Climate 411

Washington state’s landmark climate law continues to build a greener future for Washingtonians

Photo of Mount Rainer

Photo Credit: Bryan Dickerson via Pexels

Results were released today for Washington’s third quarterly auction of 2024, administered last Wednesday by the Department of Ecology (Ecology). During the auction, participating entities submitted their bids for allowances. Under the Climate Commitment Act — Washington’s landmark climate law which sets a binding, declining limit on pollution — Washington’s major emitters are required to hold one allowance for every ton of greenhouse gas that they emit, with the total number of allowances declining each year. With fewer allowances available each year, this system requires polluters in Washington to reduce their emissions in line with the state’s climate targets. Distributing allowances through quarterly auctions allows Ecology to both regulate harmful emissions and raise critical revenue to invest in frontline communities, ramp up clean job creation, bolster climate resilience, and accelerate further emissions reductions.

Here are the results, released today:

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Posted in California, Carbon Markets, Cities and states, Economics, Greenhouse Gas Emissions, News, Policy / Authors: / Comments are closed

Locking in the U.S. NDC: New report finds policy combined with IRA can ensure significant power sector reductions and major benefits

Photo Credit: Laura Penwell via Pexels

As we race to decarbonize the economy this decade, the Inflation Reduction Act (IRA) has provided an enormous economic opportunity for the clean energy industry. With costs of deploying clean energy solutions becoming so low, we are in a critical window of time to adopt new carbon policies and lock in “cost-optimal” model projections and go beyond them to realize a pathway for the U.S. that’s consistent with a 1.5°C warming trajectory.

However, according to a recent report by the Rhodium Group (RHG), the United States is not on track to meet its nationally-determined contribution (NDC) goal of 50-52% economy-wide emissions reduction in 2030 from 2005 levels, with RHG projecting a reduction of only 32-43%.

With this carbon policy imperative in mind, a new peer-reviewed journal article, building on a report by Resources For the Future (RFF), demonstrates how policies that constrain carbon emissions in the power sector could unlock the full potential of IRA incentives in order to achieve the economy-wide goal of 50-52% emission reductions from 2005 under the U.S. NDC, with 80% emission reductions in the power sector.

Electricity Sector Carbon Emissions

The article finds that combining a carbon cap with the IRA significantly drives down the cost of achieving reductions to meet the cap. Modeling showed a marginal abatement price of $27/ton to achieve 369 million tons of additional abatement and reach 80% power sector emission reductions by 2030, compared to 2005 levels, which is nearly 60% cheaper when compared with model scenarios that only have a carbon cap, without the IRA. The combination of a carbon cap with the IRA would also lower consumer costs this decade to roughly $114/megawatt hour (MWh), compared to $117/MWh without either policy in place, and create significant net climate and health benefits due to deeper reductions in fossil fuel pollution.

Net Social Costs and Benefits

Background

The U.S. NDC is ambitious and aligned with recent COP28 decisions consistent with keeping a 1.5°C warming trajectory within reach. Achieving the NDC would demonstrate global climate leadership and be significant, given that the U.S. contributes about 11% of global emissions. The power sector is the core component for achieving the NDC, with numerous studies continuing to show that the majority (about two-thirds) of near-term abatement is projected to have to come from the power sector. Moreover, the power sector plays a key role in decarbonizing the economy through electrification of other sectors such as buildings, transportation and heavy industry.

To reach the 2030 target, U.S. power sector emissions need to drop by roughly 80% by 2030, compared to 2005 levels, or “80×30”. This goal will require rapid acceleration of electric power sector decarbonization, striving to triple the annual deployment of new clean energy projects and phase out fossil fuel pollution — consistent with the COP28 pledges.

Recent federal and state-level policy actions are accelerating progress towards 80×30. The IRA and the Infrastructure Investment and Jobs Act (IIJA) have changed the economics of decarbonizing the power sector and paving the way for a cost-optimal pathway to clean energy. If realized, this pathway, in tandem with state policies and company-level actions, could contribute to a significant portion of the emission reductions needed in the power sector and across the economy to meet the NDC target. However, there are both risks to locking in the cost-optimal trajectory under the IRA projected by models and opportunities to go beyond the IRA in order to fully unlock the potential of the power sector to drive progress to the NDC target.

We are already seeing a powerful effect from the incentives in the IRA, which are projected to unlock around $390 billion of spending on energy and climate through 2022-2031. Of this amount, around $160 billion (41%) is expected to be spent on tax credits for clean electricity, underlining the significant investment the IRA makes in the power sector transition and the importance of maximizing its implementation. The tax credits are also uncapped, in that there is no limit in the legislation that restricts government spending on them.

