Energy and Climate Policy

Aaron Steinberg is an interdepartmental program assistant at the Council on Foreign Relations in New York.  On Sunday, the Indian Election Commission released the much anticipated polling dates for the 2019 general election. Amid the electoral preparations, opposition party members are accusing the incumbent, Prime Minister Narendra Modi, of using recent tensions in Kashmir to stoke nationalist sentiment. Political analysts say that Modi’s response to the tensions have indeed helped in preliminary polling, but the concern over domestic issues that had been haunting the prime minister remain during this politically pivotal juncture.   One of the centerpieces of the Modi government’s platform has been addressing air pollution, but his efforts to ameliorate the matter have reportedly fallen short. According to the latest data on air pollution, seven of the ten most polluted cities globally are in India’s Indo-Gangetic Plain (IGP)—home to over half of the country’s population. One of the most common metrics used for air pollution is the concentration of suspended particulate matter that have a diameter less than 2.5 micrometers (PM2.5). Various factors contribute to poor air quality, but one culprit, residential energy use, has been identified as a primary contributor to emissions in the IGP. Last year, a study using recent data on PM2.5 concentrations found that residential biomass burning causes as much as 90 percent of the annual anthropogenic PM2.5 emissions in the IGP. The residential energy emissions come primarily from the 78 percent of people who burn biomass (usually in the form of agricultural residues, fuel wood, and dung cake) for cooking and heating, as it is the most affordable energy source for low-income households. Carcinogens from biomass burning contribute to an array of health issues, including respiratory and heart diseases, cancer, and stroke, all of which are central to India’s increasing burden of noncommunicable diseases. One New Delhi chest surgeon found that half his lung cancer patients are nonsmokers; when he started practicing thirty years ago, 80–90 percent of such patients were smokers. For many, breathing has become the new smoking. In 2016, the Modi government launched an initiative to address the issue. Known as Pradhan Mantri Ujjwala Yojana (PMUY), it aims to create liquid gas connections for households below the poverty line and subsidizes state-owned fuel retailers for every new connection. The massive transition has made India the second-largest importer of liquefied petroleum gas (LPG) in the world, and it is poised to take the lead in 2019. Currently, India imports nearly 80 percent of its fuel to meet demand, leaving the supply vulnerable to price fluctuation and political whim. Amid India’s rising demand, importers looked to Iran as an additional source, becoming the country’s second-largest client. Major disruptions were expected in the wake of President Donald J. Trump’s renewal of sanctions, but India, along with eight other countries, were granted waivers, which prevented disruption. Had sanctions been carried out against Saudi Arabia, as was threatened in the wake of the murder of journalist Jamal Khashoggi, PMUY would have faced severe disruptions.  India’s reliance on imports, combined with the subsidies given through PMUY, has put considerable strain on the country’s balance of payments. PMUY’s initial success helped justify the expenditure, but issues are beginning to arise as the program progresses. With general elections coming up in the spring, the Modi government appears to be doubling down on its efforts. PMUY has made impressive progress since its introduction; fifty million new LPG connections have been reported as of 2019. The program’s success has been credited with assisting Modi’s party, the Bharatiya Janata Party (BJP), in winning the 2017 legislative assembly election in Uttar Pradesh (UP), where PMUY was originally implemented. It is no coincidence that PMUY was launched in UP, which sends the most legislators to parliament of any state. The Modi government is looking for similar success in the upcoming election, but the longevity of PMUY is being questioned as low refill rates for the LPG cylinders indicate a return to biomass burning. Currently, PMUY beneficiaries pay for their stove and first cylinder refill in monthly installments; however, beneficiaries must pay market rates for subsequent refills. While PMUY has done well in creating LPG connections, many Indian households are finding it difficult to fund the refill of their LPG cylinders despite the incentives. In one UP district, refill rates sunk as low as 25 to 30 percent. When money is scarce, returning to biomass is an easy way to cut costs. As of early 2019, Modi is polling ahead of his closest competitor, Rahul Gandhi, but his lead has diminished in the past year. Failing to address the shortcomings of PMUY would be a major misstep for Modi and the BJP. The government’s current plan to increase LPG subsidies may help restore confidence in PMUY throughout the election period, but energy-source diversification is crucial to long-term success of the program. India’s shift from biomass is one facet of a larger low-carbon transition. LPG is an example of a low-carbon alternative, but converting to an energy source with greater domestic availability would help ensure greater stability for the program. One method suggested by the National Institution for Transforming India is complementing the new gas stoves with electric stoves, which could be powered by domestically sourced energy. Currently, India’s energy mix is dominated by coal, which will remain a fixture for the foreseeable future. Like biomass, coal is a major contributor to air pollution, so investing in cleaner, more efficient coal plants to power electric stoves would curb emissions from both sources. Although coal is dominant, renewable sources are a distant but growing second, outpacing the growth of coal in 2018. Today, renewable energy stands at around 20 percent of the energy mix and is projected to reach at least 48 percent by 2030. If increased access to alternatives to biomass burning are paired with a more diversified energy mix in India, PM2.5 levels would be drastically diminished, leading to greater quality of life for all, especially as renewables supplant coal. PMUY has been a successful first step in addressing biomass burning and improving India’s overall air quality, but as the BJP’s flagship energy program stands now, India’s air quality and its health are largely contingent on the price of and access to LPG.

