Climate Compass Blog

Biden’s Clean Energy Memo Shows Need for Carbon Price

Shortly before the new year, Vice President Biden issued a memo summarizing the federal government’s progress in promoting “clean energy,” primarily via the 2009 stimulus bill (the American Recovery and Reinvestment Act, or ARRA). The Dec. 15 memo highlights significant incentives provided for efficiency, renewable electricity, biofuels, plug-in hybrid-electric vehicles, carbon capture and storage, and other low-carbon technologies. It summarizes where things stood one year ago (e.g., in terms of generating capacity, number of homes with smart meters) and where things are expected to be in the next few years.

The memo notes that ARRA provides $80 billion for clean energy investments. In terms of impacts, Vice President Biden claims, for example, that ARRA and other policies put the United States on track to double by 2012 non-hydro renewable electricity generation capacity compared to the level at the beginning of 2009. The memo says the rate of home energy efficiency retrofits will increase by an order of magnitude from 2009 to 2012 (to one million per year). While there are currently no commercial-scale carbon capture and storage projects in operation, the memo projects that there will be five by 2015. There are also evaluations of vehicle fuel economy, biofuels, nuclear power, electric vehicles, smart grid, and clean energy manufacturing.

While the clean energy advances touted by the Vice President are undoubtedly positive developments, the key policy for significantly reducing U.S. greenhouse gas emissions—i.e., putting a price on carbon—is still being debated in Congress. The House passed a climate and energy bill that included a greenhouse gas cap-and-trade program in June, and the Senate continues deliberations on a similar bill.

In considering efforts to transition to a low-carbon future, it’s helpful to remember that climate change is a “tale of two market failures.” First, and most importantly, businesses and households do not face any price associated with emitting greenhouse gases despite the social costs (e.g., costs of damage to coastal communities from sea level rise, increase in costs due to reduction in water resources) associated with their contribution to dangerous climate change. Thus businesses and households lack a key financial incentive to invest in efficiency or lower-carbon energy sources. Second, while intellectual property protections help firms profit from their investments in new technology, the nature of innovation is such that the gains to society (i.e., to other businesses and consumers) from a single company’s investments in innovation generally exceed the returns to that company.  Thus businesses tend to under-invest in innovation.

With respect to fostering innovation, a summary from Harvard’s Belfer Center of U.S. Department of Energy research, development, and demonstration (RD&D) funding over time illustrates that the $7.5 billion in energy-related RD&D funding in ARRA is more than half as much as DOE received, cumulatively, in the five years from FY2005 through FY2009. 

We know that a combination of a market-based climate policy that puts a price on carbon (e.g., via a greenhouse gas cap-and-trade program) to “pull” a portfolio of low-carbon technologies into the market coupled with incentives for low-carbon technology research, development, demonstration, and deployment (RDD&D)—i.e., policies to “push” low-carbon technologies into the market—make reducing greenhouse gas emissions less costly overall than a reliance on only “push” or “pull” policies alone.

The efforts outlined in the Vice President’s progress report are providing a much needed “push” for clean energy—such as government funding and loan guarantees to leverage private-sector investment in commercial-scale demonstrations of carbon capture and storage.  But, ultimately, the United States will not make the required significant, absolute reductions in emissions without the market “pull” created by an economy-wide carbon price.

Steve Caldwell is a Technology and Policy Fellow

New Brief Tracks DOE Recovery Act Spending

In February 2009 Congress passed the American Recovery and Reinvestment Act (ARRA or the stimulus package) providing the largest single investment in clean energy in American history.  About $84 billion of the $787 billion in stimulus funds targets energy, transportation, and climate investment in the form of grants, tax cuts, and loan guarantees.  Given the magnitude of this investment and its anticipated role of laying the groundwork for American leadership in a global clean energy economy, it is beneficial to follow how these funds are spent.   

We recently published the first installment of a  brief on the spending of ARRA funds by the U.S. Department of Energy (DOE), the agency with jurisdiction over the majority of energy expenditures.  The brief specifically examines how the funds have been appropriated, awarded, and spent as a way to track how quickly the money is moving out the door along with the impact of this spending on job creation.  We plan to keep tabs on the use of ARRA funds over time and update this brief accordingly.

On the whole, ARRA money is moving at a slower pace than expected – as of November 13, 2009 only 3.9 percent of the DOE’s total appropriated ARRA funds had been spent. But ARRA is leveraging private investment and, as Vice President Biden noted in a recent memo to President Obama, “jumpstarting a major transformation of our energy system.”  For example, with these funds and additional leveraged private investment, renewable energy generation is expected to double from 27.8 GW in January 2009 to 55.6 GW by 2012.1

ARRA funds will also lead to significant growth in the manufacturing capacity for clean energy technology, advanced vehicle and fuel technologies, components of a smarter electric grid, home weatherization, and carbon capture and storage technologies.  New industry and funding for programs already in existence will create and save jobs in the clean energy sector.  At the end of October 2009, the Bureau of Labor Statistics reported nearly 10,000 jobs created from the DOE’s use of Recovery Act funds.  This number is expected to grow considerably as more of the ARRA money is committed to and spent by recipients (Biden’s memo predicts 253,000 jobs will be supported from new renewable generation and advanced energy manufacturing alone).         

Stay tuned for updates as we continue to follow the spending progress and impacts of DOE ARRA funds. 
 
Olivia Nix is the Innovative Solutions intern

 

1. Biden, Joseph. Memorandum for the President from the Vice President. Subject: Progress Report: The Transformation to A Clean Energy Economy. 15 December 2009.

