Solving the Climate Crisis, a new congressional action plan to address climate change, was released last week by the US House Select Committee on the Climate Crisis (SCCC). In case you don’t have the time to dig into its 500-plus pages, don’t worry—Resources for the Future (RFF) economists have done the legwork for you, offering their review of the recent report here.
The report lays out a framework for future congressional actions, organized into 12 main pillars. Below, we include a table of contents for ease of navigation through the responses provided by RFF scholars. Try clicking on the hyperlinks in the table of contents to jump down to view further elaboration in the article text. In the main text under the table of contents, RFF scholars address some of these pillars in detail and remark on what could work and what’s missing in specific elements of the plan, drawing from existing evidence and continuing research at RFF.
Editor's note: This article was originally published on July 6, with contributions from Alan Krupnick added on August 13.
Pillar 1: Invest in Infrastructure to Build a Just, Equitable, and Resilient Clean Energy Economy
1.1 | Build a Cleaner and More Resilient Electricity Sector Key Takeaways: SCCC calls for both a carbon price and a clean energy standard, which would set a requirement that US power generation meet a certain percentage of no- or low-carbon generation. The report also includes several recommendations for modernizing wholesale electricity markets.
1.2 | Build a Cleaner and More Resilient Transportation Sector Key Takeaway: Report attempts to layer multiple policies to reduce greenhouse gases from the transportation sector—but piling up policies could backfire.
1.6 | Plug Leaks and Cut Pollution from America’s Oil and Gas Infrastructure Key Takeaway: SCCC seizes low-hanging fruit on climate mitigation, with recommendations for more aggressive action to reduce methane emissions from oil and gas sectors.
Pillar 3: Transform US Industry and Expand Domestic Manufacturing of Clean Energy and Zero-Emission Technologies
3.1 | Rebuild US Industry for Global Climate Leadership Key Takeaway: Key policy pillars in report can drive innovation and investment, support industry, and protect communities in the energy transformation needed to achieve deep decarbonization.
3.2 | Invest in Manufacturing of Clean Energy, Clean Vehicle, and Zero-Emission Technologies Key Takeaway: Report aims to stimulate clean energy innovation in industrial sectors by contracting federal projects with bidding companies that take advantage of low-emissions technology.
Pillar 4: Break Down Barriers for Clean Energy Technologies
4.1 | Align the Tax Code with a Net-Zero Goal and Eliminate Unnecessary Tax Breaks for Oil and Gas Companies Key Takeaway: Report proposes ending tax breaks for US oil and gas industry, which may have little impact on global emissions, but would save the federal government billions annually.
4.2 | Put a Price on Carbon Pollution Key Takeaway: While offering principles for designing an “effective” and “equitable” carbon pricing system, the report shies away from designing carbon pricing policy.
Pillar 5: Invest in America’s Workers and Build a Fairer Economy
5.1 | Ensure the Clean Energy Economy Benefits Current and Future Workers Key Takeaway: Report recommendations go well beyond previous efforts, establishing a new office to develop community-specific strategies.
Pillar 8:Invest in American Agriculture for Climate Solutions
Key Takeaways: Report positions for success by using established legislation to incentivize land owners and agricultural producers to “farm carbon,” but not all regions—nor plant species—are created equal. Report misses opportunity to identify target watersheds to prioritize and integrate programs, rather than being a scattershot across all states.
8.2 | Reduce Agricultural Emissions Key Takeaway: A breakthrough step in this plan is the recommendation to expand investments in rural broadband—currently, the absence of this technology holds producers back from being innovative and discourages market expansion.
Pillar 9: Make US Communities More Resilient to Impacts of Climate Change
9.2 | Support Community Leadership in Climate Resilience and Equity Key Takeaways: Establishing a National Climate Adaptation Program has some value, but may lead to a breakdown in mitigation measures. Section misses an explicit charge to include a criterion for investment in adaptation or mitigation in any infrastructure bill.
9.3 | Partner with Tribes and Indigenous Communities for Climate Adaptation and Resilience Key Takeaway: The SCCC stresses the disproportionate exposure that communities of color, low-income communities, and tribal and indigenous communities face from climate change and recommends increased funding to implement climate adaptation programs that incentivize resilience and ensure that disadvantaged communities can meet these challenges.