This is a guest post by Benjamin Silliman, research associate for Energy Security and Climate Change at the Council on Foreign Relations.  Amid controversy whether the Green New Deal manifesto is too broad, Senator Edward Markey (D-MA) spoke out in an interview published yesterday to elaborate on direct Congressional actions that might come about in alignment with the resolution’s chief environmental focus. Distinguishing the resolution’s aims from his past efforts to pass cap-and-trade market pricing carbon emissions credits, Markey noted, “We could wind up putting a price on carbon, but we have to protect the most vulnerable simultaneously.” Markey’s suggestions in the interview may give a hint at what Democrats think is possible to pass right now: “Practically speaking, we could pass a tax-extender bill for tax breaks for wind, solar, batteries, electric vehicles. We could pass an infrastructure bill that would be a green infrastructure bill. We can take the appropriations process, and in each individual area insert funding for green programs. We can make a down payment on what we need to do now on infrastructure, on taxes, on appropriations. And that is the beginning of a pragmatic way of looking at this existential challenge.”  Markey’s words might resonate with many members of Congress, from both parties, who are frustrated with the executive branch’s inability to respond effectively to the pressing issue of climate change. Congress could exercise its authority over the budget to start funding green infrastructure programs within the U.S. Department of Defense, the Federal Emergency Management Agency (FEMA), and federally funded projects through companies like the Tennessee Valley Authority or the Export-Import Bank of the United States. Current U.S. government support for infrastructure is woefully inadequate. The nation’s energy, rail, water, road, communications, and industrial systems are in need of significant investment. The American Society of Civil Engineers estimates that there is an infrastructure spending gap in the United States of nearly $1.5 trillion needed by 2025 just to maintain the quality of current infrastructure. These estimates mean there is a tremendous opportunity to authorize appropriations that could be used more wisely to address transportation, energy, water, and defense infrastructure in a manner that is more resilient to climate change and supports the transition to cleaner forms of energy as upgrades are needed. To do this successfully, data-driven metrics clearly evaluating previous infrastructure’s cost, effectiveness, vulnerabilities, and environmental impact are needed, and should be a high priority for congressional research to establish. Developing a procedural and flexible evaluation structure will allow for optimal technologies to be deployed, maximizing environmental gain for cost. The U.S. Department of Defense (DoD) has openly and repeatedly raised concern about the effects of climate change. According to the U.S. Government Accountability Office, DoD maintains a portfolio of $1.2 trillion of infrastructure across 4,800 sites worldwide as of 2017. During the next round of budget increases, infrastructure spending should be tied to green spending and research. The Trump administration has also made it clear it plans to “rebuild” the military. To do so will require substantial infrastructure investment. Ensuring that infrastructure is resilient to climate risks is vital. Congress should look for low-hanging fruit elsewhere in the budget as well. Disaster relief organizations, like FEMA, that participate in large-scale infrastructure investment for repair after damaging events, would benefit from requirements that consider climate change. In 2017, the National Oceanic and Atmospheric Administration (NOAA) estimated that natural disasters caused $300 billion in damages. To supplement relief resources, Congress appropriated an additional $34.5 billion in post-disaster funds and forgave $16 billion of debt for the National Flood Insurance Program. In the future, when designating supplemental relief funds, a green infrastructure or increased weatherization requirement would help ensure that damaged infrastructure is replaced with buildings and energy systems that are better prepared for extreme weather events. The damages experienced by Californians after utility PG&E failed to upgrade its equipment against heat and fire is a telling lesson in the liability risks that come when infrastructure cannot meet current environmental conditions. Initial funds allowing for better planning and access to capital to make needed weatherization and energy efficiency upgrades could potentially reduce the extent of future relief needed in the future. Congress also can use its budget influence on federally-funded infrastructure projects to require certain environmental standards as a prerequisite. That could include environmental targets on state-owned entities like the Tennessee Valley Authority (TVA), a government-backed company that built power projects during the original New Deal and recently opted to shutdown coal plants. TVA is already managing liabilities from coal ash spills. Activists looking for bold, comprehensive action won’t be satisfied with the U.S. Congress taking these incremental steps.  However, such steps are immediately implementable and would avoid one of the biggest problems confronting our ability to implement climate solutions, mainly that infrastructure is long-lasting. Once it is built, it is harder to allocate funds to replace it. Forcing greener choices in current appropriations would help pave a path towards broader legislation.

