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
November 17, 2011
Contact: Tom Steinfeldt, 703-516-4146
NEW PAPER DETAILS OPTIONS FOR CLEAN ENERGY STANDARDS
Center for Climate and Energy Solutions and the Regulatory Assistance Project
Explore State & Federal Policy Alternatives
WASHINGTON, D.C. – A well-designed clean energy standard (CES) can create new industries, diversify U.S. electricity supplies, and reduce air pollution, according to a new paper released today by the Center for Climate and Energy Solutions (C2ES) and the Regulatory Assistance Project (RAP).
The paper, Clean Energy Standards: State and Federal Policy Options and Implications, examines issues and options in designing a clean energy standard – a policy that requires electric utilities to deliver a certain amount of electricity from clean energy sources. The paper’s aim is to help policymakers, utility regulators, and other stakeholders better understand how a CES works, its potential benefits, and the implications of different national- and state-level policy options.
“We stand at a crossroads in America’s energy landscape,” said Eileen Claussen, President of the Center for Climate and Energy Solutions. “Transitioning to a cleaner, more diverse energy supply is necessary to grow new energy industries at home, limit our exposure to fuel-price volatility and regulatory risk, and reduce the greenhouse gases contributing to global climate change. A well-designed clean energy standard can help drive a major shift toward innovative U.S. energy solutions.”
Thirty-one states now have some form of renewable or alternative energy portfolio standard. Yet in the absence of significant new policies, according to the paper, the share of U.S. electricity coming from clean energy sources is unlikely to increase more than a few percentage points in the next 25 years. At the national level, Republican-sponsored CES bills were introduced in the last Congress and President Obama called for a federal CES in his 2011 State of the Union address.
“The CES idea is relatively new, and this paper will facilitate a broader and better-informed discussion of a CES at the state and federal levels,” said Richard Sedano, Director of U.S. Programs for the Regulatory Assistance Project. “Cleaning up the electric power sector is a challenge of monumental proportions, but we’ve already seen the power of renewable portfolio standards and CES policies in many states and feel certain that even more progress can be made.”
Among the key issues for policymakers is defining “clean energy.” Options include renewables; highly efficient natural gas combined cycle generation; fossil fuel generation with carbon capture and storage (CCS); nuclear power; and electricity savings from efficiency and conservation. By allowing utilities flexibility to choose among energy sources, the paper notes, a CES can minimize cost impacts on electricity consumers. A CES can also limit utilities’ and consumers’ exposure to fuel-price volatility by diversifying electricity supplies, and spur growth and jobs in clean energy industries.
For more information about the climate and energy challenge and the activities of the C2ES, visit www.C2ES.org.
The Center for Climate and Energy Solutions (C2ES) is an independent non-profit, non-partisan organization promoting strong policy and action to address the twin challenges of energy and climate change. Launched in November 2011, C2ES is the successor to the Pew Center on Global Climate Change, long recognized in the United States and abroad as an influential and pragmatic voice on climate issues. C2ES is led by Eileen Claussen, who previously led the Pew Center and is the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.
About the Regulatory Assistance Project
The Regulatory Assistance Project (RAP) is a global, non-profit team of experts focused on the long-term economic and environmental sustainability of the power and natural gas sectors. We provide technical and policy assistance on regulatory and market policies that promote economic efficiency, environmental protection, system reliability and the fair allocation of system benefits among consumers. We have worked extensively in the US since 1992 and in China since 1999. We added programs and offices in the European Union in 2009 and plan to offer similar services in India in the near future.
Written in conjunction with the Regulatory Assistance Project, this discussion paper examines the policy options and implications for a clean energy standard (CES).
A transition from conventional fossil fueled electricity generation to clean energy offers several benefits—particularly the growth of new clean energy industries and associated jobs, diversification of energy supply, and reductions in the public health and environmental damages (especially from air pollution) associated with conventional electricity generation.