The problem

Despite this promise, a wide range of model projections reflect uncertainty in the degree and magnitude of IRA implementation as well as other pressures such as increased demands and risks to faster clean deployment. Model projections assume “cost-optimal” conditions whereby decisions to build, maintain, and/or retire power generation are optimized for system costs, which may differ from real-world investment decisions.

According to a study examining multiple models, power sector emissions are projected to fall by 47-83% below 2005 levels in 2030. RFF’s power sector modeling is consistent with this range, projecting a decrease of 44-63%, falling short of 80×30. And across the economy, reductions from the IRA are projected to be 33-40% below 2005 levels in 2030 with a 37% average, below the 50-52% the NDC target.

The solution

The challenge ahead of us for the power sector is to lock in these cost-optimal trajectories and maximize the potential benefits of the IRA — AND close the gap to reach 80×30. The RFF report offers a potential policy solution by combining the IRA incentives with a carbon emissions cap that constrains the total amount of carbon dioxide emissions in the power sector over time, and ensures that electric demand must be increasingly met by zero-emissions electricity generation. While the RFF analysis looked at the interaction of the IRA and emissions cap policies at the federal level, the same dynamics exist with state or regional caps as well.

Model methodology and scenarios

RFF used the Haiku model — a national capacity expansion model that reflects supply and demand at the State level and optimizes for system cost with a given set of inputs and policy conditions.

RFF’s model tests several scenarios, which include:

  1. Baseline: A “pre-IRA baseline” scenario that does not include the IRA;
  2. IRA: An IRA “Business-as-Usual” scenario that includes current policies;
  3. Cap mimic IRA:
  4. IRA + 80×30 cap: A scenario that combines the IRA with a carbon emissions cap to ensure 80×30 is reached; and
  5. 80×30 cap: A “Cap Only” scenario, for comparative purposes, that uses a carbon emissions cap to reach 80×30 without the IRA in place.

Key Findings

1.  A nationwide Carbon Emissions Cap can lock in the IRA at no additional cost: Including a carbon emissions cap with a carbon price on fossil fuel pollution will further incentivize uptake of IRA incentives to lock in the upper range of projected emission reductions and a shift to clean energy generation, and spur a faster transition away from coal generation in particular.

Change in Generation Mix in 2030 Relative to 2020

2.  A Carbon Cap is needed to achieve 80×30: The RFF model scenarios finds a carbon emissions cap combined with the IRA will both

  • lock in IRA abatement projections to maximum effect and provide certainty over the emissions outcome; and
  • close the gap on the 80×30 target at much lower incremental cost. The average resource cost of achieving 80×30 is $31/ton under the “IRA+CAP” scenario.

3.  The IRA dramatically reduces the cost of getting to 80×30 — slashing the cost per ton of emissions by nearly 60%: Reaching 80×30 in the “Cap only” scenario has a marginal abatement cost of $67/ton, while for the “IRA + CAP” scenario the marginal abatement cost is $28/ton — or about 58% lower with the IRA in place. This finding demonstrates how powerful the combination of the IRA with an emissions cap could be for reaching 80×30, and, therefore, the NDC target.

4.  A Carbon Cap combined with the IRA drives overall reduction in consumer costs: Energy prices are lower in the “IRA + CAP” scenario compared to the pre-IRA baseline ($112/MWh compared to $117/MWh for averaged across 2023-2032), which particularly benefits low- and mid-income consumers who pay a larger fraction of their income on utility bills. This outcome is due to the IRA incentives placing a downward shift in retail prices as the costs of clean generation that would have been paid by electricity ratepayers are shifted to taxpayers. While the carbon cap accounts for the cost of fossil fuel pollution and accelerates phase out of coal and uptake of renewables — while still extracting revenue from polluters — this is balanced by shift away from ratepayers under IRA incentives that does not impact consumer prices.

5.  A Carbon Cap combined with the IRA leads to major net health climate benefits: The “IRA + CAP” scenario shows climate and air quality health benefits that substantially outweigh resource costs, with a net benefit of $226 billion. This outcome is driven by an improvement of roughly 80% in additional air quality benefits, reflecting lower SOx and NOx emissions from coal generation. This finding further emphasizes that a limit and/or price associated with ongoing CO2 emissions is critical to driving down coal capacity and consumption and avoiding harmful pollution — with coal generation falling from 562 tera-watt hours (TWh) under the IRA, to only 110 TWh for the “IRA + CAP” scenario.