Test your knowledge of deforestation, from its role in climate change to efforts to combat it.

Five CFR experts highlight trends worth tracking in the year ahead.

The conference in Poland will be a major test of the world’s collective political will to fight global warming. Following through on promises made in Paris will not be easy.

As European voters look for new alternatives, Green parties are making waves across the region. In doing so, they could signal a counterweight to the populist European right and influence national and European climate policies.

Renewed U.S. sanctions against Iranian oil exports kick in officially this week as part of the Trump administration’s decision to exit the Iranian nuclear deal. Estimations on how effective the sanctions have been is a relatively messy affair to date. Iran is expected to lose between 1 million to 1.5 million barrels a day in oil sales to Europe, Japan, South Korea, and India, with speculation that some of that oil might wind up instead in China or being repurposed in barter trade with Russia. Today, the U.S. government officially confirmed it was handing out temporary waivers to several of the countries that had previously announced intentions to go to zero purchases from Iran. Snatching defeat from the jaws of victory, the announcement, aimed to keep oil markets from overheating, calls into question the ultimate effectiveness of the Trump Iranian sanctions project overall. Worse still, it has simultaneously lay bare the fact that President Donald Trump, like countless U.S. presidents before him, has to worry about global oil prices in conducting foreign policy, despite an abundance of U.S. domestic energy. Iran has long experience in trying to avoid restrictions on its oil sales including turning off internationally-required tanker transponders to make it harder to track its shipping movements. But available satellite assisted tracking technology has improved since 2012, the last time the U.S. imposed sanctions on Iran. Tracking services are now offering up to the minute updates on Iranian oil exports, helping to illuminate the shadowy world of smuggling. One famous service, Tanker Trackers, even located with precision recent Iranian deliveries to China’s strategic petroleum reserve in Dalian. In years past, Iran has tried to entice major trading partners to evade sanctions compliance by promising sweetheart oil and gas exploration and other lucrative commercial deals. But the more uncertain long range commercial outlook for prolific Middle East reserves weakens Tehran’s bargaining chips. Fewer players, be they government-run firms or private companies, are looking to increase access to oil reserves in a place like Iran these days. After losing billions in investments in geopolitically risky international oil and gas ventures, China’s government has shifted efforts to new, clean energy technologies like renewables, batteries and automated cars. Europe’s big oil companies like Norway’s Equinor, France’s Total, and Royal Dutch Shell are also shifting to renewables and minding their knitting in places with less geopolitical risk. Also losing interest in risky international ventures, many American firms are squarely focused on new North American shale reserves that are now challenging the Middle East for market share. Many European, Japanese, and South Korean refiners initially responded to the Trump administration’s call for zero purchases of Iranian oil by quickly saying they would comply with the new U.S. sanctions, and French firm Total abandoned its natural gas development project in Iran. Ironically, all these pledged sanctions compliance announcements shook oil markets which were already tightening from a deal between the Organization of Petroleum Exporting Countries (OPEC) and Russia to limit supply to boost the price of oil. That prompted U.S. President Donald Trump to start tweeting at Saudi Arabia to intervene with more oil as they had done when then U.S. President Barack Obama had hardened Iranian oil sanctions in 2012 to get Tehran to the negotiating table. Had oil markets been oversupplied at the time the Trump administration was initiating new Iranian sanctions, chances are most countries would have begrudgingly gone along in a manner that would not have disturbed oil prices or added risk to the global economy. But in the context of a crisis-torn Venezuela and surprising reports that Saudi Arabia’s ability to produce more oil was more limited than previously supposed, the administration was faced with harder choices. Before offering its official statement on October 31, 2018, that “sufficient” oil supplies existed to permit a significant reduction in the petroleum purchased from Iran, the administration first jawboned Saudi Arabia to increase its production further, and then, in the aftermath of the Khashoggi scandal and related public U.S.-Saudi strains, the U.S. State Department was forced to hint that waivers would be given to countries having difficulty finding replacement barrels for Iranian purchases. Oil prices began to recede. In all, eight countries officially received such  temporary waivers, including Turkey, India and South Korea late last week. The waffling on sanctions enforcement has definitely helped with oil prices but it means that Iran will have an easier time finding outlets for its oil production, even if it can only take back goods as payment and not cash. Added oil supplies are expected on the market in early 2019 when infrastructure additions will allow higher exports of U.S. crude oil. U.S. diplomats are also working to free up more oil from northern Iraq and the Saudi-Kuwaiti neutral zone in the coming months. That Trump had to berate the Saudis and then capitulate on Iranian sanctions enforcement is a testament to the limitations of U.S. energy independence. Unlike in OPEC countries, additional U.S. oil export capacity isn’t just magically available on demand by pronouncement by government leaders. The pace of investment in new oil wells, export pipelines, and terminals is in a cacophony of dozens and dozens of independent, uncoordinated commercial oil company decisions that are dictated by markets and capital planning processes. Over the next month or two, rising U.S. oil production, which hit its historical record this month, remains stuck inland, constrained by pipeline bottlenecks. Even when those bottlenecks help keep the price of oil in Texas at a discount to international levels, it doesn’t help the Trump administration, which has to worry about how any shock in the global price of oil would disturb its broader goals that are related to the dollar, trade and global economic growth. That reality became even more apparent when Saudi Arabia hinted it could unsheathe its oil weapon after 44 years of quiescence, if the newly-elected U.S. Congress chooses to enforce the Magnitsky Act in response to the death of Jamal Khashoggi.  Reminding Americans of previous gasoline lines caused by the 1973 Saudi oil embargo, a Saudi commentator noted that the Saudi energy minister’s need to deny the possibility of a replay of 1973 signaled “to those who understand global politics that Saudi Arabia had many cards to play.” The incident laid bare an ugly reality: even with all our newfound oil and gas, America and its allies still need strategic stocks to protect the global economy from any rising petro-power that would try to use oil to blackmail the West into compliance to a political result they don’t want. U.S. production, though responsive to rising prices, is not able to surge rapidly enough to damp down a sudden supply shock. This was certainly noticed in China, which is only half way through building its own stockpile expected to reach 850 million barrels by 2020. China has increased its pace of stock building in the past few weeks, ironically with soon to be sanctioned Iranian oil. It is also a result that has taught a new generation of U.S. leaders about the limits of American oil power.

With much of the world’s attention fixated on climate change, the Our Ocean conference is a great opportunity to address the health of the oceans and garner commitments to save it from the scourges of pollution, overfishing, and transnational crime. 

