Safety Board investigation. Later, it pleaded guilty to 84 counts of involuntary manslaughter in the 2018 fire that quite literally burned Paradise to the ground. It is now once again under criminal indictment, for a 2020 fire in Shasta County, California.

It is fortunate that the great institutional cultures of NERC and the IEEE are not easily changed. Yet it is equally unfortunate that PG&E’s institutional culture seems impervious to change. When I see an effort to reform a bad institutional culture, I am reminded of Mark Twain’s words in Huck Finn, “He reckoned a body could reform the ole man with a shot-gun maybe, but he didn’t know no other way.”

Humans being humans, mistakes are inevitable. As the technical subject matter becomes ever more daunting, and the engineering systems ever more complex, we must trust that institutions and individuals will operate with the highest levels of integrity. Unfortunately there are serious limits to independent verification and oversight.

Role of NERC and Engineering Standards in Grid's Reliability.

Is the Recent Run Up in Energy Prices Good for the Environment?
Author
Joseph E. Aldy - Harvard Kennedy School
Harvard Kennedy School
Current Issue
January-February 2022
Issue
1
Joseph E. Aldy

The United States has recently experienced the fastest rate of inflation in three decades, with the run up in energy prices playing a critical role. Overall fuel prices in October were 30 percent higher than a year earlier, and in mid-November, U.S. gasoline prices had reached their highest level in seven years. These higher prices primarily reflect changes in underlying market fundamentals, especially demand outpacing hydrocarbon production.

While some analysts have suggested that these higher prices could encourage energy conservation and greater adoption of electric vehicles, which in turn could reduce carbon dioxide emissions, the benefits for the environment are likely modest.Energy price volatility has increased substantially during the pandemic, with crude oil prices ranging from negative $37 per barrel in late April 2020 to more than $80 per barrel in late 2021.

Such volatility makes it difficult for businesses and households to assess the value of their next investment in an energy-consuming durable, whether it’s a boiler at a factory or a new car. This uncertainty about the returns can weaken incentives for private investment, as businesses wait to learn more about how energy prices may change in the future. Indeed, when uncertainty grows — such as with the recent market swings — more and more businesses will find it optimal to delay investment.

If a higher energy price reflects the effect of a long-term climate policy — a carbon tax, for example — then energy consumers may expect higher prices, driven by policy, to persist. This predictability may reduce the prospect that a business would make an investment error — expecting high energy prices, buying a more efficient and costly piece of long-lived equipment, and then realizing lower-than-expected energy prices in practice. Sarah Armitage and I have written about how a carbon tax could result in fewer such investment errors — and hence lower social costs of reducing carbon dioxide emissions — than policy tools that do not provide certainty over price impacts. Several other research papers have shown how consumers cut their gasoline consumption more in response to a given change in a tax on gasoline than the same increase in the price of gasoline. The durability of tax policy reduces the uncertainty over future prices that characterizes market-driven price increases.

A predictable energy price impact resulting from climate policy would also deliver clearer, durable signals of the potential returns to innovation. This may motivate more inventors and entrepreneurs to work toward developing novel clean energy technologies and commercialize them for the market. The boom-bust cycles of the oil market since the 1970s have undermined such incentives, while a comprehensive long-term climate policy framework would significantly improve them.

The distributional impacts of higher energy prices can also differ quite substantially under climate policy than under similar energy prices that reflect short-term changes in energy supply and demand. If consumers pay more for gasoline and heating oil because crude oil prices are higher, or refining margins are greater, then these higher prices translate into greater profits for oil producers and refiners. These profits mean greater returns to the owners of the companies — shareholders, private owners of smaller companies, and national oil companies (and their governments). Lower-income households, who typically dedicate a larger fraction of their budgets to energy consumption, bear a disproportionate burden under this higher energy price scenario.

If consumers pay more for these fuels because of a carbon tax, however, then the government collects the revenues, not the oil companies. It can direct relief to those hardest hit by higher prices. For example, when British Columbia launched its carbon tax, it created a special cash assistance program for low-income households. Analyses of the tax-and-dividend approach to carbon pricing — returning all revenues as quarterly payments to households on a per capita basis — suggest that the bottom 70 percent of the income distribution would receive more in these regular dividends than what they would pay through higher energy prices as a result of the carbon tax.

