U.S. States & Regions
States and regions across the country are adopting climate policies, including the development of regional greenhouse gas reduction markets, the creation of state and local climate action and adaptation plans, and increasing renewable energy generation. Read More
Despite the uncertain future of comprehensive federal climate legislation, states continue to move forward with energy policies that reduce greenhouse gas emissions and save consumers money on their electricity bills. One policy in particular is quickly gaining traction in the states: Property Assessed Clean Energy, or PACE, programs. Twenty-three states plus Washington, DC, have PACE legislation, and 13 others have proposals on the table including Kentucky, South Carolina, Nebraska, and Pennsylvania.
PACE is an innovative funding mechanism that addresses many of the financial barriers to energy efficiency and renewable energy retrofits on residential, commercial, and industrial properties. In general through PACE states delegate authority to local governments to designate an improvement district and issue bonds, which provide low-interest, long-term loans to property owners for energy saving measures. The loans are paid back through an addition on the property tax bill and often over a 20-year period. If the property is sold, the debt transfers to the new owner. PACE programs usually create a lien on properties that is “senior” to (i.e., takes precedence over) other obligations on the property.
Because PACE is run by local governments, there are different styles of implementation for the various program elements including: program administration, underwriting criteria, source of funds, eligible measures, and quality control. For example, San Francisco uses a third party for administrative functions and issues “mini-bonds” to be purchased by a pre-determined investor, while Babylon County, in New York, uses in-house staff to administrate and has repurposed an existing solid waste fund for financing.
The White House strongly supports initiatives that make it easier for homeowners to get loans for energy efficiency and renewable energy improvements, and PACE programs have benefited from $150 million in stimulus funding. In an effort to standardize best practices and ensure that PACE is good policy for all stakeholders, the White House released a Policy Framework for PACE Financing Programs in October 2009. The measures initially accelerated the adoption of PACE and served as a guide for the second generation of PACE programs.
However, both existing and developing programs have been slowed or halted entirely due to opposition from Freddie Mac and Fannie Mae. In May, both agencies sent letters to mortgage lenders reminding them that an energy-related lien may not be senior to a federally backed mortgage. The letters place a burden on the lender to determine if they originate mortgages in any state or locality that permits a first lien priority on energy loans. Proponents of PACE and its senior lien provision say it is a necessary requirement for local governments to raise funds.
Following Freddie and Fannie, on July 14 the Federal Housing and Financing Agency (FHFA) released a statement of their opposition to PACE. As a result, the California attorney general’s office has sued the FHFA, Fannie Mae, and Freddie Mac for their actions and unwillingness to guarantee properties with PACE assessments. The July 14 lawsuit asks the court to declare that PACE does not violate the standards of Fannie and Freddie and also requests an injunction to prevent the agencies from taking action against home owners with PACE loans. Congress is also working on legislation that would require Freddie and Fannie to use underwriting standards that would facilitate the use of PACE programs. With a scarcity of financing options that overcome the high upfront cost of retrofits, this is an issue worth watching closely.
Olivia Nix is the Innovative Solutions intern
Less than a week after Senate Democrats decided that including cap and trade in an energy bill was too ambitious for this year, the Western Climate Initiative (WCI) forged ahead with a blueprint for its own such program. Seven U.S. states and four Canadian provinces, which together represent 13 percent of U.S. and 50 percent of Canadian greenhouse gas emissions, have compiled a detailed plan for implementing a market-based system to reduce greenhouse gas emissions in their region to 15 percent below 2005 levels by 2020. The plan is an elaboration on the design recommendations released by the same states and provinces in 2008.
As we enter the dog days of August in Washington, it’s become evident that states must continue to push forward with their own efforts to combat climate change. At the regional, state, and local level, public policy is being formed to reduce greenhouse gas (GHG) emissions while maintaining the right balance between protecting the environment and growing the economy. But many states are being forced to make tough decisions using limited resources, and for some, this November’s election could be pivotal for setting the future course of the effort.
If you’re concerned that climate change action ended with Senator Reid’s decision to exclude a cap on GHG emissions from energy legislation this summer, rest assured that action in the U.S. is ongoing and growing in many areas. While Senate inaction has caused the Washington policy community to turn greater attention to potential EPA climate action and the related legal ramifications, it’s important to recognize the valuable work in practice at the state level.
For instance, carbon dioxide (CO2) from electricity in ten Northeast and Mid-Atlantic states has been capped since January of 2009; the regional cap-and-trade initiative, known as the Regional Greenhouse Gas Initiative (RGGI), will reduce CO2 from electricity by 10 percent by 2018. Many believed that RGGI would be a model for a national cap on utilities with legislation, which may still be the case once climate legislation resurfaces.