This post is co-written by Daniel Scheitrum, an assistant professor at the University of Arizona’s Department of Agricultural and Resource Economics. In the U.S. Environmental Protection Agency document summarizing the newly proposed Affordable Clean Energy rule (ACE), the notice correctly points out in the background section of the executive summary that carbon dioxide emissions in the U.S. power sector have steadily declined in recent years “due to a variety of power industry trends, which are expected to continue.” The EPA document specifically mentions an expectation that the price of natural gas will remain low and solar capacity will continue to grow. It notes that some power plant generators have announced plans to change their generation mix “away from coal-fired generation towards natural gas fired generation, renewables and more deployment of energy efficiency measures” and cites the U.S. Energy Information Administration’s (EIA)’s 2018 Annual Energy Outlook, “the cumulative effect of increased coal plant retirements, lower natural gas prices and lower electricity demand in the AEO2018 reference case is a reduction in the projected CO2 emissions from electric generators even without [implementation of] the [CPP].” These same market trends have been noted by independent experts who also contend that the ACE is unlikely to change the trajectory for U.S. coal. S&P Global Market Intelligence reported last week that it saw no evidence that electric and municipal utilities were going to reevaluate plans to shut down coal generation as a result of the shift to the new ACE plan. S&P Global’s analysis forecasts that 23,700 Megawatts (MW) of coal-fired capacity is scheduled to be retired between 2018 and 2032, including thirty-six coal units expected to shut down prior to 2020. Some major utilities have already publicly confirmed retirement plans will continue unchanged. For example, AEP and Dominion Energy have announced that they will not adjust plans. Dominion still plans to retire its Yorktown coal units while Duke Energy will retire coal at Asheville, North Carolina and bring on natural gas-generation in the same location. Duke also has plans to retire plants in Gaston County, North Carolina and Citrus County, Florida in a business decision the company says was not related to the CPP. Notably, First Energy Corporation has said the new proposed ACE will not change the planned retirement or transfer of the 1,300 MW Pleasants coal plant in West Virginia. FirstEnergy Solutions announced it plans to shut down four coal fired power plants, including three in Ohio, by 2022. Colorado’s Public Utility commission also gave preliminary approval this week for Xcel Energy to close 660 MW of coal fired generation and replace it with renewable energy plus battery storage. The utility says the plan will save ratepayers $213 million. While there seems to be a lot of agreement on these basic trends, the numbers on anticipated emissions reductions from the U.S. electricity sector between now and 2035 vary considerably. We take a closer look at the differences and offer some background. The Clean Power Plan, proposed by the Obama administration in 2014, prescribed that each state would meet specific standards for carbon dioxide emissions based on their individual energy consumption. States were free to determine how to achieve the reductions through a state action plan to be approved by EPA. The plan was challenged in court by twenty-seven states. At issue, among other objections, was the plan’s broad scope covering actions that went beyond regulating steps to be taken at the individual plants themselves. The new proposed ACE rule limits regulation to plant-specific compliance to performance standards.  