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Is a National Clean Energy Standard the Answer?

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For the purposes of these discussions, let’s all put politics aside and judge the proposals by their content and not their proposer’s party                                                                     

                                                                            --Green New Directions

The 2018 midterm elections swept the Democrats into control of the US House of Representatives and climate change onto the landing pages of most media networks. Since the elections, global heating [i]has continued to be at or near the top of voter priority lists. A recent poll conducted by the communications programs at Yale and George Mason Universities shows that 40 percent of eligible voters now see climate as crucial to whom they’ll vote for in 2020.

Climate polled as a voter priority in previous elections. However, the vouchsafed preference for an aggressive federal environmental agenda never translated into adequate action being taken by either Congress or the president at the time, i.e., G.W. Bush, or Obama.  Adequate that is to keep from crossing the 1.5 degrees Celsius (2.7 degrees Fahrenheit) threshold above which scientists warn the most devastating and likely irreversible impacts will occur.

I grant it’s not easy to protect the environment while simultaneously trying to save the economy and defending the nation against aggressors—foreign and domestic. The problem, of course, is that neither humanity nor the economy stands much chance of being saved if the physical environment becomes so polluted and heated as to make living in it problematic.

This time around, there is little reason to believe that climate will flash and burn in the minds of voters as it has in the past. A new generation of environmental defender has joined with earlier generations to add its voice to the cries for environmental action—a collective voice raised louder than any that has gone before.

Nature herself looks to have grown tired of the political bickering and half-measures being taken by humans to effectuate the transition to a low-carbon economy. She now appears to be taking matters into her own hands. Melting ice caps, torrential rains, raging forest fires, persistent droughts, and the extinction of flora and fauna have become daily reminders of the consequences of unsustainable human practices.

With constituents expressing concerns over climate and the role it will play in deciding whom to support in the next election, members of Congress on both sides of the aisle, and all 24 of the Democratic candidates for president are crafting their own branded answers to the crisis.

In response to proposed legislation and the policy statements of individual candidates, I’ve started a series of discussions on those I believe will most influence the policy debate during the current election cycle. Other proposals will be referenced—where appropriate with links—although without much detail.

Within each discussion, I’ll be providing readers an overview of the proposed policy, how it compares to other approaches, and a read on the political undercurrents it will be buffeted by as it responded to by various interests.

Clean Energy Standard Act of 2019

First on the series’ agenda is The Clean Energy Standard Act of 2019 proposed by Senator Tina Smith (D-MN) and Assistant Speaker of the House Ben Ray Luján (D-NM). The legislation’s objectives are to:

  • Establish the federal Clean Energy Standard (CES) to put the US on a path to net-zero electricity emissions. Under this plan, every company selling retail electricity would be asked to increase the amount of clean energy provided to its customers, with the recognition that different regions will be starting the clean energy transition at different benchmarks;  
  • Create a CES credit trading market, which would allow retail electricity sellers to cost-effectively achieve clean energy targets without taxes or other federal revenues; and,
  • Encourage companies to bring cost-effective, emission-free technologies to market. The bill would further incentivize development and deployment of zero-emission technologies, including long term storage, that can be turned on or off at any time and help balance the electric grid as the transition to clean energy continues; and
  • Significantly reduce emissions and benefit public health and the environment.

The bills (S. 1359 and HR 2597)  are technology-neutral enabling power sources from renewables, advanced nuclear, battery storage, and carbon capture to replace fossil fuels for electric generation. Under the Act, the nationally averaged percentage requirement for clean electricity increases from approximately 51 percent of retail sales in 2021 to approximately 77 percent in 2035 and approximately 96 percent in 2050.

It is interesting that Senator Smith and Representative Luján chose the policy approach they have. The last time Democrats controlled the House of Representatives Speaker Pelosi appointed a select committee to focus on climate matters. The Select Committee on Energy Independence and Global Warming was chaired by then-Congressman Markey (D-MA). Its work resulted in a cap-and-trade bill (Waxman-Markey).

The bill narrowly passed the House never making it onto the floor of the Democratic-controlled Senate. Its defeat is said to have left an indelible mark on Speaker Pelosi’s mind and considered partially responsible for the cautious tack she has taken with the current Special Climate Crisis Committee. 