The current status of clean energy generation depends on how one defines clean energy. While there is no universally agreed upon definition of clean energy in the power sector, various stakeholders endorse some or all of the following as at least partially clean energy options: highly efficient natural gas combined cycle generation; fossil fuel use coupled with carbon capture and storage (CCS); nuclear power; renewables; and electricity savings from energy efficiency and conservation. These generation sources provide about half of U.S. electricity today. While market dynamics and current state and federal policies have led to recent growth in clean energy generation—such as the growth in renewable generation driven in part by state renewable electricity portfolio standards—projections for the power sector indicate that, absent significant new policies to promote clean energy, the status quo in terms of power generation will continue largely unchanged for at least the next quarter century.
Given the benefits of clean energy and the dependence of substantial growth in clean energy generation on new policies, policymakers have lately turned their attention to the idea of a clean energy standard (CES). A CES is a type of electricity portfolio standard that would set aggregate targets for the level of clean energy that electric utilities would need to sell while giving electric utilities flexibility by: (1) defining clean energy more broadly than just renewables, and (2) allowing for market-based credit trading to facilitate lower-cost compliance. As a concept, a CES builds on the successful experience of the majority of states that have implemented renewable and alternative energy portfolio standards and draws on a history of federal policy deliberation regarding national electricity portfolio standards.
States could pursue new CES policies singly or jointly to create multi-state programs. State CES programs could complement existing state renewable portfolio standards, and a CES may be a promising option in states where more narrowly defined renewable electricity policies have had less appeal. A handful of states have already enacted electricity portfolio standards that have many of the attributes of a CES.
The federal government could also enact a national CES. A federal CES has recently received bipartisan support, with several Republican Senators sponsoring federal CES proposals in the last Congress and President Obama endorsing a federal CES in his 2011 State of the Union address. While the prospects for near-term enactment of a federal CES are uncertain, a federal CES has received substantial attention and warrants close consideration by stakeholders.
This paper introduces stakeholders to the concept of a CES, explains how a CES works, describes the benefits that a CES can deliver, and explores federal and subnational options for CES policies. This paper also explores some of the nuances of CES policy design and the implications of different design choices. This discussion can help both state and federal policymakers, utility regulators, and other stakeholders decide whether a CES is an appealing option and to help state stakeholders understand the potential impacts of a federal CES on their states so that they might formulate and communicate federal CES policy design preferences.
Several of the paper’s key points are summarized below.
- Absent significant new policies to promote clean energy, the share of total U.S. electricity generation obtained from clean energy sources will likely not increase by more than a few percentage points over the next 25 years.
- Substantial increases in clean energy generation can offer important benefits, including:
- Growth of new clean energy industries and associated jobs—e.g., wind turbine manufacturing, solar panel installation, and nuclear power plant construction;
- Diversification of energy supply to limit electric utilities’ and ratepayers’ exposure to fuel price volatility and regulatory risk associated with particular energy sources;
- Mitigation of environmental and public health impacts from electricity generation—including criteria and hazardous air pollutants, greenhouse gases emissions that contribute to climate change, and other impacts.
- A CES is a promising policy for spurring a transition to clean energy in the power sector.
- As a type of electricity portfolio standard, a CES sets requirements for the percentage of electricity sales that must be supplied from qualified clean energy sources and allows electric utilities to demonstrate compliance via tradable credits that they earn themselves for their own generation or buy from other electric utilities or clean energy generators.
- As a market-based policy, a CES can effectively increase clean energy generation and achieve associated benefits while offering substantial compliance flexibility for electric utilities thus minimizing impacts on electricity consumers.
- By broadly defining clean energy, a CES provides opportunities for utilities, states, and regions to exploit their unique mix of clean energy options.
- A CES program can build upon the success of existing electricity portfolio standards that a majority of states have already implemented, provided that the percentage targets are increased in proportion to the potential of newly eligible resources. If additional clean energy resources are allowed to qualify for an existing portfolio standard without increasing the targets, the mix of resources used to meet the standard and the resulting compliance costs may change, but the total amount of clean energy generation will not increase and the goals of the policy may not be furthered.