Another regional effort, the Western Climate Initiative (WCI), recently released a comprehensive strategy to reduce GHG emissions by 15 percent below 2005 levels by 2020 at a net savings of $100 billion. Furthermore, states have repeatedly taken action that aims to reduce GHG emissions for many years. Below is a small sample of recent action from our website’s section on States News.
Figure 1: States have taken plenty of action over the past two years while Congress considered different climate-related bills.
It is not all good news, though. The ongoing economic recession has led some states to dial back their support for climate change action for the immediate future, while “climategate” has led others to openly question climate change science (all scientists involved in the controversy have been exonerated of any wrongdoing).
Arizona’s governor issued an Executive Order that put off indefinitely the state’s participation in the WCI’s cap-and-trade program set to begin in 2012, citing the recession. Utah’s legislature urged the U.S. EPA to “halt its carbon dioxide reduction policies and programs and withdraw its ‘Endangerment Finding’ and related regulations until a full and independent investigation of climate data and global warming science can be substantiated.” Lastly, a ballot initiative in California could permanently delay implementation of the state’s landmark global warming law (AB-32), citing the law’s effect on the economy despite the state’s own analysis that shows the bill will be a net benefit for jobs, personal income, and overall economic production. The fight over this ballot initiative will be significant and most expect a close vote in the fall. A recent poll has California voters rejecting the ballot initiative, but only by a small margin.
Despite these lapses, dozens of states spread across every region of the country remain leaders on climate change, energy independence, and clean energy economic policies. No matter what happens in Congress this year or after the election in November, action on climate change will continue throughout the United States. The states have long been known as incubators of public policy, and their efforts to reduce GHG emissions remain powerful examples of states taking the lead.
Nick Nigro is a Solutions Fellow
Today the Partner jurisdictions of the WCI released a comprehensive strategy designed to reduce greenhouse gas (GHG) emissions, stimulate development of clean-energy technologies, create green jobs, increase energy security, and protect public health. The Design for the WCI Regional Program is a plan to reduce regional GHG emissions to 15 percent below 2005 levels by 2020. The plan is the culmination of two years of work by seven U.S. states and four Canadian provinces and builds on the recommendations for a regional cap-and-trade program that the Partners released in September 2008.
The emission reductions are achieved through a new market-based system that caps GHG emissions and uses tradable permits to incentivize low-carbon energy sources and through encouraging emission reductions in industries not covered by this cap. A recently-updated economic analysis by the Partner jurisdictions shows that the plan can achieve the regional GHG emissions reduction goal and realize a cost savings of approximately US $100 billion by 2020.
By: Jessica Shipley, Solutions Fellow, Pew Center on Global Climate Change
Any climate and energy legislation will impact U.S. farmers and ranchers, and this paper examines the many legitimate concerns the agriculture sector has with such legislation. There have been a large number of economic analyses, modeling exercises, and reports published in the past several months based on an array of climate policy assumptions, and the resulting scenarios have ranged from realistic to doomsday. The results of these efforts have often been skewed or cherry-picked to support particular arguments. This brief tries to objectively assess the impacts of climate legislation and identify ways that such legislation could be shaped to provide greater opportunities for the sector. U.S. farmers have long exhibited adaptability and entrepreneurship in the face of changing circumstances, and they will be presented with a host of new markets and opportunities with the advent of climate and energy legislation.
Farmers have many reasons to be engaged participants in the climate and energy policymaking process. It is imperative that the United States take constructive action on climate and energy to maintain a leading role in the new energy economy. In shaping those actions, productive engagement by American farmers can help ensure that U.S. policy addresses their concerns and embodies their ideas. America’s farmers will be the best advocates of both the principles of a robust offset market and the creation of other market and renewable energy opportunities.
Key takeaways from this brief are:
- American farmers and industry will face greenhouse gas limitations regardless of what happens in the legislative and regulatory process. Market-driven requirements from the private sector (e.g. Walmart), regulation by the U.S. Environmental Protection Agency (EPA), state or regional programs, and nuisance lawsuits will continue to require greenhouse gas (GHG) emissions to be reduced going forward. Legislation can simplify requirements on business, provide incentives and new markets for farmers, and provide mechanisms to lower the risks and costs to all sectors of the economy. In fact, without legislation, the piecemeal nature of GHG limitations will likely result in a worse outcome for farmers.
- Costs to farmers from GHG legislation can be substantially mitigated by cost-containment mechanisms. Though there is potential for increased costs (namely energy and fertilizer input costs) to farmers, mechanisms potentially available in legislation can significantly minimize price volatility and cost impacts to farmers and the economy as a whole, even though not all these can be adequately reflected in economic modeling.
- The opportunities for farmers to realize a net economic gain from climate legislation are significant. Offsets, biofuel and biopower, renewable power, and the ability to receive payments for multiple environmental benefits from well-managed working farmlands are among the new potential opportunities. The key to making this a reality is climate and energy policy that is shaped by the agriculture sector and farmers themselves.