Finally, higher energy prices resulting from tight energy supplies may reduce the political appetite for more ambitious climate change policy — whether a carbon tax or new regulations — that would likely impose higher energy costs and prices, at least in the near term. Current high prices may make the potential costs of curbing emissions more salient and weaken public support for such climate policies.

Is the Recent Run Up in Energy Prices Good for the Environment?

With the ACE Rule Cert Grant, Where is the Court Headed?
Author
Bethany A. Davis Noll - NYU State Energy and Environmental Impact Center
NYU State Energy and Environmental Impact Center
Current Issue
January-February 2022
Issue
1
Bethany A. Davis Noll

At the end of October, the Supreme Court decided to take on the Affordable Clean Energy regulation, a case where it will be ruling entirely in hypotheticals. ACE is the Trump administration’s repeal of the Clean Power Plan, an Obama-era regulation limiting greenhouse gas emissions from existing power plants. That repeal was based on the idea that the CPP’s reliance on generation shifting was unambiguously illegal. But the U.S. Court of Appeals for the D.C. Circuit vacated ACE, holding that ACE itself “hinged on a fundamental misconstruction of Section 7411(d) of the Clean Air Act.”

The Biden EPA has said that it will not stand by the Trump-era rule and will rewrite it. The agency did not seek review of the vacatur in the Court, but West Virginia, along with a coalition of states and other petitioners, did. West Virginia’s request asks a first hypothetical: Is EPA “constitutionally authorize[d]” to issue a rule that is “capable of reshaping the nation’s electricity grids and unilaterally decarbonizing virtually any sector of the economy?”

Westmoreland Mining Holdings LLC asks another one: does the agency have the authority to “decide such matters of vast economic and political significance as whether and how to restructure the nation’s energy system”? North American Coal Corporation asks if Section 111(d) authorizes EPA to “develop industry-wide systems like cap-and-trade regimes.” North Dakota asks whether the agency is allowed to “deprive states of all implementation and decisionmaking power in creating their Section 111(d) plans.”

Why are these hypotheticals? Because EPA has not issued a new rule seeking to restructure the energy system — at least as of press time. Instead, it is rethinking its regulatory approach to the entire sector. Nonetheless, the Court has granted the request to decide how much authority the agency has to address the power sector’s greenhouse gas emissions under 111(d).

The ACE case is not the only one this term that involves claims of agency overreach. In a recent shadow-docket case, the Court vacated the Centers for Disease Control’s eviction moratorium, holding that the CDC’s reading of the statute would give it a “breathtaking amount of authority.” And another case on the docket for the October term, American Hospital Association v. Becerra, has to do with claims that the agency used a vague or “ancillary” term of the relevant statute to “alter the fundamental structure of a regulatory scheme.”

Claims that agencies are acting outside the scope of their authority heated up substantially during the Trump administration. In a paper published last summer in the Administrative Law Review, I found that the Trump administration overall enjoyed only a 23 percent win rate in cases challenging agency actions (which compares poorly to studies showing around a 70 percent win rate for prior administrations).

An interesting trend emerged from examining those losses: many were about courts finding that the Trump administration had acted outside the bounds of its authority. The cases at the Court now are about whether agencies both acted outside the bounds of their authority and seized control of vast authority. But at bottom both trends have to do with agencies working to implement a policy priority of the president, and courts then taking a searching look.

Interestingly, the ACE rule case is not the Court’s only opportunity to review a Trump-era rule disavowed by the Biden administration. On the same day it granted certiorari in the ACE rule case, the Court granted certiorari in a case about the Public Charge Rule, designed to deny green cards to immigrants who might need to rely on public assistance programs like food stamps. In that case, the rule was enjoined in the U.S. Court of Appeals for the Ninth Circuit and elsewhere (though not on a nationwide basis).

The Trump administration sought an appeal to the High Court and in February 2021, the Supreme Court granted certiorari. After that, Arizona and a state coalition sought to intervene in the Ninth Circuit. Before that motion could be decided, the Biden administration stipulated to dismiss the Supreme Court case and then quickly repealed the rule. So what is left to decide in the Supreme Court? The Court agreed to hear whether Arizona and its coalition should have been permitted to intervene to defend the Trump-era rule.

It seems that the Court may want to have a say in whether Trump-era rules should survive. It may also be scrutinizing the practice of a new administration that seeks to avoid defending a prior administration’s rules. And the Court seems to want to decide how Section 111(d) should be interpreted even in the absence of an agency rule. These are interesting times.