- At the state and federal levels, CES policies have attracted bipartisan support, including CES proposals from President Obama and Republicans in Congress.
- CES programs enacted by the federal government or by states singly or in coordination could spur incremental clean energy generation and deliver associated benefits.
- Federal CES proposals have attracted bipartisan support in previous years, but it is not clear if or when legislation to create a federal CES will move forward.
- States have already proven themselves to be policy innovators with respect to renewable electricity portfolio standards, and states may seek to reap the benefits of clean energy for themselves by implementing new CES policies—either singly or as part of multi-state programs.
- At least four states (Michigan, Ohio, Pennsylvania, and West Virginia) already have electricity portfolio standards that credit cleaner, non-renewable energy sources, and Indiana has a similar but voluntary program. These states offer several lessons for future state or federal CES programs, including:
- Utilities tend to comply with electricity portfolio standards by deploying the lowest-cost qualified resources, so policymakers may need to include special provisions in a CES if they hope to provide a meaningful incentive for less commercially mature and higher-cost technologies.
- Policymakers can design CES programs that have very modest impacts on electricity rates.
- A combination of factors—including the policy’s target and the types of energy sources that qualify—determine how much incremental clean energy generation a CES program will deliver beyond “business as usual,” and policymakers should consider the interaction of such factors in developing a CES to ensure the program can meet their goals for additional clean energy generation.
- The net effects of a CES policy are a function of interrelated policy design decisions. Policymakers and stakeholders should understand CES policy design options and their interactions and implications. Policymakers and stakeholders might usefully evaluate a CES in terms of key criteria and think about implications of different policy design decisions in light of these criteria.
- Effectiveness – What is the magnitude of the policy’s desired impacts?
- CES targets set the requirements for overall clean energy generation.
- The degree to which a CES delivers the benefits associated with clean energy depends on how policymakers define qualified clean energy under the program.
- Certain policy design options (e.g., exemptions for certain utilities and alternative compliance payments) can have the effect of reducing a CES program’s effective target for incremental clean energy deployment.
- Policymakers may include provisions in a CES to provide particular incentives to certain technologies—e.g., less commercially mature or higher cost ones—in order to reap particular clean energy-related benefits.
- Cost-effectiveness – how efficiently does the policy achieve its intended aims?
- As a market-oriented policy, a CES is an inherently cost-effective program.
- Policymakers have several options for providing electric utilities with compliance flexibility under a CES (e.g., banking and borrowing of credits).
- In general, the more flexibility that utilities have for meeting clean energy targets (e.g., the more broadly clean energy is defined), the more cost-effective a CES program will be.
- Fairness – does the policy lead to any undue burdens or unearned windfalls for particular utilities, power generators, or regions and customers?
- Owing to a variety of factors, different electric utilities supply their customers with electricity from widely varying existing generation mixes. In addition, utilities, states, and regions have different cost-effective options for increasing clean energy generation (e.g., because of different renewable resource endowments).
- How policymakers set CES targets, treat new vs. existing clean energy generators, and define qualified clean energy sources determine how the effects of a CES program vary among different utilities, power generators, or customers.
- Effectiveness – What is the magnitude of the policy’s desired impacts?
For those of you who came to our website today expecting to find information and resources from the Pew Center on Global Climate Change, please don’t click away. Today we announced an exciting transition. We are now C2ES — the Center for Climate and Energy Solutions. In addition to changing our name, we’ve refreshed our mission and strategic approach, updated our website, and made other changes to ensure that we can continue to craft real solutions to the energy and climate challenges we face today.
Yes, a great deal has changed in the last 24 hours. But what hasn’t changed is the need for straight talk, common sense and common ground. Today’s climate and energy issues present us with real challenges — and real opportunities as well. This is about protecting the environment, our communities and our economy. And it is about building the foundation for a prosperous and sustainable future.