Pillar 10: Protect and Restore America’s Lands, Waters, Ocean, and Wildlife
10.1.2 | Lift Up America’s National Parks and Public Lands as Part of the Climate Solution Key Takeaway: While an aim to reduce maintenance backlogs to increase resilience could be effective, focusing on the National Park Service addresses only part of the issue. A landscape approach that includes all associated public lands would be helpful, and this strategy may require prioritizing lands and regions with particular vulnerabilities.
10.1.4 | Protect and Restore Forests and Grasslands Key Takeaway: While the SCCC report makes comprehensive recommendations for forest management, any reforestation or afforestation legislation must consider the forest life cycle—from investment in the earliest steps, to post-planting management—if the goals are to be achieved.
10.2 | Make Public Lands and Waters a Park of the Climate Solution Key Takeaway: While the report proposes imposing a moratorium on all new federal fossil fuel leases and increasing royalty rates on new onshore leases, it doesn’t consider charging “carbon adders,” which could generate much of the emissions reductions of a moratorium while also generating billions in additional revenue.
Pillar 1: Invest in Infrastructure to Build a Just, Equitable, and Resilient Clean Energy Economy
1.1Build a Cleaner and More Resilient Electricity Sector
Resources:What role does a clean energy standard (CES) play in thispackage of proposals?
Daniel Shawhan: Unlike the other power sector policies proposed in the action plan, the CES is an overarching policy that applies to all grid-serving power generation. It would set a requirement that US power generation has to meet a certain standard of “cleanness.” The other power sector policies, many of which support one or more particular kinds of clean generation, would tend to reduce the CES credit price needed to meet that standard of cleanness.
What is a CES?
Kathryne Cleary and Daniel Shawhan: A CES is a market-based portfolio standard that requires a certain percentage of electricity sales to come from zero- or low-carbon generation. This required percentage of sales typically increases over time. A CES is designed like a renewable portfolio standard (RPS) that many states already have in place, which requires a certain percentage of sales to come from renewable technologies. Unlike an RPS, a CES is typically technology neutral and provides credits to other zero- and low-carbon generation, in addition to eligible renewable sources. Thus, technologies like nuclear or fossil-fueled plants with carbon capture and storage can earn credits under a CES policy.
Like an RPS, a CES awards a clean energy credit per megawatt-hour of “clean” generation. Typically, electricity retailers are the entities responsible for complying with the CES. They must acquire some number of clean energy credits—a specified proportion of the amount of electricity they sell—in order to comply with the standard. These credits can be traded, which lowers the cost of compliance and improves the efficiency of the policy. The trading allows the qualifying generation to be done by those who can do it at the lowest cost.
What are some potential advantages and disadvantages of a CES?
Kathryne Cleary and Daniel Shawhan: Naturally, a CES has advantages and disadvantages relative to other policy options aimed at decarbonizing the electricity sector. We describe a few of them here.
Pricing carbon directly is likely to be a more cost-effective policy for decarbonization, but carbon pricing legislation has often been difficult to pass due to political resistance. A CES, on the other hand, may be more politically appealing because it is structured like an RPS, a policy that is politically popular and widely implemented across 29 states and the District of Columbia.
A CES also tends to raise electricity prices less than a carbon price does. On the other hand, a carbon price can create program revenue that can be redistributed and used to reduce the impacts of the policy on certain groups, such as low-income communities, or for other purposes, such as government deficit reduction.
Relative to an RPS, a CES allows more technologies to compete to meet the standard. This means the cost of achieving emissions reductions is lower under a CES than under an RPS with the same percentage requirement. Alternatively, this enables a CES to have a higher percentage requirement than an RPS without having a higher cost.
For the projected effects of specific US national CES proposals, see this RFF issue brief about the Smith-Luján bill and this RFF working paper about the 2012 Bingaman CES bill.
What are some important design considerations for a CES?
Daniel Shawhan and Kathryne Cleary: Policymakers must decide what kinds of power generation will receive CES credit and how much of a credit per megawatt-hour each generator will receive. One important question about eligibility concerns natural gas. Since natural gas–fueled power plants emit less greenhouse gases than coal-fueled power plants and much less health-damaging local pollutants, giving partial credit to efficient natural gas plants can be a way to reduce emissions even further at a given cost, as shown in a Hill briefing in October 2019 given by Paul Picciano, Daniel Shawhan, and Kevin Rennert.