- Climate change and resulting weather patterns pose numerous risk management concerns for agriculture. The strong scientific evidence behind climate change should concern farmers because of the significant new risks climate change poses to farmland and the rate at which those risks are increasing.
A clean energy standard (CES) is one policy option for spurring the deployment of clean energy technology and reducing greenhouse gas emissions from the electric power sector. Thirty-one states and the District of Columbia have enacted energy standards for the power sector. Sen. Jeff Bingaman (D-NM) proposed a federal CES with the introduction of the Clean Energy Standard Act of 2012 on March 1, 2012, building on the state programs, President Obama's call for a federal clean energy standard, and earlier proposals from both sides of the aisle.
A CES is a type of electricity portfolio standard. An electricity portfolio standard requires electric utilities to supply specified percentages of their electricity sales from qualified energy sources (with credit sometimes given for electricity savings from energy efficiency) while typically allowing utilities to demonstrate compliance via tradable credits. Most state electricity portfolio standards and several congressional proposals have promoted renewable electricity generation through policies known as renewable portfolio standards (RPSs) or renewable electricity standards (RESs). Some states (e.g. Ohio) have instituted electricity portfolio standards that set requirements for "clean" or "alternative" energy, including not only renewables, but certain non-renewable electricity generation technologies, such as new nuclear power and coal with carbon capture and storage (CCS).
Several of the climate and energy legislative proposals in the 111th Congress (2009 – 2010) included national electricity portfolio standards—both RESs and CESs – such as the Bingaman-Murkowski energy bill, American Clean Energy and Leadership Act (ACELA), and Sen. Lindsey Graham's (R-SC) Clean Energy Standard Act. The concept of a federal CES attracted renewed attention during the 112th Congress (2011 – 2012) when President Obama proposed the adoption of a CES in his January 2011 State of the Union address. President Obama's proposal would double the share of electricity generated from clean energy sources to 80 percent by 2035. Of particular note, the Obama proposal would provide partial credit to efficient natural gas electricity generation under a CES, which the CES proposals in the 111th Congress would not do.
In the Senate, Energy and Natural Resources Committee Chair Sen. Jeff Bingaman (D-NM) and Ranking Member Sen. Lisa Murkowski (R-AK) undertook a thorough study of the policy components of a CES in spring of 2011, and solicited stakeholder input on policy design and implications. Bingaman drew on this study in writing his CES proposal, which was released in March 2012. Sen. Bingaman held one hearing related to the proposal in May 2012. The bill was not reported out of committee. In the House, the leadership of the Republican Party did not expressed interest in a CES, though some Democrats showed interest. The discussion of a CES is likely to evolve considerably in coming Congresses.
- Blog: Senate Hearing on Bingaman Clean Energy Standard, May 17, 2012
- Congressional Testiony of Judi Greenwald, Full Committee Hearing: The Clean Energy Standard Act of 2012, Before U.S. Senate Committee on Energy and Natural Resources. 112th Congress. May 2012
- Clean Energy Standards: State and Federal Policy Options and Implications, November 2011
- An Illustrative Framework for a Clean Energy Standard for the Power Sector, November 2011
- Summary of Sen. Jeff Bingaman's Clean Energy Standard Act of 2012, March 2012
- Comparison of CES Proposals (C2ES Illustrative Framework, Bingaman CES, Hall CES), updated March 2012
- Podcast: Clean Energy Standard 101. C2ES explains the basics of a CES. March 1, 2012
- Statement: Eileen Claussen Comment's on Clean Energy Standard Act of 2012, March 2012
- Blog: The Bingaman Clean Energy Standard: What is "Clean"?, February 28, 2012
- Blog: The Bingaman Clean Energy Standard: Let the Conversation Begin, February 22, 2012
- Responses to the Senate Energy and Natural Resources Committee CES White Paper, April 2011
- State Renewable & Alternative Energy Portfolio Standards Map, updated August 2012
- State Energy Efficiency Standards and Targets Map, updated May 2012
- Comparison Chart: Diversified/Renewable Energy Standard Provisions in Climate and Energy Legislation in the 111th Congress, April 2011
- Race to the Top: The Expanding Role of U.S. State Renewable Portfolio Standards, June 2006
- Webinar: Clean Energy Standards: State and Federal Policy Options and Implications. 2011 December 7. National Council on Electricity Policy (NCEP). (Video of the webinar posted here)
- Congressional Briefing: A Cleaner Way to Power? June 20, 2011. 2322 Rayburn House Office Building, Washington, DC 20515.
- Aldy, Joseph. "Promoting Clean Energy in the American Power Sector." The Hamilton Project. Discussion Paper 2011-04. May 2011.