Estimates for the emission reductions that will come via the ACE diverge from other forecasts for the U.S. power sector and are lower than reductions projected for the Clean Power Plan. To delve into the differences, we start by pointing out that estimates from 2015 regarding the CPP’s expected effect on emissions are considered out of date. That’s because so much change in fuel sources for U.S. generation has already taken place in the power sector that emissions reductions have gone beyond estimates for the current time made four years earlier. There are even notable differences between the EIA’s AEO 2017 and AEO 2018 estimates which makes sense since market driven changes in the sector are happening so rapidly. One important input variable producing differences in analysis for 2025 to 2035 is assumptions about future U.S. domestic natural gas prices. The EIA reference case assumes natural gas prices of $3.40-$5.00 per million Btu (mmBtu) while its “high resource” case projects natural gas prices in the range of $2.90-$3.30/mmBtu. We believe the high resource case estimate for U.S. natural gas prices is most likely given that prices have averaged $3.15/mmBtu over the past five years. Futures prices out to the year 2025 range from $2.91/mmBtu at the end of 2018 to $2.70 in summer 2025 and while they are not predictors per se, they reflect the amalgamation of current bets by natural gas traders. Barclays raised its natural gas forecast for fourth quarter 2018 to $2.83 mmBtu, up from $2.58 mmBtu, noting that injections of natural gas to storage this year have been the lowest in almost a decade. Cheniere’s new liquefaction trains at Corpus Christi, Texas and Sabine Pass are also expected to come on line soon ahead of schedule, originally scheduled for early 2019. A new plant at Elba Island will also start operations this year. The three projects together will boost U.S. export capacity by about 1.5 billion cubic feet a day. Barclay’s also notes that U.S. natural gas production will reach record highs next year, growing by 4.5 bcf/d. EIA’s 2018 reference case for greenhouse gas emissions without the CPP in place expected emission reductions of 694 million metric tons (MMT) by 2025 compared to 2005, 662 MMT in 2030, and 683 MMT in 2035. By comparison, the high resource case without the CPP projects emissions reductions of 807 MMT in 2025 compared to 2005, 751 MMT in 2030, and 738 MMT in 2035. The EPA’s ACE proposal does not provide estimate of total levels of emissions, but rather changes in the baseline emissions. EPA’s models differ from those of EIA and focus on changes on a state by state, facility by facility level and caps only existing sources. That is in contrast to EIA’s model which looks across state lines at regional balances and projections for competition among new sources. EPA’s estimates in the rollout of the ACE projects that repealing the CPP would increase emissions by 45 MMT in 2025, 67 MMT in 2030, and 60 MMT in 2035. The proposed emissions reductions of the ACE program are provided in comparison to these values. For instance, the ACE scenario of Replacing the CPP with Heat Rate Improvements of 4.5 percent at a cost of $50/kW projects emissions to increase by 34 MMT by 2025, 55 MMT in 2030, and 50 MMT in 2035. The contribution of the ACE in 2025 is then reducing emissions by 11 MMT compared to replacing the CPP with no policy. Jason Bordoff of Columbia University’s Center for Global Energy Policy (CGEP) noted the gaps in these estimates in a recent op-ed, and compared them to Rhodium Group’s baseline forecast, which anticipates higher emissions reductions of about 35 percent by 2030 and assumes similar natural gas prices as the high resource case for EIA. In his op-ed, Bordoff notes that a recent joint Columbia-Rhodium study calculated that a carbon tax starting at $50 per ton and rising each year by 2 percent could double the 36 percent emissions reduction previously expected from the CPP by 2030 by accelerating the switch to renewables. The bottom line is that there is much uncertainty about the ultimate level of emissions changes that could result by 2025 depending on both market trends and policy frameworks. One interesting aspect of the proposed rule-making under the ACE is that it would give individual states up to two years to develop and submit their climate action plans for the power sector to EPA for approval. That would kick the can into the next U.S. presidential election cycle. Since polling shows that a majority of Americans are in favor of some kind of climate policy and climactic weather events are likely to stay in the news through 2020, it’s anyone’s guess how individual states will choose to proceed. This fall’s midterm elections could provide some hints.

