Climate Change Policy: Shifting Government Support Towards Clean Energy Sources
The existing government policies that are already on the books have been passed over the course of many years, have compounded in effect over the years, and have become a fixture of the existing economic landscape. In that regard, coming from an economy that was run exclusively through fossil fuels during most of the course of power generation, the utility industry, and embedded transportation infrastructure, many of the existing frameworks are set up in a way that was designed to support what we now consider non-clean energy sources. Given that we’re in a new century that has seen a rapid acceleration of clean energy sources and a commitment towards even greater penetration of clean energy sources, many climate policy advocates have put forth the idea that the best action we can take is to shift the existing web of government support from fossil fuels and towards clean energy sources.
Many advocate that the government’s role, driven by our elected leaders, should be to get clean energy in the fold as fast as is reasonably possible. According to Edward Maibach, Director of the George Mason University Center for Climate Change Communication:
Accelerating the transition to a clean energy economy is one of the best things we can do for the health, wealth and security of everyone in our nation–now and in the future. The fastest way to get this done is to demand clear energy leadership from our elected representatives. – Edward Wile Maibach, Director of George Mason University Center for Climate Change Communication
Similarly, J. Drake Hamilton of Fresh Energy noted that technology-neutral clean power policies can be paramount:
“We need to put clean energy, where it is not already, on a level playing field with fossil fuels. The number one important thing to do at the state and national level is a 100% clean electricity standard. And we don’t know that we can get to our goals solely with solar and wind and batteries, as there’s going to be a 10 to 20% gap. So, we need to be thinking technology neutral as we push for clean electricity.” – J. Drake Hamilton, Fresh Energy
Specifically, the following are two direct ways in which public policy could lead to the shift in government support towards clean energy sources:
- Eliminating Fossil Fuel Subsidies
- Renewable Tax Credits
- Clean Energy Financing Policies
- Decarbonize Government Procurement and Resource Allocation
- Reduce Regulatory Burden of Renewable Energy
Eliminating Fossil Fuel Subsidies
What is it: The current fossil fuel landscape sees the government providing the fossil fuel industry (including oil, gas, and coal) with various types and levels of government subsidies, which are financial incentives and rewards for fossil fuel production and generation. These subsidies can appear in a number of different ways, including loopholes in calculating payouts for coal mining on public lands, direct subsidies via fuel tax credit, indirect subsidies like the Last In, First Out Accounting method permitted to oil and gas companies, research grants into new fossil energy technologies, and more. Increasingly, one climate policy position has been to push for the removal of these fossil fuel subsidies, both the outright incentives and the hidden ones, as a way to force fossil fuel generation to compete on a more level playing ground with clean energy sources.
Is it enacted anywhere: The G7 nations (the United Kingdom, United States, Canada, France, Germany, Italy, Japan, and the European Union) set a deadline of 2025 for them to collectively eliminate fossil fuel subsidies, though obviously, each participating member of G7 has achieved a varying level of compliance towards that as-of-yet unreached deadline to date.
In Favor of Eliminating Fossil Fuel Subsidies:
“It is inconsistent, and ultimately counterproductive, to strive to meet urgent climate goals while at the same time increasing oil and gas production capacity, further extracting coal and developing additional coal-fired power generation. To level the playing field that currently undermines the prospects for renewable energy, subsidies to fossil fuels need to end, and both the public and private sectors must accelerate divestment from these harmful resources” – REN21
“We need to realign the incentives and tax breaks away from fossil fuels and towards energy conservation and renewable energy. We need to create new carefully targeted incentives for reducing carbon emissions. There’s no reason for draconian laws and tax hikes. There are new technologies already available, whether electric cars, cost-saving equipment for zero energy buildings, or electric grids powered by renewable energy and batteries. All the technology is available and ready to go. Only two things are needed: 1) to realign the incentives so people and companies do what’s right here– using off-the-shelf available technologies that will improve lives, save money, and improve the environment; and 2) some education and cheerleading to bring awareness of the many benefits of these energy-saving technologies.” – Joe Emerson, Zero Energy Project
“We need to eliminate subsidies for dirty energy, both the direct and indirect subsidies that fossil fuels and nuclear benefit from, in particular. Among those, the environmental impacts of dirty energy need to be stringently regulated and their costs internalized. Once we do that, the inherently superior economics and environmental impacts of wind and solar are going to play even more of a driving factor. RPS goals, for example, will become easier to meet once the economics are rationalized by phasing out subsidies and internalizing environmental impacts.”– Tim Judson, Executive Director at NIRS
