Ten Key Clean Energy Policies for Senate Legislation
Posted July 6, 2010
The U.S. Senate is on the verge of taking up climate and energy legislation that could be a giant step towards a clean energy economy if it has the right policies. The urgency and importance of transitioning to clean energy has never been clearer. The Gulf of Mexico oil disaster serves as a constant reminder of the need to break our dependence on oil and other fossil fuels.
Many countries are already well underway in a race to develop the technologies that achieve this goal. A comprehensive climate and energy bill would help ensure America doesn’t get left behind. The bill would also create millions of good American jobs, enhance national security, and curb the pollution that causes global warming.
The cornerstone of an effective Senate bill is carbon pollution limits, which my colleague Dan Lashof discusses here. These limits are essential to spurring clean energy innovation and investments. A bill without carbon pollution limits is a piecemeal approach that could cause more harm than good for the reasons described by my colleague David Doniger here.
Our country also needs clean energy policies that target specific sectors of the economy such as buildings, industry and power generation. Carbon pollution limits must be supplemented with these policies to ensure that each of these economic sectors makes the transition to clean energy in a quick and cost-effective manner.
I briefly describe below ten key clean energy policies that the Senate should include in the climate and energy bill.
Clean Energy Codes and Standards
- Minimum Utility Energy Efficiency Requirement – The bill should require that electric and natural gas utilities meet a minimum energy efficiency requirement. This requirement should be either: 1) an energy efficiency resource standard (EERS) that requires utilities to save 1% of their electricity sales per year through energy efficiency, ramping up to 2.5% per year over time, or 2) a requirement that utilities invest in cost-effective energy efficiency an amount equivalent to the value of 20-33% of the carbon allowances they are allocated pursuant to the bill. Read more about this recommendation here.
- Renewable Electricity Standard – The bill should establish a renewable electricity standard (RES) of 20% by 2020 and 25% by 2025. The American Clean Energy Leadership Act (ACELA, S. 1462), which the Senate Energy Committee reported last year, has a 15% by 2020 RES. The stronger 20% by 2020 and 25% by 2025 targets are needed to ensure robust deployment of renewable resources. The ACELA RES also encourages dirty energy technologies by: 1) removing technologies such as nuclear plants, large scale hydro-electric dams, and municipal solid waste incinerators from the baseline that is used to determine an individual utility’s RES target, and 2) making biomass power plants that use feedstock from high-carbon, environmentally sensitive areas an eligible resource to meet the RES. These dirty energy technologies should not be encouraged by utility performance standards.
- Building Energy Codes – The bill should include a requirement that new buildings be 30% more efficient by 2015 and 50% more efficient by 2018 compared to recent model building energy codes. ACELA already has a building energy codes provision that encourage states to adopt and enforce codes that meet these targets. The Practical Energy and Climate Plan (S. 3464) introduced by Senator Lugar has a somewhat stronger building energy codes provision than ACELA. A backstop mechanism, however, would need to be added to both bills to ensure that buildings in states that fail to adopt and enforce the codes still meet the targets. The Senate climate and energy bill should include such a codes provision along with the backstop mechanism. The bill also should contain a provision that requires changes to underwriting and appraisal standards as recently proposed by the Leading Builders of America and the Institute for Market Transformation here. These changes would ensure that energy costs of a home are considered in calculating the costs of home ownership in the mortgage process. Congress should also appropriate $100 million in FY 2011 to states for code adoption, training and enforcement, with increased funding over time.
- Oil Savings Target – The bill should establish a national target that reduces oil consumption and increases safer sources of supply (through enhanced oil recovery using permanently sequestered manmade CO2) by a combined 2 million barrels per day by 2020, 8 million barrels per day by 2030, and 20 million barrels per day by 2050, relative to 2005 levels. To meet the targets, all relevant agencies should be required implement measures within their jurisdiction to accomplish the savings. These measures can include higher fuel economy, smart growth and transportation efficiency, sustainable low carbon fuels, vehicle electrification, and increasing domestic oil production through enhanced oil recovery.
Clean Energy Investments and Incentives
- Transportation Efficiency Policies – The bill should include transportation efficiency policies that support options such as public transportation and high-speed rail, and encourage more convenient and livable communities. Such provisions would direct the Environmental Protection Agency (EPA) and the Department of Transportation (DOT) to set a national greenhouse gas (GHG) reduction goal for the transportation sector and set standards to evaluate progress. The provisions would also amend transportation planning rules to require state departments of transportation and larger metropolitan planning organizations to set GHG targets, develop transportation plans certified by DOT and EPA to show progress toward goals, and report on progress. Finally, the transportation efficiency provisions should authorize a grant program to assist with increased planning expenses and offer incentive grants to help states and metropolitan planning organizations implement plans. Every major climate bill in both houses of Congress contains these transportation efficiency measures.
- Advanced Energy Manufacturing Tax Credit – The bill should include the SEAM Act (S.3324), which expands the Qualifying Advanced Energy Project tax credit (I.R.C. Sec. 48C) to provide up to $5 billion in tax credits. The American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5) established the incentive, which includes a $2.3 billion cap. This funding was quickly used to support 183 new or expanded manufacturing facilities, and hundreds of projects were denied because of lack of funding. The additional funding would be used to support many of these unfunded projects.
- Building Energy Retrofit Incentives – The Home Star Energy Retrofit Act (S.3434) should be included in the bill if it has not already been passed in other legislation. The bill should also include a longer term program to incentivize whole-building performance-based efficiency retrofits for residential and commercial buildings. The program should be modeled after the Gold Star performance path in Home Star for residential buildings and similar to the performance path in the State Energy Efficiency Retrofit Program (ACELA Sec. 262) for commercial buildings.
- Treasury Grant Program – The bill should extend the Treasury Grant Program enacted in ARRA until 2012. The program enables those eligible for a commercial renewable electricity project investment tax credit (I.R.C. Sec. 48) to take a Treasury Grant instead of the tax credit.
Clean Energy Financing
- CEDA – The bill should include a Clean Energy Deployment Administration (CEDA) that provides credit support to emerging technologies to help them cross the financing “valley of death” that often prevents demonstration-scale projects from developing into commercial-scale ventures. ACELA already contains a CEDA (Title I, Subtitle A), but the following modifications need to be made to the provision: 1) include limitations to ensure that high-carbon technologies do not receive CEDA support, 2) remove the exemption of CEDA from important taxpayer protections contained in the Federal Credit Act of 1990, 3) include an overall cap on the amount of credit support that can be provided by the program, 4) remove the requirement that CEDA be “self-sustaining,” and 5) eliminate the merger of CEDA with the existing Department of Energy Loan Guarantee Program. None of these modifications would inhibit CEDA from providing robust support to emerging technologies.
- IMPACT – The bill should also include the IMPACT Act (S. 1617), which establishes state revolving loan funds to support efforts by medium and small manufacturers to increase their energy efficiency and produce clean energy technologies.
My colleagues and I plan to post more detailed blogs about each of these policies.
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