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Policies for when we get serious about climate change
There are policies that decrease emissions, then there are policies that DECREASE EMISSIONS
The paths to decarbonization are plentiful. Liberal state and local governments are leading the way with innovative policy ideas, and no two states are approaching decarbonization the same way. While states may be leading the way in the US with big net-zero goals, most have not enacted meaningful enough policies to ensure their net-zero future.
Take New Mexico for example - New Mexico has two legitimate decarbonization goals so far: 1) an executive order that aims to reduce greenhouse gas emissions 45% below 2005 levels by 2030; and 2) the Energy Transition Act that aims to achieve an electricity sector consisting of 40% renewables by 2025, 50% by 2030, and 100% by 2050. Recent reports tell us New Mexico isn’t anywhere close to being on track to achieve those goals. And even if New Mexico were to achieve those goals, the state would still not be net-zero.
Not only are most state goals insufficient, but they haven’t yet enacted the right laws to actually reach those insufficient goals. While states like New Mexico are dabbling with EV mandates and attracting clean energy companies (which, by the way, are great initiatives everyone should be doing), they’re avoiding the big, meaningful policies that will ultimately decarbonize our entire economy.
The Rocky Mountain Institute (RMI) built an interactive policy simulator for 47 US states that shows how different policies would affect projected greenhouse gas emissions in a state - helping policymakers visualize the reality of our decarbonization goals.
RMI’s policy simulator is useful as we determine which policies we’ll need to focus on if we want to get serious about decarbonization. Today’s post is about putting our decarbonization goals in perspective. I’m going to lay out New Mexico’s emissions goals, and the unavoidable policy ideas we will have to reckon with when we decide to get serious about climate change. Let’s dive in.
The RMI Energy Policy Simulator pictured above is an online tool that allows users to project the emissions implications of 77 unique climate policies that foster decarbonization. The simulator can calculate the expected emissions reductions of proposed rules as granular as New Mexico’s proposed version of Advanced Clean Cars 2, for example:
ACC2 will be great for the climate, our air quality, and our economy, but it doesn’t quite get us to our goals. Most of the other 77 policy ideas on the simulator have benefits that are barely, if at all, detectable on the graph.
In fact, if New Mexico were to enact the 69 least effective climate policies (of the 77 possible policies on the RMI simulator) to the fullest extent possible, the state still wouldn’t reach its 2030 emissions target. This includes a more stringent ACC2 than what is currently proposed, a stricter Low Carbon Fuel Standard than was proposed last legislative session, rapidly developing carbon capture technology and implementation, and 66 other unique policies that have zero to little precedent in New Mexico so far, and the blue line still doesn’t reach the green dot:
Now, this doesn’t mean we need to forget about the small increments of improvement that come from policies like Advanced Clean Cars 2, the Low Carbon Fuel Standard, or the other 67 climate-friendly policies, we just shouldn’t pretend these are going to help us reach our climate goals completely. A worthwhile policy doesn’t have to fix every issue we have, but if we spent the next six years working on the small policies only, we’d lose the climate fight. It’s time we start grappling with the big, meaningful policies, as well.
There are at least eight policies in the RMI simulator that have the potential to reduce emissions drastically enough for us to reach our climate goals. Most states are not pursuing these ideas aggressively. Of course, there are exceptions - the West Coast and New England have their own Cap and Trade and Cap and Invest programs, but overall, most states are acting as if they won’t ever have to close coal-powered plants, tax carbon, or drastically reduce fossil fuel exports.
Here’s how a few of these big-reduction policies would work.
Early Retirement of Power Plants
Power plant retirement programs phase out the least efficient fossil-fuel-derived energy-producing facilities. According to RMI,
Early retirement programs should target the emissions intensity of plants, establishing a benchmark level of emissions per unit energy (i.e. an energy performance standard). The use of a performance standard acknowledges a role for highly efficient fossil fuel plants, permitting upgrades to environmental control equipment rather than outright closure, if the plants can remain profitable. Flexible compliance will reduce the burden created by retirements and help keep costs modest.
While most retirement plans will be based on environmental measurements like GHG emissions or conventional pollutants, it is important to also weigh reliability and financial measures, and grid planners and operators must consider what resources could replace retired capacity. For example, retrofits of certain plants might be justified by grid reliability benefits due to their particular location in the power grid.
To ensure cleaner resources replace retired assets, it is best to supplement this policy with programs encouraging efficiency and renewable energy.
Subsidies for clean electricity production
Subsidies for clean electricity production usually come in the form of Feed-In Tariffs (FITs), which are guaranteed prices for electricity generation that let markets decide how much electricity to supply. The tariffs would be set over multiple years to provide revenue stability for investors. FITs reduce uncertainty about the return on energy investments and push the private sector to innovate.
A moderate $30/MWh subsidy on clean energy would reduce emissions drastically right away:
If New Mexico enacted a price on carbon that slowly increased to $100/metric ton of CO2e ( which is much lower than the actual social cost of carbon btw) by 2050, the expected emissions reductions would be huge:
As you can see, the blue line is still well above New Mexico’s 2030 emissions reduction goal represented by the green dot on the graph. But if you increase the price of carbon to $255/metric ton of CO2e, we reach our 2030 emissions goal with carbon pricing alone:
Of the 77 policies in the RMI projection, carbon pricing is by far the most effective - especially in the short to medium term - because it’s economy-wide and the tax revenues can be reinvested in clean industries that provide a return to the state. Furthermore, pricing carbon would push the market to retire power plants early, shift to non-animal products, use less fuel, etc. - accomplishing many of the big objectives at once.
The tough part about a carbon price at the state level is you don’t want it to be the reason all of your state’s economic activity moves to a less-regulated state like Texas. For that reason, a nationwide carbon tax would likely be most beneficial as it keeps the economic playing field more even.
Reduce fossil fuel exports
For New Mexico, this one is interesting. The oil and gas industry is both the state’s largest polluter and largest source of tax revenue. According to the LFC:
New Mexico typically receives over $4 billion in direct revenue from oil and gas production through severance and property taxes and royalty and rental income. Additional indirect income comes from sales and income taxes on oil and gas drilling and services… Most years, oil and gas direct and indirect revenue make up 25 percent to 30 percent of total general fund revenue…
At the same time, the oil and gas industry is terrible for the climate as it makes up 53% of total emissions in the state according to the New Mexico Environment Department:
Logistically, reducing oil and gas exports would mean reducing demand by providing alternatives, raising prices through a carbon tax, or reducing permits for infrastructure that makes this economic activity possible. If New Mexico reduced fossil fuel exports by 100% by 2050, the emissions reductions would only grow as time goes on:
These four policies aren’t the only meaningful policies worth noting. Methane capture, shifting to non-animal products, soil improvement, and other policies would drastically reduce emissions in New Mexico and abroad. I urge you to play around with the RMI policy simulator to see just how many options we have.
We’re going to need a large variety of small, nimble policies to reduce emissions in those hard-to-reach areas, and we’ll need big, economy-wide policies that eventually get the net-zero job done. My goal in this post is to open up the discussion on the possibilities that are out there.
In conclusion, you can’t hide from the math. We’re going to have to put a price on carbon, reduce oil and gas production, and so much more. New Mexico currently emits over 70 million metric tons of CO2e per year, and the state’s goal is to reduce that to about 50 million metric tons in the next six years. Experts say we will likely blow past all of our emissions goals. That being said, it’s worth shooting for anyway. I would hate for our most ideal climate to only exist within a simulation (pictured below).