The reality that many energy companies are getting more serious about investment in low-carbon solutions is getting lost in the political noise of the day.

The Trump administration's rollbacks of greenhouse gas emissions will likely damage American energy production, global influence, and jobs. 

President Trump has targeted Germany over its supposed dependence on Russian natural gas, and the proposed Nord Stream 2 is dividing the EU. What’s in store for Europe’s pipeline politics?

Stefan Koester is an intern with the Energy Security and Climate Change program at the Council on Foreign Relations. He is a graduate student at the Fletcher School of Law and Diplomacy at Tufts University. Today the Trump administration published proposed rulemaking rescinding the authority of California to set its own tougher vehicle emissions standards along with the state’s Zero Emission Vehicle (ZEV) mandate. Under what the Environmental Protection Agency (EPA) and National Highway Traffic Safety Administration (NHTSA) are calling the One National Standard, California and nine other states following its lead, would no longer have the authority to set GHG emissions standards or ZEV mandates that are different from a federal standard. California and other states have promised to sue the Federal government, likely leading to years of litigation and market uncertainty. While this battle plays out in the courts, there are lessons that can be learned from the clean electricity transition to see how states, cities, and corporations can spur EV adoption in the absence of federal leadership. There are unique differences between the electric power and transportation sector, but there are broad lessons from the electric power sector to apply to the burgeoning transportation transition. In the absence of the authority of states to set ZEV mandates, there are ways states, cities, and corporations can work collaboratively to drive the clean transportation transition. State-level taxes on gas guzzlers and rebates for EVs can send the right market signal to consumers and spur automakers. Strong and public EV procurement commitments on the part of logistics and transportation companies would show corporate leadership. And finally, U.S. automakers may realize competitive difficulties in managing multiple, parallel business platforms if automakers do not focus more attention on the global EV market. All this is to say that U.S. automakers could ignore federal rules, regardless of federal policy, and stay the course to comply with the California standard. Where Renewables and EVs are today Wind and solar are now the second and third fastest growing energy sources in the United States, respectively. Since 2010, nearly half of all new capacity additions have been from renewables. This year, under the less-than favorable conditions of the Trump administration, wind and solar are the second (1,956MW) and third (1,921MW) largest source of new generation after natural gas (6,646MW). In total, wind and solar made up 36 percent of all new generation this year. With the falling cost of wind and solar, along with battery storage technology, it is likely that renewable energy will hit grid parity with natural gas, on a levelized cost basis, in the next five to ten years. Renewables still only make up 7.3 percent of the electricity sector to date, but several states, like California, Iowa, and Massachusetts, are well on their way to reaching 50 percent in the coming decades. Electrification in the transport sector, even in California which has had incentives for several decades, is not matching the success of renewables. Today, there are roughly 269 million registered motor vehicles in the United States, and while EV (both plug-in and pure-battery) sales grew by 20 percent in 2017, they only make up 0.3 percent of total vehicle stock. Even the most optimistic projections out to 2040 show that EVs will only make up a third of global vehicle fleets. The EIA’s more modest growth trajectory shows EVs growing to 6 percent of total sales by 2040. The Trump administration’s proposed rule will likely slow this development even further, with estimates of an additional 2.2 billion tons of greenhouse gas (GHG) emissions through 2040. While Mandates worked for Renewables, they