Over the past few weeks, college students have been shedding light on the future of solar energy on the National Mall in Washington, D.C. Out of 19 teams from around the globe and 10 energy performance and livability contests, one overall winner emerged at the recently held U.S. Department of Energy 2011 Solar Decathlon. The winning WaterShed home design, built by students from the University of Maryland, was inspired by the Chesapeake Bay ecosystem. The house included a 9.2 kilowatt rooftop solar array and prominently featured storm water management and recycling components, such as a butterfly roof and pollution filtration.
With the Northeast still reeling from the impacts of Hurricane Irene, the possibility of even more flooding was almost too much to comprehend. But last week the remnants of Tropical Storm Lee stalled and sent plumes of precipitation toward the Northeast, creating a replay of the floods a few weeks earlier. This time the area along the Susquehanna River in Pennsylvania and New York was in the bulls-eye. Since the ground was still saturated from Irene, this new round of flooding was worse, surpassing the previous record event set in 1972 when Hurricane Agnes dropped a torrential downpour on the area.
This Q&A orginally appeared on Singapore International Energy Week's website.
Q1. The Kyoto Protocol expires in 2012. Do you see an agreement on its successor during negotiations at Durban later this year? Or is an extension of the Kyoto Protocol or a move to a transitional framework a more likely outcome?
Eileen Claussen: The Kyoto Protocol has played an important role in advancing climate change efforts in some parts of the world. Most notably, the European Union established its successful Emissions Trading System and other policies in order to fulfil its obligations under the Kyoto Protocol. However, because developing countries are exempt from Kyoto's emission targets and because the United States has chosen not to join, the Protocol covers just one-third of global greenhouse gas emissions. Japan, Canada and Russia have made clear that they will not take on new binding targets post-2012 without commensurate obligations by the United States and the major developing countries, which are not prepared for binding commitments. Hence, there appears very little prospect of new Kyoto commitments being adopted in Durban.
While our ultimate aim should be a comprehensive and binding international climate framework, we must accept that getting to binding commitments will take time. The Cancún Agreements made important progress in strengthening the existing frameworks in the areas of finance, transparency, adaptation and technology. Further incremental progress in these areas will promote near-term action and will strengthen parties' confidence in one another and in the regime, thereby building a stronger foundation for a later binding agreement. At the same time, countries must continue strengthening political will and policies domestically. In Durban, parties should make concrete progress in implementing the Cancún Agreements--for instance, by establishing the Green Climate Fund and agreeing on stronger transparency measures--while affirming their intent to work toward binding outcomes.
Q2. Global GHG emissions increased by a record amount last year. Is the goal of preventing a temperature rise of more than 2 degree Celsius just a "nice Utopia" as IEA's Dr Fatih Birol put it?
EC: Long-term goals are tricky. On the one hand, they provide a rallying point to help focus attention and orient action, and a yardstick for measuring progress. On the other hand, they are meaningful only if they can be operationalized, and if interim efforts don't appear to be on track, people may be discouraged as a result and the will to act may actually weaken. In the case of climate, a temperature goal is appealing because it is easily related in the public mind to the core issue--global warming. But as a metric, it is several steps removed from the action that is needed: Reducing emissions. From a practical standpoint, a global emissions goal might be more helpful.
Countries' pledges to date clearly do not put us on the path to meeting the 2 degree goal. While achieving the goal is not yet out of the question, it would require a dramatic acceleration of efforts around the globe. The bottom line is that we know what direction we must go. Whatever our long-term goal--indeed, whether or not we have a long-term goal--the immediate challenge is the same: Ramping up our efforts as quickly as possible.
Q3. How much of an impact will the recent nuclear power crisis in Japan have on GHG emissions reduction?
EC: It is still too early to know what impact the Fukushima disaster will have on energy choices and greenhouse gas emissions around the world. The most dramatic example is the recent decision by Germany to completely phase out nuclear power. While many in Germany believe that the gap can be filled by renewable energy and improved energy efficiency, others are deeply concerned that the country will deepen its reliance on coal, making it impossible to achieve its ambitious greenhouse gas reduction goals.