For a CES implemented at the federal level, policymakers can consider regional disparities in existing clean energy resources. Some regions have better resources for zero-emitting and very low-emitting generation than others, so those regions can meet a higher percentage target with less impact on electricity rates. Having a cleaner electricity supply currently can have a similar effect. Consequently, policymakers can design CES to promote regional fairness while also ensuring that emissions reductions goals are met.
The treatment of existing zero-carbon resources, such as nuclear or hydroelectric plants, is also important to consider. Choosing to credit these resources unnecessarily could increase costs of the program to electricity customers. For example, while some nuclear plants are struggling to stay online, others are able to cover their going-forward costs from wholesale market revenues without subsidies. However, choosing to exclude these resources could reduce the cost effectiveness of the policy, if crediting the resources would prevent early retirement. One option is to give full credit to existing generators. Another is to give partial credit to existing generators. For generators for which this partial credit would not be enough to cover their going-forward costs, state governments could then choose whether to provide additional support or not.
Another design feature that is important to consider is cost-containment measures. Including an alternative compliance payment effectively puts a price ceiling on the credit price. It relaxes the target, if necessary, just enough to ensure that the credit price does not exceed a certain level.
TheSolving the Climate Crisisaction plan includes several recommendations for modernizing wholesale electricity markets. Why is wholesale electricity market reform important for advancing clean energy?
Kathryne Cleary and Karen Palmer: Several regions of the United States (namely the Northeast; the Midatlantic; and parts of the Midwest, California, and Texas) rely on wholesale markets to determine which resources to dispatch to meet electricity demand and which resources to invest in. Since the 1990s, grid operators in these regions have used these markets to efficiently procure capacity resources and ensure competitive wholesale electricity prices.
While they have succeeded at opening generation markets to competition, these markets were designed for an electricity system that relies on traditional resource types (e.g., coal, natural gas, and nuclear) and were introduced before renewables contributed much to electricity generation. Consequently, this framework is increasingly becoming outdated and unable to support cleaner resources that have different attributes than traditional resources. For example, wholesale capacity markets—which are used in the Midatlantic and Northeast regions of the United States to encourage investment—compensate generators for being available to generate power when called upon. Unlike some traditional fossil-fueled plants (e.g., natural gas plants) renewables are variable and generate only when natural resources are available, such as when the sun is shining or the wind is blowing. As a result, intermittent renewables cannot earn as much revenue in the capacity market as other resources, which can discourage investment in these cleaner technologies.
In addition to creating a disadvantage for renewable resources, some wholesale markets do not compensate renewables for their clean energy attributes. The carbon damages associated with electricity generation are an externality that the market must internalize to achieve the socially optimal outcome. Thus, when regional grid operators do not take carbon emissions into account, they undervalue power generated from renewables and overvalue power from fossil-fuel generators, which leads them to operate fossil-fueled power plants more frequently than they would if these attributes were taken into account. While some regions incorporate a cost of carbon into wholesale markets as a consequence of state regulation (e.g., in the Northeast and California), others do so only partially for generators in states that participate in the Regional Greenhouse Gas Initiative (e.g., PJM, the largest grid operator in the country).
In addition to not valuing clean energy attributes, some regional grid operators have attempted to discourage the participation of renewables in wholesale markets. Many states have chosen to support clean energy with policies such as renewable portfolio standards. These policies have encouraged investment and resulted in more renewables competing in wholesale markets. However, because these policies effectively subsidize renewables, fossil-fueled generators that do not receive subsidies have argued that state-subsidized resources should be required to bid a minimum price in the capacity market in order to establish a level playing field for all types of generators. The desire to offset the effects of these clean energy policies on electricity market outcomes has led to mitigation efforts in PJM (the Midatlantic regional grid operator) and in New York State to impose additional constraints on subsidized resources participating in these wholesale markets, which further discourages their investment.
Recommendations in the Solving the Climate Crisis action plan address some of these issues by facilitating greater participation of renewables in wholesale markets and advancing clean energy by removing market rules that discourage clean energy. The plan facilitates growth in renewables by incorporating carbon costs in wholesale markets and modernizing market design to effectively incorporate intermittent renewable resources and demand-side resources.