Recommendations

RFF’s journal article clearly illustrates how an additional carbon policy could work at the federal level, but there’s also a critical role for State- and company-level actions. For example, efforts such as the Regional Greenhouse Gas Initiative (RGGI), North Carolina’s Carbon plan and regulator efforts across 25-member U.S. Climate Alliance that concretely create an obligation to reduce emissions are necessary to close the emissions gap to 80×30. Power companies and utilities also have a major role in realizing the “cost optimal” model outcomes and developing and executing plans that maximize IRA incentives, reduce customer costs and realize social and environmental benefits.

With clean energy deployment costs plummeting, it is essential to act fast and build on the impacts of the IRA by putting in place additional policies to reduce carbon emissions — at all levels — that lock in cost-optimal model projections and go beyond them to reach the U.S. NDC target.

Posted in Carbon Markets, Cars and Pollution, Economics, Greenhouse Gas Emissions, News, Policy / Authors: / Comments are closed

Investors, bipartisan former officials, others defend SEC climate risk disclosure rule

Photo by Jose Saenz

 

Extreme weather caused by climate change is a threat to human health and safety, but it is also increasingly the cause of serious economic disruptions. And in the transition to a lower carbon economy, companies are navigating both opportunities and challenges.

The Securities and Exchange Commission (SEC) recently adopted a rule to better equip investors to manage these risks. The rule will standardize public companies’ disclosures of climate-related financial risk information. (You can read more details about the rule here).

The SEC’s rule has received widespread support from a diverse array of stakeholders. However, certain state attorneys general, oil and gas interests, the U.S. Chamber of Commerce, and others have challenged the rule in court.

EDF joined Americans for Financial Reform, Sierra Club, and Sierra Club Foundation (represented by Earthjustice) and Natural Resources Defense Council (NRDC) to support the SEC’s climate risk disclosure rule by filing an amicus curiae – or “friend of the court” – brief in the U.S. Court of Appeals for the Eighth Circuit.

Our brief shows that:

  • The rule is rooted in decades of the SEC requiring financially relevant environmental disclosures and updating disclosure requirements to reflect evolving market dynamics and investor concerns.
  • The rule is reasonable and firmly supported by rigorous evidence of the importance of climate risk information to investors.
  • The rule furthers the SEC’s core missions of investor protection, market efficiency, competition, and capital formation.

Our brief is in good company. More than a dozen others from investors, experts, and a broad range of stakeholders have also been filed in support of the rule, underscoring the SEC’s manifest authority to require commonsense climate-related financial risk disclosure and the importance and benefits of doing so.

Here are a few highlights from filings supporting the SEC’s action:

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Posted in Climate Finance, News, Policy / Authors: / Comments are closed

California’s carbon market continues to fund much-needed climate action with third auction

Wind energy in California.

Photo credit: Kendel Media via Pexels

Results of the latest Western Climate Initiative (WCI) auction were released today. While the auction sold out for the 16th consecutive time, a decline in the settlement price indicates potential market uncertainty about the cap-and-trade program’s design in the future.

This auction is expected to generate roughly $950 million for the Greenhouse Gas Reduction Fund (GGRF), which is dedicated to supporting initiatives aimed at strengthening climate resilience and reducing greenhouse gas emissions. The GGRF is critical to California’s climate strategy. In the past 10 years, climate investments like GGRF have cut emissions in California by 109.2 million metric tons — the equivalent of the annual emissions of more than 25 million cars — by investing in projects like building affordable housing near job centers, adding zero-emissions transport options, and more.

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Posted in Cities and states, Greenhouse Gas Emissions / Authors: / Comments are closed

How Long Beach is Leading the Charge Toward a Clean Energy Future

Written Q&A with Mayor Rex Richardson on Climate and Economic Progress in Long Beach, California

City of Long Beach Landscape

Long Beach, California, is showing communities around the country why embracing the clean energy economy is a winning strategy.

Home to one of the busiest port complexes in North America, with a long reliance on revenue from oil and gas, Long Beach is now charting a new path that marries climate progress and economic progress. Under Mayor Rex Richardson’s leadership, the city is making bold moves to electrify its port and cut harmful pollution, land coveted EV manufacturing jobs, and leverage billions in federal investment from historic climate laws – all while lifting up frontline and disadvantaged communities hit hardest by pollution and climate impacts.