Smart Grid Boosts Efficiency, Renewables, and Reliability

The smart grid is a hot topic these days. President Obama touted the smart grid during his campaign and continues to be a booster. The 2009 stimulus bill (the American Recovery and Reinvestment Act, ARRA) provided nearly $4.5 billion to the Department of Energy (DOE) for smart grid investments. In October, DOE made $3.4 billion in awards under the Smart Grid Investment Grant Program, and, in November, DOE announced awards totaling $620 million as part of the Smart Grid Regional and Energy Storage Demonstration Project.

Last month, we added a smart grid factsheet to its Climate Techbook. While it’s not easy to give a short definition of the smart grid, one can think of it as the application of digital technology to the electric power sector to improve reliability, reduce cost, and increase efficiency. Smart grid technologies—including communication networks, advanced sensors, and monitoring devices—provide new ways for utilities to generate and deliver power and for consumers to understand and control their electricity consumption.

The smart grid has several anticipated benefits unrelated to climate change, such as improving electricity reliability (e.g., fewer power outages) and reducing utilities’ operating costs (e.g., by eliminating meter reading). Much of the buzz around the smart grid, however, has to do with the ways that smart grid technology can facilitate greenhouse gas emission reductions.

Efficiency, renewables, and  plug-in hybrid electric vehicles (PHEV) are three of the primary climate solutions the smart grid can enable. Initial evidence suggests that giving consumers direct feedback on their electricity use via smart meters and associated display devices can by itself lead to energy savings of 5-15 percent. One of the challenges that will become increasingly important as the United States relies more on renewable electricity from wind and solar power is that these resources are variable (i.e., they only generate electricity when the wind blows or the sun shines) rather than schedulable like traditional fossil fuel power plants. Smart grid technology makes it easier to add energy storage to the grid and to exploit demand response (e.g., cycling air conditioners on and off) to more easily balance electricity supply and demand as output from variable renewables fluctuates. Finally, smart grid technology would facilitate charging PHEVs during periods of low electricity demand (when generating costs are lowest and existing capacity is underutilized) so that PHEV charging can be done most cost-effectively.

Achieving greenhouse gas emission reductions at the lowest cost will require deploying a portfolio of energy efficiency measures and low-carbon energy technologies, several of which can build upon smart grid technology.

Steve Caldwell is a Technology and Policy Fellow

One Less Excuse to Avoid Acting

Only time will tell whether the deal struck in Copenhagen proves a true turning point in the effort against climate change.  Flying home after two chaotic and exhausting weeks, I find I’m of two minds.  

The deadline of December 18, 2009, in fact drove many governments further than before.  In the weeks preceding, the United States, China, India and others felt compelled to come forward with explicit emission pledges.  Under the Copenhagen Accord, countries have until January 31 to put these numbers on record; then there is no taking them back. 

These pledges are not binding.  They are statements of intent, not obligation.  But that is not what disappoints me.  I never expected Copenhagen to produce more than a political accord.

What troubles me is that governments did not resolve to move next to a legally binding treaty.  That goal was part of the tentative agreement announced by President Obama.  But then he left, and in final deal-making, it somehow vanished.  The negotiations will of course continue.  Governments agreed they’d meet next year in Mexico, the year after in South Africa.  But with what type of agreement in mind?  That’s unclear.

Black Carbon and Climate

Today, the Obama Administration has formally recognized the importance of black carbon as a component of broader policies to address climate change. At the UN Climate Change Conference in Copenhagen, Nancy Sutley, the Chair of the Council on Environmental Quality, announced an initiative aimed at reducing emissions of black carbon. The United States is committing $5 million towards international cooperation to reduce black carbon emissions in and around the Arctic. According to Chair Sutley, the new initiative will include investments to study the effects of black carbon, demonstrate options for reducing emissions, and begin to quantify both the climate and public health benefits of reducing emissions. The initiative will focus on diesel engines (both on-road and non-road, including those used for port operations), older district heating and industrial facilities, and agricultural and forest fires.

We just released a new white paper highlighting the climate impacts of black carbon (Black Carbon: A Science/Policy Primer). Over the last decade, a growing body of evidence indicates that soot and smoke are major contributors to climate change. Black carbon, a component of soot, warms the air by absorbing sunlight in the atmosphere, changes rainfall patterns and, when deposited on snow and ice, accelerates melting. Black carbon is produced by both natural processes and human activity from the incomplete combustion of fossil fuels, biofuels, and biomass. Primary sources include diesel engines, small industrial sources, residential coal and solid biofuels for cooking and heating, and agricultural and forest fires.

The new paper summarizes current knowledge on the climate effects of soot components (black carbon and organic particles) and identifies emission sources and technologies to mitigate their impacts. It also presents perspectives on the potential role of soot mitigation approaches in developing more comprehensive climate strategies.

Black carbon remains in the atmosphere for only days to weeks, meaning it has strong regional climate effects. Recent studies suggest that black carbon may be responsible for 30-50 percent of recent warming in the Arctic, contributing to the acceleration of Arctic sea ice melting. Loss of Arctic sea ice is one potential “tipping point” that could lead to rapid warming and irreversible climate change. Black carbon is also driving increased melting of the glaciers in the Himalayan Plateau, upon which some 40 percent of the world’s population depends for fresh water. Reductions in black carbon would help address these issues and also would have many co-benefits, particularly in public health and especially in the developing world.

Controlling emissions of CO2 and long-lived greenhouse gases must remain the centerpiece of policies to address climate change, since they ultimately drive the Earth’s temperature in the long term. However, reducing black carbon emissions represents a win-win scenario: it would have an immediate cooling effect on the Earth’s climate, potentially delaying temperature increases in the short run and helping reduce the risk of irreversible tipping points in the climate system, and it would reduce air pollution, significantly improving public health.

Jeremy Richardson is Senior Fellow for Science Policy