Other countries must assess for themselves the implications of Fukushima for their energy futures. For those countries choosing to continue or deepen their reliance on nuclear power, the tragedy clearly offers lessons for improving safety. Given the continued growth in energy demand projected in the future, particularly in developing countries, it is difficult to imagine that we will be able to meet the world's energies needs and simultaneously meet the climate challenge without continued reliance on nuclear power. It is therefore imperative that we continue striving to enhance safety and solve the issue of long-term waste disposal.
Q4. Technology is seen as a key enabler to achieve low emissions growth. In your opinion, what are the top three technologies available today that can make the biggest impact?
EC: There are thousands of technologies available today that could make a huge impact with the right policy support, such as a price on carbon. But the problem, at least in the US today, is that it is unclear when such policy support will be forthcoming. So I will pick my top three based on the ones that need the least additional policy support to make a contribution, either because they yield multiple economic benefits beyond climate, or because they benefit from existing policy drivers.
a. Batteries in cars. Batteries can be used in vehicles in a variety of ways. While a battery-only vehicle may only be able to fill a niche market, hybrid vehicles that run on either gasoline or electricity will likely have broader appeal, and start-stop batteries, which turn off the gasoline engine while a vehicle idles, can be applied to just about any vehicle, achieving modest per-vehicle reductions that add up to significant reductions fleet wide. The combination of new US standards for fuel economy and GHG emissions and electric utility interest in selling electricity can drive battery costs down. The potential emission reductions are enormous, but they depend on cleaning up the electricity grid.
b. Information technology. IT can enable dramatic GHG reductions, for example through energy efficiency (e.g. smart buildings that turn on lights and HVAC when they're needed and turn them off when they're not), substituting videoconferencing for travel, and using wireless communication to optimize transportation routing for people and goods. Convenience and time savings are such powerful drivers of IT that it needs little incremental policy support.
c. Carbon capture and storage (CCS) for enhanced oil recovery (EOR) using CO2. CCS is technically available, and potentially a game changer, enabling us to continue to use fossil fuels but with very low CO2 emissions. CO2-EOR is already economic using naturally occurring CO2, and is close to economic using captured CO2. With very little policy support, EOR using captured CO2 could yield some near-term emission reductions while driving CCS costs down, thereby enabling enormous emission reductions in the future.
Q5. Energy efficiency has long been touted as the lowest hanging fruit to address the energy and climate change challenges. Many Asian countries have announced ambitious targets to cut their energy and carbon intensities. For example, as part of its 12th Five-Year Plan, China has indicated that it aims to cut energy intensity by 16 percent and carbon intensity by 17 percent in the next five years. Do you think Asian countries are doing enough? What more can they undertake to help combat climate change?
EC: Efficiency improvements that generate more economic output with less energy input are important for a variety of reasons, including energy supply security, pollution and greenhouse gas (GHG) emission reduction, and improvement of livelihoods. Countries such as Korea, China and India have taken significant measures to improve efficiency, with the result that the energy intensity of their economies has been lowering over the past decade.
Many energy efficiency measures are classified as "low hanging fruit," meaning the energy savings and other benefits they produce far outweigh the cost of investing in them. Asian countries are currently focusing on exploiting these low hanging fruit, notably in the industrial and power sectors, as well as in appliances and equipment, and large commercial and public buildings. Eventually, achieving additional energy savings will require more expensive investments, and targeting more difficult sectors, such as small and medium enterprises and households.
Asian governments will need to adjust policy tools to meet these new challenges. Policy certainty and appropriate price signals are important to ensure the efficiency improvement potentials of current investments are maximised. One way of providing these is through cap-and-trade type systems, such as those being considered or developed in China, India and Korea. This will also require the phase-out of subsidies that artificially decrease energy prices and encourage consumption rather than conservation. Though progress is slow, several Asian countries have taken or are taking steps in this direction as well.
Limiting the growth of or reducing energy consumption is, of course, essential. However, shifting to less carbon-intensive sources of energy is equally important in the medium to long term. As such, many Asian countries should also be commended for investing in developing less GHG-intensive energy sources.