Other attempts to put a federal clean energy standard in place have been made. Senator Lindsey Graham (R-SC) sponsored the Clean Energy Standard Act of 2010. Had it passed the Act would have set a clean energy standard of 50 percent of electricity sales by 2050.

Senator Jeff Bingaman (D-NM) proposed his version of a clean energy standard in 2012. Bingaman’s plan would have set a target of 24 percent of electric generation beginning in 2015—then rising by three percent per year until reaching 84 percent in 2035.

Given the defeat of the three pieces of legislation, it’s fair to ask: why Senator Smith and Congressman Luján would choose to reintroduce a clean energy standard into the climate defense debate? The quick answer is that things have changed since Markey, Graham, and Bingaman first proposed their legislation. How much they have changed is yet to be determined.

Carbon tax versus cap-and-trade

Carbon taxes and cap-and-trade represent different approaches to pricing carbon. Under a tax scheme, the price of each emitting unit is set, leaving the amount of emissions subject to the tax to be decided by market forces. Under a cap-and-trade scheme, the government establishes the emission reduction targets leaving the price of additional units for the market to decide. There are several cap-and-trade and carbon tax bills pending House and Senate action.

Carbon pricing—both cap-and-trade and a tax--has proven difficult to put in place in the United States and elsewhere, e.g., Canada. Although the reasons in each case are different, they are all political in nature.

For economists, a price on carbon is the most cost-efficient way to reduce the greenhouse gas emissions responsible for the world’s heating. For policymakers, who must daily come to grips with the messiness of politics, the way forward is not nearly as cut and dried. To-date the biggest barrier to a carbon tax is the unwillingness of voters at the state level to support one.

Washington State voters, for example, have defeated a state carbon tax twice—in 2016 (I-732) and again in 2018 (I-1631). Defeat of the two Washington State tax initiatives has been laid at the feet of fossil fuel companies and their well-financed opposition campaigns. After all, why else would a state that just passed the most forward clean energy standard reject so efficient a way to protect the environment? Why indeed?

The “purity” of pricing carbon loses some of its luster in practice. For example, a mark against the tax is its regressive nature. The tax impacts poorer populations more than the wealthy because energy expenditures represent a much higher percentage of low incomes.

The 2016 Washington State proposal was opposed by social justice, environmental and health advocates who sought to use the revenue for renewable energy, mass transit, and other green infrastructure projects, and to aid communities most affected by fossil fuel pollution or climate change. 

Washington State voters again rejected a carbon tax in 2018 (I-1631). The second time around the proceeds of the tax would have been used in ways approved of by environmental justice advocates. These included easing the burden on low-income energy consumers; assisting in the transition of fossil fuel workers out of that industry; and, investing in ways to make the state’s natural ecosystems and communities more resilient to the ravages of climate change.

Carbon taxes, in general, are intended to provide an incentive for companies to manufacture their products in ways that result in fewer emissions. Fewer emissions, however, can mean higher costs for power producers and manufacturers—whether in the need to purchase more efficient equipment or simply to pay the tax. The higher costs are naturally passed on to consumers, just as tariff costs are.

The citizen dividend helps offset higher consumer prices. The dividend provisions in the carbon tax and hybrid cap-and-trade bills waiting to be acted on by Congress, excluding the Clean Energy Standard of 2019 proposal, divide the rebates among all eligible recipients, i.e., every citizen and lawful resident. A billionaire will receive the same rebate as a single mother on welfare.

Low-income populations are not the only ones seeking justice in the case of the transition to a low-carbon economy. Workers in the fossil fuel industry, for example, will inevitably be negatively impacted in terms of lost employment. Coal miners are an obvious example. Yes, the weakness of their industry has more to do with the price competitiveness of coal versus natural gas and renewables. However, it also has to do with the cost of regulatory compliance.

Until there is consensus on what to do with the revenues from a carbon tax, I seriously doubt it will ever become law. It is somewhat telling that presidential contender Inslee has stayed fairly silent on the matter both in his speeches and in his climate mission plan. It’s what losing twice in an environmentally conscious state like Washington can do to you.