With the ACE Rule Cert Grant, Where Is the Court Headed?

The Public Supports Clean Energy but Politics Is Preventing Win-Wins
Author
David P. Clarke - Writer
Writer
Current Issue
November-December 2021
Issue
6
David P. Clarke

An August United Nations scientific assessment concluded that “unequivocal” evidence shows human activities have inflicted “widespread and rapid changes” across the planet. In September, another UN report prompted the secretary general to warn, “The world is on a catastrophic pathway” even if all Paris Agreement commitments are met. To the Union of Concerned Scientists’ Rachel Cleetus, her organization is now “beyond concerned,” with members’ feeling “heartbroken” by worsening climate damage and “alarmed” and “angry” at policymakers’ failure to act.

Frustration runs deep, not only because the climate crisis is mounting but also because major policy advances are so tantalizingly close and hold out prospects for win-win actions.

In September, following an intensive two-day markup, the House Energy and Commerce Committee passed a major portion of the Democrats’ $3.5 trillion budget reconciliation package. The bill included a $150 billion Clean Electricity Performance Program that environmentalists and Democratic sponsors argue would generate almost eight million jobs, $1 trillion in economic activity over the next 10 years, and serve as the “most powerful tool” for decarbonizing the power sector. The Department of Energy would offer electricity suppliers grants if they increase their clean supply by four percent compared with their previous year’s performance, and would penalize generators that fail to.

But Senator Joe Manchin (D-WV), whose vote is indispensable for Democrats to pass a reconciliation bill in the 50-50 divided Senate, opposes both the CEPP and the Democrats’ $3.5 trillion package full of clean energy funding.

Another significant clean energy proposal that has galvanized attention is a DOE study described as “the most comprehensive review to date” of solar energy’s potential role in decarbonizing both the U.S. electricity grid and broader energy system. The study concludes that solar energy could “power all of the homes in the U.S. by 2035 and employ as many as 1.5 million people in the process,” said Energy Secretary Jennifer Granholm in a statement. But Granholm emphasized that “strong decarbonization policies” will be needed to raise solar energy’s level from its current 3 percent to 40 percent (or 1,000 gigawatts) by 2035, and as high as 3,000 gigawatts by 2050.

However, as noted by the CEO of the Solar Energy Industries Association, Abigail Ross Hopper, “policy, plain and simple” will be the greatest hurdle to raising solar to 40 percent. “The blueprint is there, the American people support it, and now it’s up to policymakers to make it happen,” she says.

Greg Wetstone, CEO of the broad-based nonprofit American Council on Renewable Energy, expresses optimism that legislation can move forward, despite the challenges of “default partisanship on every issue.” DOE’s solar study demonstrates that the United States can make the needed clean energy transition “rapidly enough” without increasing electricity costs to consumers, “two really important conclusions.” Democrats’ reconciliation bill policies will be “foundational” both for achieving the study’s targets and for driving national economic growth, he adds.

SEIA’s Hopper also emphasizes the solar study’s significance in helping to “make it clearer than ever that solar is a real solution to the climate crisis.” With the right policies, the U.S. can decarbonize its electric grid using solar and storage while keeping electricity costs low and generating hundreds of thousands of new career opportunities across the country, she says.

Among necessary policies are the CEPP and a 30 percent investment tax credit for solar. The House panel’s September markup includes investment tax credits for solar and for storage, and other provisions that SEIA and more than 700 solar companies called for in a letter to President Joe Biden and congressional leaders. Although SEIA is “encouraged” by the “sweeping climate and energy legislation” approved by the House Energy and Commerce and Ways and Means committees, says Hopper, she cautions that “there is a long road ahead in getting legislation to the president’s desk.”

Doubtless, intense legislative fights can be expected. But Wetstone underscores reasons to be hopeful that “some version of the CEPP” and other critical policies will proceed, including Biden’s unprecedented presidential commitment to climate action, as well as the increasingly visible “horrific, immediate implications” of climate change. Moreover, he says, the Federal Energy Regulatory Commission is signaling “a really dramatic change” in rules allowing renewable energy to compete in electricity markets. But the movement toward clean energy has to be “accelerated on a climate time frame,” he adds.

Here’s hoping climate evidence and redoubled legislative efforts make 2021 a year of win-win policy breakthroughs.