The Pew Center's September 2011 newsletter highlights a new intiative focused on expanding carbon dioxide enhanced oil recovery, a new brief on international climate assistance, the lessons we can learn from Hurrican Irene, and more.
During the last weekend of August, the Eastern U.S. braced for a walloping. Hurricane Irene spiraled up the Atlantic coast, ripping trees out of the ground in North Carolina and drenching much of the rest of the coast. When I heard that Irene was making her way up toward my hometown of Ridgewood, NJ, I had flashbacks to Hurricane Floyd, a devastating storm in 1999 that brought us much destruction and devastation.
Recently, I had the opportunity to attend as an observer the launch of the National Enhanced Oil Recovery Initiative, facilitated by the Center and the Great Plains Institute. In the short time since the launch, the EOR Initiative has generated notable
Carbon dioxide enhanced oil recovery (CO2-EOR) works by injecting CO2 into existing oil fields to increase oil production. It is not a new concept. In fact, around 5 percent, or 272,000 barrels per day, of all domestic oil produced comes from oil recovered using this technique, which was first deployed in West Texas in 1972. Decades of monitoring CO2-EOR sites have shown that in properly managed operations the majority of CO2 is retained in the EOR operation and not released to the atmosphere. One of the initiative’s goals is to better understand the role of CO2-EOR for carbon storage as this industry grows to produce more than 1 million barrels per day, or around 17 percent of domestic oil supply in 2030.
In Brief: Clean Energy Markets: Jobs and Opportunities
July 2011 Update (originally published February 2010)
Download this Brief (PDF)
This brief discusses how investment in clean energy technologies will generate economic growth and create new jobs in the United States and around the globe. The United States stands to benefit from the expansion of global clean energy markets, but only if it moves quickly to support domestic demand for and production of clean energy technologies through well-designed policy that enhances the competitiveness of U.S. firms.
Clean energy markets are already substantial in scope and growing fast. Between 2004 and 2010, global clean energy investment exhibited a compound annual growth rate of 32 percent, reaching $243 billion in 2010. Forecasts of investment totals over the next few decades vary according to assumptions made regarding the nature of future global climate policies. Over the next decade, assuming strong global action on climate change, cumulative global investment totals for clean power generation technologies could reach nearly $2.3 trillion.
Recognizing the potential of these markets, the European Union, China, and other nations are moving to cultivate their own clean energy industries and to position them to gain large market shares in the decades ahead.
- The European Union continues to lead the world in clean energy investments, spending nearly $81 billion in 2010. Since 2009, China has invested more money per year in clean energy technologies than the United States, investing $54.4 billion in 2010 compared to the United States’ $34 billion. Over 85 percent of today’s market for clean energy technologies is outside of the United States, primarily in Asia and Europe.
- Germany’s clean energy investments of $41.2 billion were the second most for any country in 2010, surpassing the now third-place United States.
- China now boasts the world’s largest solar panel and wind turbine manufacturing industries, accounting for nearly 50 percent of manufacturing for both technologies.
- Danish wind manufacturers produce close to 22 percent of annual global installed wind capacity.
These countries have taken deliberate steps to position themselves as leaders in the 21st century clean energy economy. History shows that it matters where industries are first established, and countries can use policy to foster domestic “lead markets” for particular industries, giving them the foothold that can lead to significant growth in global market share. In the United States, well-crafted climate and clean energy policy can give nascent clean energy industries such a foothold by creating domestic demand and spurring investment and innovation. Strong domestic demand creates not only export opportunities but also jobs – many of which must be located where the demand is, thus fostering domestic job growth even when industry supply chains are globally dispersed.
National climate and clean energy policy in the United States can help create jobs and domestic early-mover industries with the potential to become major international exporters. Such policy should provide incentives for investment in clean energy, for example through a clean energy standard, that requires a certain amount of electricity be obtained from clean energy sources, or a market-based mechanism that puts a price on carbon. The time to act is now: through policy leadership at home and abroad, the United States can position itself to become a market leader in the industries of the 21st century.
Click here for the press release.