One other provision that has popped up in carbon tax proposals that is potentially poisonous from a political perspective is what I would call the get-out-of-jail-free card. The clearest statement of the provision appears on the Climate Leadership Counsel website under the heading of The Four Pillars of Our Carbon Dividends Plan. Number IV reads:

IV.   REGULATORY SIMPLIFICATION

The final pillar is the streamlining of regulations that are no longer necessary upon the enactment of a rising carbon fee whose longevity is secured by the popularity of dividends. Many, though not all, Obama-era carbon dioxide regulations could be safely phased out, including a repeal of the Clean Power Plan. A robust national carbon price would also make possible a historic emissions provision stipulating that no party should be liable for damages from past emissions that were legal at the time. To build and sustain a bipartisan consensus for this regulatory simplification, the initial carbon fee should be set to significantly exceed the emissions reductions of all prior climate regulations, and the carbon fee should increase from year to year. (emphasis added)

I’m going to try to refrain from saying too much about the provision. I think readers should make up their own minds on the matter.

I will say, however, that I’m curious about the need to rescind existing environmental regulations. It would be possible to use the language in HR 763, under Section 8,  which states the Administrator shall not enforce any rule limiting the emission of greenhouse gases from the combustion of that fuel under this Act (or impose any requirement on any State to limit such emission) on the basis of the emission’s greenhouse gas effects. (emphasis added)

HR 763 is favored by the Citizens Climate Lobby, which is one of, if not the, leading grassroots organizations in support of a carbon tax.

Certainly, I understand why fossil fuel companies are being given the card. The question that needs to be answered is whether the benefit of rescinding regulations and absolving companies of any liability for past acts is greater than the cost to society of such dispensations.

The harsher impact of the carbon tax on some individuals more than others is repeated in terms of economic sectors. The application of a carbon tax across all sectors—not simply power generators—inevitably will raise the numbers of opponents, e.g., farmers. Although there are “fixes” for such problems, they too become problematic, as was the case in Washington State’s conundrum of how the tax revenues were to be divided. I say this notwithstanding paid for surveys showing “overwhelming” support of a national carbon tax. A matter I will address in a future article.

As seen in Washington State, opposition to a carbon tax wells up when a real proposition is on the table. It is not to say that the economists are wrong about the efficiency of a carbon tax. It is a reflection on the inefficiencies of politics

As Noah Kaufman points out the same characteristics of CES that economists and climate advocates see as limitations could be advantages that help overcome the political constraints that have prevented the passage of serious climate policy in the United States to date. (emphasis added) The downsides of a CES that Kaufman considers as possible strengths are:

• a gradual decline of the US coal industry,

• delaying confrontations with powerful industries, and

• avoiding concerns about price pain for energy consumers.

The gradualness of a CES relative to the suddenness of a carbon tax and the all-encompassing cultural change of a green new deal like the one contemplated by the Markey/Ocasio-Cortez resolution holds a certain allure for moderates. I would remind readers that kicking cans down the road is a time-honored way of dealing with thorny problems in the political realm. Notwithstanding that a CES alone won’t get the nation to where it should be along the Celsius scale, it is a step forward.

One of the strongest reasons lawmakers may seriously consider a national clean energy standard is its resemblance to state renewable portfolio standards (RPS). State RPS’s establish a percentage of electric generation that must come from renewably sourced energy, e.g., solar wind, geothermal, and biomass. Like HR 2597/S. 1359 an RPS can include any or all non-emitting energy sources and carbon capture technologies.

Twenty- nine states, the District of Columbia, and three territories have an RPS. There are also eight states and one territory that have set renewable energy goals.

Voter feelings towards renewables tend towards warm and fuzzy—unlike the feelings Washington voters exhibited towards a carbon tax. [ii] RPS standards have shown themselves both popular and effective at the state level in multiple ways, although less efficient than a carbon tax.

Although an expensive means for reducing CO2 emissions on a mano y mano basis, portfolio standards are not simply about carbon. The standards can be designed to reflect the specific circumstances and goals—both climate and non-climate related—of a state. For example, they have been used by states to support the creation of new industrial clusters and as a source of replacement jobs for out of work miners in fields of the 21st century.

These state-based programs have not only been successful; they have been widely embraced by voters and shown themselves effective at both defending their state’s environment and growing their economies.

As suggested by Resources for the Future specifically about the Smith-Luján legislation—

Policymakers interested in reducing carbon emissions from the electricity sector in a cost-effective way could find that a CES is a viable alternative to putting a price on carbon. Though not a perfect instrument, it likely holds more political appeal than a carbon tax and could be tacked on to existing RPS programs. Implementation of a CES at either the state or federal level could have enormous potential to transform the electricity sector.