The Public Supports Clean Energy but Politics Is Preventing Win-Wins

Instead of 'Hot Summer' for FERC, Commission Lands in Hot Water
Author
Bethany A. Davis Noll - NYU State Energy and Environmental Impact Center
NYU State Energy and Environmental Impact Center
Current Issue
November-December 2021
Issue
6
Bethany A. Davis Noll

Illinois Democrat Sean Casten rolled out his “Hot FERC Summer” campaign in a speech on the House floor intended to promote the Federal Energy Regulatory Commission’s powers with respect to climate change, some boosted through proposed legislation. Meanwhile, the courts are paying attention to FERC and its analysis of need, climate impacts, and environmental justice (or lack thereof). A pair of decisions highlights a new era for the panel, even as the commission shifts priorities under President Biden.

First up, in June, the Court of Appeals for the D.C. Circuit vacated a certificate allowing Spire STL Pipeline to operate a natural gas pipeline outside St. Louis, Missouri. Spire had admitted that there was no new demand for the pipeline. The commission nonetheless relied on a study prepared by a Spire affiliate claiming it would use the new pipeline to determine that the company had shown adequate need. The court found that FERC had failed to assess the probative value of the affiliate’s study, ignored concerns that Spire engaged in self-dealing with its affiliate, and failed to balance the claimed need against the adverse environmental effects of the new pipeline.

Because the errors were significant, the court vacated the certificate. But the pipeline is already operational. Spire responded with a flurry of filings, including seeking rehearing (but only on the remedy) and petitioning FERC for emergency relief. At press time, FERC had granted the company a 90-day certificate while it considers Spire’s request for a temporary certificate. FERC did not seek rehearing of the court’s vacatur, though Commissioner James Danly (airing dirty laundry perhaps) claimed in a dissent that a majority of commissioners (at the time) thought the agency should have sought rehearing.

In the second case, Vecinos para el Bienestar de la Comunidad Costera, the same court held that FERC’s environmental justice and climate analyses were lacking. Several companies had applied for authorization to construct new liquified natural gas terminals in Cameron County, Texas, to export the fuel. In approving the projects, FERC calculated the additional emissions but claimed it could not determine if the impact was significant because there was no “universally accepted methodology” for that. However, FERC’s own regulations direct the commission to evaluate these types of impacts, using “theoretical approaches or research methods generally accepted in the scientific community.” And FERC had previously not disputed that the social cost of carbon — a monetary estimate of the damages for each additional ton of greenhouse gas emissions — was a generally accepted method for evaluating the impact of greenhouse gas emissions.

In addition, the commission dismissed petitioners’ environmental justice concerns with the projects, claiming that they would not have a disproportionate impact on “minority and low-income populations versus on some other project-affected comparison group” because “all project-affected populations are minority or low-income populations.” But a project does not lack a disproportionate impact just because it only affects minority and/or low-income residents. Instead, that is likely proof of disproportionate impact.

In the case of the terminals at issue in Vecinos, the court remanded the case to FERC to improve its analysis and did not vacate the orders authorizing the projects. But even if both the pipeline at issue in the Spire case and the natural gas terminals at issue in Vecinos continue to operate, the impact of the decisions is sure to be felt beyond these cases. FERC is reexamining its overall policy governing analysis of proposed pipelines. It will want to ensure that it more carefully weighs claimed need against environmental impact as well as the climate and environmental justice effects of those new projects.

Meanwhile, these decisions are also likely to have an impact on other cases pending in the D.C. Circuit. In a Delaware Riverkeeper Network case, argued in September, the court will consider an argument that FERC improperly ignored indirect impacts of the upstream fracking as well as the emissions that would increase due to the use of the gas downstream — and that it again failed to assess the significance of the greenhouse gas emissions.

In another case, FERC had granted a certificate to PennEast Pipeline Company to build a natural gas pipeline through New Jersey and Pennsylvania, but petitioners challenged the certificate arguing that the company’s reliance on affiliate agreements (again) to demonstrate need, and the failure to address the significance of the project’s greenhouse gas emissions, was arbitrary and capricious. In September, the company announced that the project would not go forward due to the failure to obtain other necessary permits.

Even though Representative Casten has ended his “Hot FERC Summer” campaign (with a Dolly Parton-inspired flourish), the court’s analysis of the commission’s decisions is likely to stay hot.

