Solar Tribune

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.

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

fossil fuel subsidies climate change

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

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

Fact Sheet: Fossil Fuel Subsidies: A Closer Look at Tax Breaks and Societal Costs: Environmental and Energy Study Institute

Fossil fuels are underpriced by a whopping $5.2 trillion: Vox

 

Renewable Tax Credits

clean energy subsidies climate change

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

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 Value of Energy Tax Incentives for Different Types of Energy Resources – Congressional Research Service

The Basics: Renewable Energy Tax Credits – US Bank

Renewable Electricity Production Tax Credit – DSIRE

 

Clean Energy Financing Policies

File:Bic Clean Energy Annaka.jpg

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

 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:

Clean Energy Financing Programs: A Decision Guide for States and Communities – U.S. Environmental Protection Agency

Financial Incentives to Enable Clean Energy Deployment: Policy Overview and Good Practices – National Renewable Energy Laboratory

State Clean Energy Finance Banks: New Investment Facilities for Clean Energy Deployment – Brookings Institute

 

Decarbonize Government Procurement

GSA leases, building improvements get go-ahead from Senate panel - Washington Business Journal

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

 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 Role of Public Procurement in Low-Carbon Innovation – Ogranisation for Economic Co-operation and Development

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

 

This page is a part of the Solar Tribune Series on how individuals and policymakers can tackle climate change. Click here to see the overview of this series and see the other categories of action.

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