“Ending fossil fuel subsidies and getting money away from fossil fuels is critical. Ultimately, we need all financial institutions to have portfolios that align with a 1.5 degree pathway. We’re looking at how this can be achieved through government policy and are also supportive of individual level changes such as people looking at how their own pension is invested” – Isabella O’Dowd, Senior Climate Change Specialist at WWF-UK
“Many countries depend on coal and oil as a source of energy. Reducing greenhouse gas emissions is actionable, and policies can be put in place to influence the necessary changes in energy use across transportation, building, agriculture, and industrial sectors. We need to come up with policies and objectives that can speed up technological innovation to reduce greenhouse gas emissions. The best policy to work towards these goals, in my opinion, is the removal of environmentally harmful fossil fuel subsidies as a necessary first step. This represents an economic, efficient, and environmentally-effective policy.” – Diana Imbugwa
“I’ve been writing about the social cost of carbon since 2016, particularly that it’s a non-partisan idea that’s bounced between the political axes. If we start calculating the cost of continuing business as usual with a social cost of carbon, then it becomes a heck of a lot harder to continue fossil fuel subsidies and it helps us to move the needle from coal and oil and gas and makes progress towards investments in the technologies that can really start to help.” – Tamara Toles O’Laughlin
“There’s always a risk in cleantech, while it’s great to have the shared mission you run the risk of advocates of different technologies fighting amongst each other. But one set of policies that would help us all fairly dramatically is revoking subsidies for fossil fuels, including both tax credits and pure subsidies, which are fairly substantial on a global basis.” – David Hunt, Hyperion Executive Search
“We need to shift subsidies away from those companies contributing to the problem and progressively move towards subsidizing actors that creating are solutions. We need to stop subsidizing fossil fuel industries and really quickly start massively shifting subsidies towards renewable energy systems. Same with agriculture, we need to shift from subsidizing industrial agricultural operations and move towards supporting regenerative agricultural practices.” – Chad Frischmann, Senior Director of Research & Technology at Drawdown
Against Eliminating Fossil Fuel Subsidies:
“Here we show that removing fossil fuel subsidies would have an unexpectedly small impact on global energy demand and carbon dioxide emissions and would not increase renewable energy use by 2030. Subsidy removal would reduce the carbon price necessary to stabilize greenhouse gas concentration at 550 parts per million by only 2–12 per cent under low oil prices. Removing subsidies in most regions would deliver smaller emission reductions than the Paris Agreement (2015) climate pledges and in some regions global subsidy removal may actually lead to an increase in emissions, owing to either coal replacing subsidized oil and natural gas or natural-gas use shifting from subsidizing, energy-exporting regions to non-subsidizing, importing regions” – Jessica Jewell, et. al, in Nature Journal
Read more:
Time for the US to End Fossil Fuel Subsidies: Natural Resource Defense Council
Fossil fuels are underpriced by a whopping $5.2 trillion: Vox
Renewable Tax Credits
What is it: Renewable energy tax credits can take the form of investment tax credits (ITCs), which provide a tax credit to owners of renewable energy facilities based on the cost of facilities, and production tax credits (PTCs), which provide a tax credit to owners of renewable energy facilities based on how much energy they generate. These financial incentives are offered to make it more appealing to investors to take a risk on renewable energy installations where they might have been more hesitant to pour money into technologies that had not yet matured.
Is it enacted anywhere: The United States originally enacted renewable energy tax credits in 1992, which have been renewed and expanded several times between then and the most recent version in the American Recovery and Reinvestment Act of 2009.
In Favor of Renewable Tax Credits:
“Wind and solar will need to be complemented by geothermal energy, hydropower, and biomass energy. This can be incentivized by modifying the current tax credit structure that currently favors solar and wind power. Despite unequal access to tax incentives, geothermal, hydropower, and biomass are valuable because they provide baseload power and are located in geographically diverse areas.” – The Environmental and Energy Study Institute
“While the pendulum of energy subsidies may be swinging in favor of renewables in the last year or two, such momentum can be lost easily if lawmakers don’t extend various incentives and credits that have helped drive it.”- Roddy Scheer and Doug Moss, Scientific American
“If people start to realize clean energy isn’t going away, but it’s growing consistently into the future in a way that allows for investment to happen, continual cost reductions, more steady jobs, then that’s where we’ll see a real fundamental shift. We need to go from an environment where clean energy does well when a tax credit is in place but goes away when the credit is gone, or where it does well under a Democratic Administration but not a Republican one. When expectations are in agreement that this is the way the future looks, policy that creates those expectations is the absolute key to having these changes be sustainable.” – Greg Nemet
Against Renewable Tax Credits:
“The government shouldn’t pick winners and losers in the marketplace – but they try.