Instead of 'Hot Summer' for FERC, Commission Lands in Hot Water

Unlocking Opportunity With Policy
Author
Rachel Fakhry - Natural Resource Defense Council
Natural Resource Defense Council
Current Issue
September-October 2021
Issue
5
Parent Article
The Debate: Net-Zero by 2050: How Should We Achieve a Carbon-Free U.S. Economy?
Rachel Fakhry

The new U.S. Nationally Determined Contribution for 2030 under the Paris Agreement puts America firmly back into the global climate Olympics. An ambitious target commensurate with the urgency of the climate crisis, it is set to trigger seismic shifts away from our dependency on health and climate-damaging fossil fuels toward a more resilient, prosperous, and equitable U.S. economy.

In fact, an ambitious NDC is aligned with what improves Americans’ lives. It weds economic growth and the creation of millions of good paying jobs with markedly improved public health, a healthy natural world for our enjoyment, and the avoidance of more destructive extreme weather events. And several rigorous studies, one of which I led for the Natural Resources Defense Council, have demonstrated that it can be met at a modest fraction of our GDP: clean energy technologies are now affordable and reliable enough to replace many of our fossil fuel-reliant assets – oil-guzzling cars, coal-fired power plants, and so forth — for either a modest cost premium or substantial savings.

We therefore stand at a pivotal moment where we can confidently assert that unlocking this opportunity hinges on policy. The primary challenge in cutting our greenhouse gas emissions in half by the end of this decade rests in building the societal and political commitment to the transition. It will require a whole-of-government approach to drive decisive progress at the necessary nonstop pace. One bright beacon is that the federal government has all the necessary tools to deliver the pace of transformation, and many of the policy tools are familiar and have already been enacted in some form. In fact, a pile of rigorous analyses conducted ahead of the NDC announcement converged on this conclusion.

To achieve the pace of transformation, we need to pursue bold regulatory and legislative pathways that include both standards and incentives.

The Biden administration can deliver strong ambition with maximal implementation of existing administrative authority. For instance, the Environmental Protection Agency should pursue an ambitious multi-pollutant power-sector strategy under the Clean Air Act. This bears emphasis considering the overwhelming consensus that the power sector is the engine of the decarbonization of the economy in this decade and beyond as we increasingly electrify our homes and vehicles. In the transportation sector — the highest-emitting sector — EPA is expected to re-grant the waiver repealed by the Trump administration to allow states to adopt their own clean car standards. The agency should also move to quickly restore and strengthen the Obama-era clean car standards, and rapidly adopt new car and truck GHG emission standards to catalyze the transition to zero-emission vehicles. The Department of Energy has sizeable authority in accelerating the adoption of electric appliances in our homes and businesses in lieu of health-damaging gas appliances. The department must pursue appliance efficiency standards, to shift investment decisions toward high-efficiency electric options.

New, far-reaching climate and energy legislation is also critical to cut GHG emissions. Complex congressional political dynamics may complicate the passage of bold legislation. However, a series of independent studies have demonstrated that ambitious climate action would not hinge on Herculean congressional solutions, a la Obama-era Waxman-Markey legislation, but would instead be unlocked by sector-specific policy interventions, many of which already exist. In particular, a clean energy standard in the electricity sector would be game-changing and is a popular, cost-effective means of catalyzing the sector’s transition away from fossil fuels. A stable and long-term tax incentive platform for the range of clean energy technologies, such as electric vehicles and high-efficiency heat pumps and batteries, would be transformational in rapidly shifting consumer choices toward clean options. Achieving the transformation envisioned by the NDC is preconditioned on the large-scale buildout of interstate electric transmission lines and ubiquitous electric vehicle charging networks; legislation must confer robust financial incentives for the buildout of this job-creating infrastructure.

Critically, social commitment to the transition to clean energy can only be achieved if the federal government makes it as much about improving Americans’ lives as it is about averting a climate catastrophe. “Just transition” policies must be prioritized to meaningfully support communities adversely impacted by the decline of fossil fuel-related industries. The federal government should enact incentives for the domestic manufacturing of clean energy technology parts, and prioritize both emissions mitigation and new economic opportunities in pollution-overburdened communities and communities historically shunned from economic growth. Congress should pass President Biden’s American Jobs Plan, which delivers a bold climate vision tying together the host of critical policy interventions.

Solving the climate crisis may be the challenge of our time, but it also presents an unprecedented opportunity to consciously reimagine a U.S. economy that is more prosperous, sustainable, equitable, doesn’t choke its citizens in the name of progress, and does its part in avoiding a climate catastrophe.