- BPC's "The Administration's Clean Energy Standard Proposal An Initial Analysis." Bipartisan Policy Center Staff Paper. April 2011.
- Brown, Phillip. "Clean Energy Standard: Design Elements, State Baseline Compliance and Policy Considerations." Congressional Research Service (CRS). R41720. March 2011.
- CBO's "The Effects of Renewable or Clean Electricity Standards." July 2011.
- EIA's Analysis of the Clean Energy Standard Act of 2012 as requested by Chairman Bingaman
- EIA's Analysis of Impacts of a Clean Energy Standard as requested by Chairman Bingaman
- EIA's Analysis of Impacts of a Clean Energy Standard as requested by Chairman Hall
- EIA's What are renewable portfolio standards (RPS) and how do they affect renewable electricity generation?
- EIA's Impacts of a 25-Percent Renewable Electricity Standard as Proposed in the American Clean Energy and Security Act Discussion Draft
- EIA's Energy and Economic Impacts of Implementing Both a 25-Percent RPS and a 25-Percent RFS by 2025
- EIA's Impacts of a 15-Percent Renewable Portfolio Standard
- EIA's Energy Market Impacts of a Clean Energy Portfolio Standard - Follow-up
- White House State of the Union Clean Energy Standard Fact Sheet
- White House Blueprint for a Secure Energy Future (CES discussion on p. 35-36)
- RFF/EPA Workshop on "A Federal Clean Energy Standard: Understanding Important Policy Elements," July 2011.
- RFF, "Is a Clean Energy Standard a Good Way to Move U.S. Climate Policy Forward?," April 2011.
- RFF, "Modeling Policies to Promote Renewable and Low-Carbon Sources of Electricity," June 2010.
- RFF's responses to the Senate Energy and Natural Resources Committee CES White Paper, April 2011.
The Midwest Governors Association (MGA) recently held a briefing in Washington for congressional and federal agency staff to highlight key regional developments in clean energy job creation. As the Senate prepares to take up energy legislation this summer, state government officials and representatives from business groups and environmental organizations in the Midwest described the progress they have made promoting renewable energy in order to create jobs, benefit the environment, and increase energy security.
On June 4th, 2010 Vermont Governor Jim Douglas signed H. 781, “An Act Relating to Renewable Energy.” H.781 simplifies the process for permitting renewable energy projects without changing environmental standards and reforms the existing business solar tax incentive to strengthen the state’s commitment to renewable electricity. The changes to the business solar tax incentive include defining the available funding from the Clean Energy Development Fund and relaxing project deadlines to ease pressure on state regulators. The bill also removes the size limit on the definition of “renewable” for hydroelectric generation; this change is meant to solidify a relationship between Vermont and Hydro Quebec.
On May 19th, 2010 the three regional climate initiatives in North America – the Northeast and Mid-Atlantic Regional Greenhouse Gas Initiative (RGGI), the Midwestern GHG Reduction Accord, and the Western Climate Initiative (WCI) – jointly released a white paper entitled “Ensuring Offset Quality: Design and Implementation Criteria for a High-Quality Offset Program.” This paper recognizes the potential value of offsets and demonstrates a commitment to ensuring offset integrity.
Each regional program includes an offset component as a means to reduce compliance costs and increase compliance flexibility for covered sources. The regional initiatives are committed to ensuring that emissions reductions achieved through offset projects are real, additional, verifiable, permanent, and enforceable, and also based on uniform standards.
This white paper is a part of a broader effort of collaboration among the three regional programs, and is the first written product of the Three-Regions collaborative process.
Three Regions Offsets White Paper
Maryland On May 20, 2010 Maryland Governor Martin O’Malley signed four clean energy bills continuing the state’s leadership in sustainability. The new legislation includes the following:
- HB 469 creates a motor vehicle excise tax and a credit against the excise tax for electric vehicles. The credit applies to qualified plug-in electric vehicles and is equal to 100% of the State vehicle excise tax imposed, not to exceed $2000.
- HB 674 authorizes plug-in electric vehicles with MD permits to use high occupancy vehicle (HOV) lanes along the two federal highways in Maryland.
- HB 464 extends both the termination date of the existing clean energy production tax credit and the date by which a facility must begin producing qualified energy in order to claim the credit. The new termination date is December 31, 2010 and the extended qualifying production date is January 1, 2016.
- SB 277 increases the annual percentage requirements under Maryland’s Renewable Energy Portfolio Standard (RPS) for electricity from solar energy sources between 2011 and 2016. The updated RPS requires a 0.5% carve-out for solar by 2016 compared to 0.35% in the earlier RPS. The alternative compliance payment (ACP) for failing to meet the solar requirement will also increase by $0.05 per kilowatt-hour (kWh) in 2011 and by $0.10 per kWh beginning in 2013.