Daniel Shawhan: Indeed, the action plan includes both a CES, which would apply to the power sector, and a carbon price, which the action plan implies would apply to the whole economy (see page 286 of the action plan). A carbon price could be set directly as an emission fee or tax, or could be achieved via a cap-and-trade program, in which the emissions credit price would be the carbon price. The CES and the carbon price would both apply to all grid-serving power generation. If the carbon price is high enough relative to the stringency of the CES, the CES target would be satisfied without a need for the CES. In that case, the CES credit price would be close to zero. Otherwise, the CES would still have an effect, causing the power sector to be “cleaner” than it would be with just the carbon price, by whatever measure of “cleanness” the CES uses. For example, if the CES could only be satisfied by power plants using renewable energy, nuclear, or carbon capture, then more generation from these kinds of plants would result, relative to a case with just the carbon price. Having the CES in addition to the carbon price would increase both benefits and costs.
One can also look at this combination the other way around by asking what would be the effects of adding an economy-wide carbon price on top of a power-sector CES. This scenario would reduce emissions in the rest of the economy. A uniform price for emissions that applies to the whole economy is an effective way to reduce total emissions at the least cost.
1.2 Build a Cleaner and More Resilient Transportation Sector
What are the risks of implementing multiple transportation policies in hopes of solving a single problem?
Joshua Linn: As the SCCC report notes, it won’t be easy to dramatically reduce greenhouse gas emissions from the transportation sector. Although electric vehicles and other technologies have great potential, these technologies have not yet penetrated the mass market. As such, it is tempting to throw as many policies as possible at the problem—setting national greenhouse gas standards, creating a national Zero Emission Vehicle (ZEV) program, subsidizing electric vehicle sales, subsidizing infrastructure investments, and so on. The report layers multiple policies to solve the single problem of reducing greenhouse gas emissions.
Piling up policies in this way could backfire—particularly the idea of combining a national ZEV program with subsidies for buying electric vehicles. To comply with a national ZEV program and boost market shares of ZEVs, vehicle manufacturers would raise the prices of gasoline- or diesel-powered vehicles compared to the prices of ZEVs. If we suppose that there’s a national ZEV program, and then add consumer subsidies, the two policies interact in a surprising way. Offering the subsidies makes it easier for manufacturers to comply with the ZEV program, and manufacturers won’t have to charge as much for gasoline- and diesel-powered vehicles. In effect, the subsidy transfers money from federal taxpayers to buyers of gasoline- or diesel-powered vehicles. It’s hard to imagine that the authors of the report want to use federal tax revenue this way—and yet, that’s essentially what this proposal would do.
Other examples of layering policies on top of one another can lead to perverse outcomes and actually make it more difficult to cut greenhouse gas emissions from transportation. Instead, it is generally more effective to match one policy to one objective. If the goal is to increase the market share of ZEVs, it is better to either subsidize them or create a ZEV standard—but not to do both.
How can federal policy reduce vehicle miles traveled?
Joshua Linn: Pre-COVID, passenger vehicle miles traveled (VMT) were rising steadily, and VMT will probably start rising again as the economy recovers. Reducing VMT is an important step in cutting transportation sector emissions, at least until all vehicles on the road run on emissions-free electricity or hydrogen. The report discusses ways that federal policy can support state and local jurisdictions in reducing VMT. For example, the federal government could increase funding for public transportation or assist in local and state transportation planning bodies.
Targeted use of vehicle technology provides an opportunity for federal policy to encourage lower VMT directly. Vehicles contain software that measures fuel consumption and VMT, and this information can be transferred to outside parties. Car insurance companies already use these technologies to provide discounts for people who reduce their VMT. Insurance companies do this to increase their profits, rather than to reduce greenhouse gas emissions. The federal government could similarly incentivize households to reduce their VMT. For example, a household could get a tax cut or a check from the government if it reduces its driving compared to some baseline level. Since the technology exists, creating a policy like this would be a matter of figuring out the logistics and managing concerns around privacy.
Shutterstock/Volodymyr Goinyk
What can we learn from the “Cash-for-Clunkers” program?
Joshua Linn: The Solving the Climate Crisis action plan includes a proposal to subsidize scrappage of older and higher-emitting vehicles, similar to part of the Car Allowance Rebate System implemented in 2009 (i.e., “Cash-for-Clunkers”). Such programs provide consumers with a rebate for trading up to a more efficient vehicle, but analyses of programs like Cash-for-Clunkers find that the incentives don’t actually change consumer behavior that much.
Research on this program has concluded emphatically that, although it successfully transferred a few billion dollars to households during the recession, the program did not boost new vehicle sales or reduce greenhouse