It is high time to bring the iconic American ingenuity and leadership to bear and rise to these historic times.

Rachel Fakhry is a senior policy analyst at the Natural Resources Defense Council.

An All-of-the-Above Approach to Climate Policy
Author
Kelly Sims Gallagher - Fletcher School, Tufts University
Fletcher School, Tufts University
Current Issue
September-October 2021
Issue
5
Parent Article
The Debate: Net-Zero by 2050: How Should We Achieve a Carbon-Free U.S. Economy?
Kelly Sims Gallagher

Tempting as it is to seek a “silver bullet” in climate policy, it doesn’t exist. Policymakers must utilize a mix of regulatory, fiscal, market-based, investment, information and disclosure, education, and innovation policies to achieve a more globally competitive, low-carbon, resilient economy by mid-century. Compared with other countries, the United States has an incoherent, often contradictory approach to climate policy, and it shows. While U.S. emissions peaked in 2007, they remain 2 percent above 1990 levels. By comparison, the United Kingdom plans to achieve a 78 percent reduction below 1990 levels by 2035.

It’s important to set forth some principles for American climate policymaking. First, American policies must be predictable and durable so that private firms and individuals can make informed decisions about their investments. This will require bipartisanship so that policies don’t sharply zigzag depending on which political party is in office. Ideally, new climate legislation will be developed and passed with Republican, independent, and Democratic support because we must stop vacillating if we are to take advantage of the genuine economic opportunity in a low-carbon transition. The United States must be a real contender in the race for low-carbon markets around the world.

The economic transition must also be taken seriously. For workers who rely on carbon-intensive industries, vague assurances of clean energy jobs are hardly reassuring. It is not so simple for a parent to pick up and move to another town or state because a new job happens to be there. Moreover, many local towns, counties, and even states rely heavily on tax revenue from certain types of industry. If the local school or hospital depends on royalties to provide its services, then new sources of revenue must be found. Planning for the transition must thus begin now, town by town, city by city, county by county, and state by state. A recent National Academy of Sciences study on accelerating decarbonization called for the establishment of a new National Transition Corporation together with a National Transition Taskforce, regional planning offices, and a net-zero transition office in every state capital.

This transition must be genuinely fair and requires a new social compact. Fairness needs to be considered, among other dimensions, in terms of race, income, age, gender, and geography. Certain communities are much more vulnerable to climate change itself and others are vulnerable to the economic transition to a low-carbon economy. Others are fortunate to live in less risky places or to already be employed in a clean, low-carbon industry. Those more fortunate must recognize that they have a responsibility to help those at risk.

We need to be disciplined in our approach to climate policy. We need to set goals, performance metrics, and budgets and stick to them. Net zero by 2050 means we have 29 years to get from the 5,769 million metric tons in 2019 to no net emissions. We need a carbon budget and we need to hold ourselves accountable to it, just as most American families live within their own household financial budgets. An independent body should be established to track progress against our goals and recommend revisions to policy as needed. Congress needs to appropriate sufficient financial resources to achieve our goals.

Let’s invest wisely and efficiently. Every public dollar invested and new policy announced should get the most bang for the buck in terms of economic gain, climate mitigation, and resiliency. Let’s stop siting new infrastructure in flood-prone areas. Let’s rebuild houses, schools, and hospitals to be energy efficient and low carbon. Integrating distributed renewables and battery storage cannot only help reduce emissions but can provide power after strong hurricanes when the grid is down. We need an American infrastructure or development bank so that we can ensure that financing is available for all communities to invest in low-carbon, resilient infrastructure.

Finally, we must recognize that climate policy is really economic, labor, and social policy. The U.S. competitive position in low-carbon technologies and industries has eroded, and American firms and workers are not economically benefiting as they should from the global energy transition. China is doing a better job than the United States in domestically deploying and exporting renewable energy technology, building new nuclear capacity, and launching a thriving electric car industry.

America must invest in innovation and construct a market-based industrial policy that supports U.S. firms and labor while holding them accountable for performance. Public and private investments in research, development, and demonstration must be greatly increased, commensurate with the scale of the challenge of climate mitigation and resilience. Just as important is investment in our human capital so that we have the people to invent the new technologies, the entrepreneurs who can bring the ideas to reality, the workforce that can manufacture advanced technologies, and the government officials who can devise and execute smart policy.

Kelly Sims Gallagher is professor and director of the Climate Policy Lab at The Fletcher School, Tufts University.