Renewable energy, driven by state and federal subsidies, is driving out baseload producers and jeopardizing the reliability of the electricity grid. According to ERCOT’s 2017 Capacity, Demand, and Reserves report, the expected 2018 peak reserve margin for the Texas electricity market has dropped to 9.3%, below the 13.75% target. Six months earlier, ERCOT had projected a reserve margin of 18.9%. This drop is primarily due to retiring generation sources, mostly coal-fired plants. Some would see this as a success, but favoring less reliable sources has an obvious downside—unreliability.”- Will Morgan, Texas Public Policy Foundation
“I believe that solar energy still needs some kind of compensation to account for its beneficial environmental impact compared with traditional energy sources based on fossil fuels. Although the tax credit has proven in the past to be a powerful instrument in helping to promote the various forms of renewable energy, I believe that moving forward a performance-based approach using tradable certificates like SRECs [solar renewable energy certificates] would further improve the acceptance of renewable energy and significantly boost its progress by better integrating the investment world.”- Frank Rieger, Sol-Up USA
Read more:
The Basics: Renewable Energy Tax Credits – US Bank
Renewable Electricity Production Tax Credit – DSIRE
Clean Energy Financing Policies
What is it: Despite the long-term economic benefits that clean energy programs reliably bring, a significant hurdle towards implementation continues to be the high upfront, capital-intensive nature of many of these opportunities. Even if the long-term savings could pay for the initial investment multiple times over, interested entities will not always have the money or credit available to pay for equipment and installation. In an attempt to smooth out this friction, clean energy financing policies are intended to provide accessible, low-barrier financing offerings for those who might otherwise have to skip on clean energy installations. These offerings can range from rebates to low-interest or no-interest loans, on-bill repayment programs, unique mortgage terms, and other tools that leverage government backing to bring about affordable clean energy projects.
Is it enacted anywhere: The U.S. Department of Energy has successfully used its Property Assessed Clean Energy (PACE) program for years to finance energy efficiency upgrades and renewable energy installations in households, commercial buildings, and industrial sites that would otherwise struggle to come up with the funds.
In Favor of Clean Energy Financing Policies:
“National Climate Banks and other clean energy financing mechanisms are so important because they can achieve enormous scale. Grants are essential, but grant funding can run out. Providing a low-interest loan can save people money from day one and lower climate pollution but also create a repayment stream that can be repurposed to issue more loans and even attract private capital. This pathway can drive scale and reduce costs, enabling us to address the climate crisis in years rather than decades.” – Hal Connolly, Policy Director at The Climate Reality Project
“Climate investment over the next decade will require a broad range of investment approaches flowing into climate change projects, both for mitigation and for adaptation. There are many private investment, public policy and public-private partnership opportunities that will create economic growth while also addressing climate change. For example, the U.S. renewable energy tax credits have been incredibly important and effective in mobilizing investment into the U.S. renewable sector. We’ve also seen great examples of municipal green bonds where the proceeds drive investment in climate projects within a city. At the Global Innovation Lab for Climate Finance, a program of CPI where I work, we’ve had success with innovative approaches to financing renewables, for example, Energy Savings Insurance. One of the big barriers to implementing energy efficiency projects is reluctance to upgrade equipment because the ultimate energy savings aren’t exactly known upfront. This is an example of an approach that mitigates that risk while driving energy savings.” – Bella Tonkonogy, Climate Policy Initiative (CPI)
Against Clean Energy Financing Policies:
Regarding the current design of incentive programs: “California’s programs to subsidize rooftop solar and electric cars are disproportionately benefiting wealthier homes that often use more energy than they need to live comfortably.” – Eric Daniel Fournier, UCLA’s California Center for Sustainable Communities
Read more:
Decarbonize Government Procurement and Resource Allocation
What is it: In many energy and climate initiatives, the government has been a leader in both a symbolic and also a market-based way. Government buildings have been the first to have minimum efficiency standards apply to them, and in certain local government fleets are the first to widely adopt electric vehicles, as two examples. But the purchasing power of the federal government is immense, so the idea behind this policy is to require carbon lifecycle considerations when determining which types of products the federal government purchases. Not only would buying lower carbon products result in fewer emissions in the direct sense of what they are purchasing, but because the federal government is such a large buyer the market signal would then inherently push many private companies to decarbonize their supply chains (whether those products are going to the government or to be purchased by the general public) so they had a greater chance at winning government products.