The question ultimately isn’t really whether a clean energy standard is a complete answer for America, but if it will be seen as a viable measure by enough lawmakers to turn it into law.

In closing, I quote Rob Cowin of the Union of Concerned Scientists—

A well-designed national clean energy standard could be the game changer we need to cut power sector carbon emissions. This legislation would serve as an important down-payment toward our climate goals by accelerating the clean energy momentum already underway across the nation.

I hope readers will let me know what they think.


[i] The Guardian has updated its style guide to introduce terms that more accurately describe the environmental crises facing the world. Instead of “climate change” the preferred terms are “climate emergency, crisis or breakdown” and “global heating” is favored over “global warming”, although the original terms will continue to be used.

Increasingly, climate scientists and organizations are changing their terminology, and using stronger language to describe the situation we’re in.

What’s next? In a coming installment of the Green New Directions series, I will be reviewing the climate defense plan of Governor Jay Inslee (D-WA). Inslee’s plan is so far the closest to the aspirational goals of Ocasio-Cortez’s Green New Deal--which accounts for her having endorsed it.

In the meantime, I would direct readers to click on Zero Net Fifty to listen to a discussion I had with my colleague Jennifer Delony on both the Smith-Luján bill and a University of Chicago RPS study that questions their value.

Look for the next issue of Climate Politics/Capitol Light on June 1, 2019. You’ll find it at www.civilnotion.com under the heading of Climate Politics.

 

Joel Stronberg's picture

Thank Joel for the Post!

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Discussions

Matt Chester's picture
Matt Chester on May 30, 2019 10:30 am GMT

Great overview, Joel. I think federal clean energy policies can and maybe even should be the path forward from a technical/market standpoint, but they seem so much more set up for failure than state measures. As you noted, even Washington state has failed to get a voter consensus on a carbon tax, so it's hard to imagine how federal lawmakers in Washington DC would win enough favor to implement what I might argue is a necessary federal carbon tax. Hopefully the Green New Deal debate is the first step towards a federal conversation that actually takes flight, but for right now it seems like state capitol buildings are indeed the true fighting ground for clean energy policy in the United States

Bob Meinetz's picture
Bob Meinetz on May 31, 2019 3:46 pm GMT

Joel, in a lifetime of public advocacy on various issues (mostly antiwar, but runner-up would be the environment) one recurring theme I've recognized about legislation, state or federal: the most efficient (read: effective) laws are typically the shortest in length. Whoever the author, whatever the cause - any bill longer than 100 pages is being padded with carve-outs, handouts, or "fixes," as you so eloquently label them, to special interests.

A quintessential example of efficient legislation is the Sherman Antitrust Act of 1890. Barely three pages in length, it was used to great effect to dismantle the trusts established by John D. Rockefeller, vehicles which threatened competitive capitalism to its core. Shortly after becoming law, it was stripped of its power by Supreme Court challenges. Resurrected by the administrations of Roosevelt #25 and Taft, it was latest used in the 1990s to dismember Microsoft's stranglehold on personal computing.

In the present example, the phrases "cap-and-trade", "net-zero", "standards", and "goals" make my skin crawl. Each is rife with opportunities for exploitation by special interests - no. Climatologist James Hansen has the most promising, efficient proposal for climate legislation, one largely absent from the national radar not because it wouldn't be effective, but because it would be too effective. Called by Hansen fee-and-dividend, by others a revenue-neutral carbon tax, it goes something like this:

1) Exact a fee on all extracted, carbon-emitting fuels at the source: port of entry, wellhead, mineshaft, etc., based on the molar equivalent of carbon they will emit upon combustion.

2) On a regular basis (Hansen suggests semi-annual or monthly) subtract administrative costs from the total revenue collected.

3) Divide what remains into equal shares, one for each taxpayer in the country.

4) Send each taxpayer a check. Rinse, repeat.

5) Periodically, raise the tax as necessary to achieve greater reductions.

Taxpayers who emit lots of carbon are ultimately penalized by higher prices for the disproportionate environmental damage they're causing. Taxpayers who emit less than the national average, however, actually profit from their carbon economy.