Legal Pathways to Biden’s Climate Goals
Author
Michael B. Gerrard - Sabin Center for Climate Change Law, Columbia University
Sabin Center for Climate Change Law, Columbia University
Current Issue
September-October 2021
Issue
5
Parent Article
The Debate: Net-Zero by 2050: How Should We Achieve a Carbon-Free U.S. Economy?
Michael B. Gerrard

Achieving President Biden’s goal of net-zero greenhouse gas emissions by 2050, with interim targets of being halfway there by 2030 and having entirely clean electricity by 2035, is possible with law and technologies that already exist or can be readily imagined. In the process, many more jobs would be created than lost, and aspects of the environment beyond climate change would be greatly improved. But it is a massive undertaking.

The nature of this task was spelled out in detail in a prescient report, Pathways to Deep Decarbonization in the United States, issued in 2014 and 2015 by the Sustainable Development Solutions Network and the Institute of Sustainable Development and International Relations. Much of the same team, led again by Jim Williams, prepared an updated version in 2020 as part of the Zero Carbon Action Project.

Based on the 2014/2015 reports, in late 2015 John Dernbach and I began work on an edited volume that the Environmental Law Institute published in 2019, Legal Pathways to Deep Decarbonization in the United States. It analyzed how federal, state, and local law and private governance need to change for the United States to achieve goals that are very similar to those that the Biden campaign would announce a year later.

Five pillars underlie this effort.

Electricity decarbonization. In generating electricity, we need to eliminate all use of coal and almost all use of gas unless it is coupled with carbon capture and sequestration, or comes from biological sources. This will require a massive program to build new solar (both utility-scale and rooftop) and wind (both onshore and offshore) facilities, as well as more geothermal, hydropower, and other non-fossil technologies. The existing nuclear fleet needs to keep running as long as it can operate safely. A comparably massive program of new transmission lines is needed to bring the power from these new sources to where it is needed, coupled with storage to fill in the gaps when there is no wind or sun. According to the Zero Carbon Action Project, that will require 3,000 gigawatts of new generation by 2050 — an average of 100 gigawatts a year. (One good-sized nuclear power plant generates about one gigawatt.)

Energy efficiency. We need a 40 percent reduction in per capita energy demand. This would mostly come from improvements in the efficiency of appliances, buildings, and all manner of industrial operations.

Electrification. Most uses that now rely on fossil fuels need to switch to electricity. The biggest sector here is transport. This means that all new cars and SUVs need to be electric by about 2035, with trucks and buses not far behind (unless hydrogen or other technologies do the job). Electricity needs to be used instead of oil and natural gas to heat buildings and water; all new buildings need to be all-electric, and over time older buildings need to be converted. The added electricity demand that all this will create (even after aggressive energy efficiency programs) is one reason we need so much new generation and transmission.

Carbon capture and removal. It is difficult to abate the emissions from certain industrial operations, such as making cement and steel. For these, and for any remaining natural gas power plants, we need to capture the carbon dioxide before it leaves the stack, and either use or sequester it. We also need to remove large amounts of the carbon dioxide that is already in the atmosphere. Some of this can be achieved by planting more trees and better managing forests. Some can be done through improved agricultural practices, which will also reduce methane emissions. Beyond that, we need various technologies now being developed to draw carbon dioxide from the atmosphere.

Non-CO2 pollutants. Carbon dioxide is not the only pollutant that contributes to climate change. Methane, fluorinated gases, nitrous oxide, and black carbon are also important, and each can be drastically reduced.

All of this will require a great deal of new infrastructure. President Biden’s American Jobs Plan, if enacted by Congress, would be an important move in that direction.

Congress has not passed a major new environmental law since 1990. The partisan paralysis since then has been a major obstacle to progress in the fight against climate change (and many other things). There are several items Congress could enact that would greatly assist in meeting the 2050 goals. These include an economy-wide carbon pricing system; a clean electricity standard; stricter command-and-control regulations of air pollution; more subsidies for clean energy; and elimination of subsidies for fossil fuels. None of these would do the whole job, but any would greatly help.

Meanwhile, many states, cities, and corporations are making great efforts. But the federal government must take the lead — both the president (who has stepped up) and Congress (for which we are still waiting).

Michael B. Gerrard is a professor of environmental and energy law at Columbia Law School, and faculty director of the Sabin Center for Climate Change Law.

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