Long Beach Mayor Rex Richardson

Long Beach Mayor Rex Richardson

EDF has worked with Long Beach to host a roundtable of climate stakeholders to support their Climate Action Plan and continues to collaborate with the city through its partnership with the African American Mayor’s Association.  To get deeper insights on the city’s transformation, I asked Mayor Rex Richardson about Long Beach’s climate and economic plans, some of the exciting projects that are underway now and what other mayors can learn from his approach. 

Let’s start with some big recent news: Ford has officially chosen Long Beach as its new home to develop its next generation of small, affordable EVs. What kinds of jobs and business opportunities will this new manufacturing facility bring to Long Beach? What has the response from the community been? 

RR: In the City of Long Beach, we are laying the foundation for the Long Beach of the future — a global, sustainability-centered hub that attracts emerging companies, industries, and technologies in clean and renewable energy. Our recent announcement that Ford Motor Company has chosen Long Beach as the home for its new Advanced Electric Vehicle Development Center is evidence of our unwavering commitment to move full-speed ahead towards a zero-emission future. 

Ford plans to open their research-and-development campus in Douglas Park, adjacent to Long Beach Airport, in early 2025. This campus will include two buildings and will host around 450 employees focused on designing Ford’s next generation of low-cost, electric vehicles.  

Ford at Grow Long Beach - 26 June 2024 (1)

Long Beach Mayor Rex Richardson with Doug Field, Ford’s Chief Officer of EVs and Digital Systems, and Alan Clarke, Ford’s executive director of Advanced EV Development, at the city’s Grow Long Beach 2024 event announcing the automaker’s new EV development center. Photo courtesy of Long Beach, California.

As a part of our Grow Long Beach Initiative, and our city’s ongoing efforts to transition away from oil production revenues as a core funding source for city services, we are placing a focus on growing our economy by drawing thousands of new advanced manufacturing and engineering jobs that will support local Long Beach residents with competitive wages, and will allow graduates from our local schools and universities to buy a home and set roots in our community. 

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Posted in Cities and states, Energy, Innovation, Jobs / Authors: / Comments are closed

An obvious solution for building electric transmission faster: Use railroads and highways

The U.S. needs to build a lot more high-voltage electric transmission lines. Our current system is disconnected in all of the wrong places, leaving bountiful renewable resources stranded, individual regions isolated, and disadvantaged communities with unreliable power and exorbitant costs. Even where we do have connections, many of the lines are outdated and can’t accommodate all of the energy that is being produced.

To ensure that our grid is resilient to severe storms and heat, capable of meeting our climate goals, and can deliver energy at reasonable cost, we will need to build or upgrade around 75,000 miles of transmission lines – the equivalent of building 30 transmission lines connecting Los Angeles to New York City.

Historically, building transmission lines over long distances has been an arduous and time-consuming process. Many lines have taken decades to reach completion, while others don’t even make it to the construction phase. Since transmission lines typically pass through many separate state and local governments, transmission developers are required to apply for a permit with each of the individual states, and potentially the individual municipality that it crosses. Each of these state and local processes can take years, leading to potentially cascading timelines, particularly for longer distance projects. And of course, any of these permitting bodies could simply deny the project from being sited in their state or local jurisdiction, setting off further actions and delays that a transmission developer will need to respond to, if they don’t simply throw in the towel.

But there is a small exception to this sluggish process: a transmission line that is being built within a specific Department of Energy (DOE) designated “corridor” and that did not receive a construction permit from a state or local agency within one year of filing their application may seek a federal permit from the Federal Energy Regulatory Commission (FERC) to move forward with their project.

In May, DOE proposed 10 National Interest Electric Transmission Corridors (NIETCs, pronounced Nit-Sees). These NIETCs represent areas where DOE has found that new interstate transmission could provide outsized benefits to consumers affected by high electricity costs and reliability concerns. Transmission lines built in these corridors will become eligible for additional financial support under the Inflation Reduction Act and Bipartisan Infrastructure Law. These proposed designations represent a necessary step forward in the process of getting more transmission lines in the ground. However, whether these corridors can deliver on their promise of removing barriers to building new transmission projects depends on where the boundaries are drawn, and whether they include the range of reasonable alternative routes that a developer may need to consider.

An analysis commissioned by EDF found that the boundaries of the corridors were drawn far too narrow, unnecessarily excluding existing infrastructure corridors and their rights-of-way — such as highway and railway routes — that can create more pathways for delivering reliable and affordable power.

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