British Columbia's 2008 revenue-neutral carbon tax quickly became a model after reducing gasoline consumption 16% in the province within a few years of becoming law. Since, it's come under fire for favoring special interests (distributions were being made via tax credits). No, says Hansen: send a check - cash on the barrelhead. Republicans love it because it's not actually a tax. Democrats love it because it helps the environment. Oil and coal interests hate it, because they take a hit on profits - but that's kind of the point, isn't it? Everyone else has been taking a hit on health and environmental destruction - it's time to hold them accountable (and everyone loves it because, hey, it's a check).

Ned Ford's picture
Ned Ford on Jun 1, 2019 4:58 pm GMT

I think this is a valid effort.  I recently did some calculations intended to compare the cost of a carbon tax intended to price fossil fuels out of the market to the cost of eliminating fossil fuels by paying for them.  I won't go through the numbers here, but in principle, funding all the wind and solar we need costs about 10% of the revenue raised by a $25/ton carbon tax.   And that's an absurd proposition because we don't need to fund it all.  A small incentive, perhaps just 50% of the value of the energy produced for the first ten years of a wind and solar facility's life, would be more than the existing subsidies for wind, and probably more than the solar industries will need once their existing subsidies expire.  Something on the order of 1 to 5% of the tax revenue raised by a $25/ton CO2 tax.

The biggest opportunity is if this legislation can truly incentivize efficiency.  Total U.S. efficiency programs run by utilities today is about an $8 billion industry.  It produces about $30 billion in savings every year, and the saving occur in a declining trail from the first year to about year 20, so the cumulative effect of all past years is something more than 10% of total U.S. electricity spending.

We could double U.S. efficiency program activity in a year or less if we could figure out how to get 44 states to raise their efforts to the level of the best six states. 

All of this saves money today.   All the wind, all the utility scale solar, and all the efficinecy.  If we get to the last 40% of fossil generation and there are still some dirt cheap fossil plants left, we can deal with that question then, but right now at least 74% of U.S. coal, natural gas and nuclear plants are more expensive to operate than the cost of power from new wind and utility scale solar.  And efficiency is cheaper than anything - so cheap it is in fact too cheap to meter.

This is also the primary solution to all other fossil energy use.  Without abundant clean renewable electricity at low cost, we have no alternatives to speak of for petroleum or non-electric natural gas use.   With cheap renewable electricity, we easily eliminate 60% of petroleum with electric vehicles, and about 40% of natural gas with air to air heat pumps.

That's not everything we can do with clean electricity, but it's enough to talk about for now.  I calculate that 150% of our total generation can come from wind and solar by 2040, 10% of the future supply will be existing wind, solar, hydropower, biomass and geothermal, but the non-wind and non-solar resources aren't able to expand much.   With 160% of our current supply in 2040, all of it clean, we eliminate about 70% of total U.S. greenhouse gases, including 4% which is methane from fossil fuel extraction wastes.

I can't read your proposal in detail right now, so I may get back to this.  I think the biggest change we need is a clear vision of a sustainable future, including how much cheaper electricity will be, and how much cheaper driving and home heating will be.   But a Federal policy that really puts this into a framework that takes advantage of the new economics of energy would help a lot.   Carbon taxes is not that framework.  People will sacrifice home maintenance, health care and food consumption to pay higher energy prices.   The existing price advantage wind and solar have over fossil fuels is equivalent to about a $50/ton CO2 tax.   It works, but we need something that speeds things up.

Geoff Thomas's picture
Geoff Thomas on Jun 19, 2019 1:39 am GMT

Sounds somewhat complicated, - how about, seeing that Wind and Solar are so much cheaper than the others, we just level the playing field, - no subsidies for any electricity generation except what every company can expect through costs against tax payment, already claimable by all other companies in the economic sphere.

The retail companies will sort out cost versus supply, availability/time of use/storage/etc, and compete as they always do, - ruthlessly,  - the customers will win, new technologies can be generously aided by Govt Grants, with independant oversight, but not at the expense of the consumer, - this cheap electrical supply will particularly assist high energy consuming industries such as aluminium and steel production plants, cement manufactories, etc. and encourage them to develop and use new technologies, eg. particular waste products in cement, which may be expensive to prepare, but longer lasting or whatever, - at least it can all come down to the direct cost of energy with the least cost paramount.

The good old Kiss, keep it simple stupid.

Cheers,   Geoff.

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