Is it enacted anywhere: According to a report by the Organisation for Economic Co-operation and Development, “sustainable public procurement has been introduced by at least 56 national governments and many more local governments, who have long understood how public procurement can improve sustainability, including through lowering greenhouse gas emissions.”
In Favor of Decarbonizing Government Procurement:
“We need a brand-new approach to the GSA Schedule for federal government procurement. You would say that all prices on the GSA Schedule would be fully burdened by the social cost of carbon and it would revamp the way the government purchases everything, from aircraft carriers to toilet paper. The federal government procures 20% of everything in the United States, so if they were to say that all things they buy must be the lowest carbon form of what we’re buying then they would literally reshape all the supply chains in the United States. This is the single most substantial action the federal government can take, and it wouldn’t even require approval from Congress.” – Jigar Shah, Co-founder and President of Generate Capital
“What matters is that President Biden requires that all government procurement is for all green products—cement, EVs, clean energy; using the power of federal government purchasing to create markets and accelerate transition” – Phil Radford, Founder and CEO of Progressive Power Lab
“We have a vision of a world that is more equitable, just, and sustainable. One of the most important tools that governments have to make changes to the economy, environment, and society in general is how they raise and spend public money through their budgets. We work to promote transparent and inclusive budget practices so that governments bring in citizens into their decisions and allocate resources effectively to fight poverty and promote equitable and sustainable development.” – Delaine McCullough, Head of Climate Finance Accountability at International Budget Partnership
Against Decarbonization of Government Procurement:
” A fundamental problem is that there is no general agreement on what green procurement is or how best to implement it. Also, several barriers exist to broader adoption, both within the federal government and in the broader economy. Those include inadequate information, lack of common standards, concerns about costs, and both market and technical uncertainties.” – Green Procurement: Overview and Issues for Congress
Read more:
The Power of Procurement: Cutting the federal government’s carbon emissions – Clean Energy Canada
Curbing Carbon from Consumption: The Role of Green Public Procurement – Climateworks Foundation
Reduce Regulatory Burden of Renewable Energy
What is it: Much regulatory burden exists in the installation of renewable energy, in particular when dealing with solar panel installation on the rooftops of businesses or homes. Extensive permitting requirements, application fees, and general red tape and paperwork serve to delay projects in a way that makes them less desirable, more burdensome to potential building owners who are on the fence, and can simply impede the progress of renewable energy installation in many locations. Permitting for these installations varies greatly from jurisdiction to jurisdiction, only adding to the difficulty and confusion. Local governments who want to see solar installations grow in number can aid that progress by reducing unnecessary regulations that stand in the way of customers and solar installations.
Is it enacted anywhere: In late 2020, Alberta completed their process of reducing unnecessary red tape by one-third in order to reduce costs, speed up approvals, and hasten growth of the solar industry in the Canadian province.
In Favor of Reducing Regulatory Burden of Renewable Energy:
“Making solar permitting easier is critical. There’s a different permitting process for literally every city and county in the nation, which causes a lot of unnecessary red tape and costs. In places like Australia and Germany, solar can be installed quickly with very little paperwork and red tape, but in the U.S. there are too many different codes and standards. We need to standardize the process for safely installing and permitting solar in the U.S. Doing so will speed up residential installations, bring installation costs down, and help with climate change.” – Tor Valenza, CEO and CHief Solar Marketer of UnThink Solar
Against Reducing Regulatory Burden of Renewable Energy:
“When asked for the reason behind these changes, such as major issues with the current regulations, Parko said, “They’re interested in protecting the prime agricultural farms.” – Tom Parko, Weld County director of planning services
Read more:
Peeling Back the Red Tape to Go Solar – U.S. Department of Energy