haven’t worked for EVs It is unclear what the legal outcome of the EPA/NHTSA rule will be and it is unclear whether the courts will issue a stay in California’s favor, allowing the standards to remain in place during litigation. However, it’s clear that while state mandates worked in the clean energy transition, their success in the transportation sector is limited. Renewable portfolio standards (RPS) for power generation have been around for more than two decades and now apply to 29 states. State RPSs created long term contracting and investment certainty for project developers and utilities, and ensured market demand. Between 2000 and 2016, RPS programs were responsible for roughly 56 percent of total U.S. renewable energy deployments, with estimates that RPSs will drive an additional 4GW of annual generation between now and 2030. States are now building more renewable resources than required under RPS statues due to falling costs and acceptance of wind and solar technologies by utilities and regulators as valuable grid contributors. The spectacular success of the RPS, however, is not easily transferable to EV adoption. In theory, ZEV mandates, like the RPS, could drive investment and certainty into burgeoning markets by ensuring that if automakers design, build, and market EVs, then there will be a market for them. Ten states have a ZEV mandate, but even the most ambitious, California, will require roughly 6 percent of total vehicle stock to be battery-electric vehicles by 2025 and 5 million by 2030, about a quarter of the state’s 20 million vehicles. California only has 366,000 EVs on the road today. The failure of ZEVs to spur the clean energy transition in the same way that RPSs have is for a number of reasons. Unlike the electric power sector, which has a couple dozen state-wide utility and regulatory actors, the transportation sector has millions of consumers, thousands of dealers, dozens of large global manufactures, and little existing infrastructure to adequately support deep EV penetration. ZEV mandates have failed to lead to widespread consumer adoption of EVs due to inadequate supporting policies for charging, dealer resistance to marketing EVs, higher upfront costs, limited available model options, and continuing consumer preferences in favor of large internal combustion engine (ICE) vehicles. In addition, turnover of the vehicle stock, which is roughly once every twelve years, requires that the consumer have market access to a perfectly substitutable EV when purchasing a new car, something that is not available today. It is unlikely that stronger mandates, regardless of Federal action, would help drive further EV adoption in the absence of supporting state and local policies to help overcome additional barriers. A state ‘feebate’ program where consumers pay a fee for gas guzzling cars and receive a rebate for EVs is likely both immune to federal interference and would spur greater consumer demand for EVs than state-wide ZEV mandates. Feebates are analogous to federal and state tax subsidies for renewable energy and, where it exists, carbon pricing that serves as a fee on fossil-fuel generation. Tax subsidies and carbon pricing helped spur investment in renewables above and beyond state RPSs. Feebates could jump start the clean transportation transition. Corporate and Public Procurement Strategies Can Drive Demand While ZEV mandates have been disappointing, corporate and public procurement policies could increase EV adoption by driving market demand, lowering technology cost, and helping overcome consumer preference barriers. When large corporates publically committed to investing in renewables, states and cities competed to adopt clean energy policies to attract investment, leading corporates to invest billions in renewables across the country. Google and Apple made headlines last year when they announced, separately, that they were 100 percent powered by renewable energy. Google signed its first renewable contract in 2010 and rapidly increased its share of renewables with investments totaling more than $3 billion, for more than 2.4 GW of renewables. Apple followed up soon thereafter announcing that they were 100 percent renewable across their global operations with over 1.4GW of renewable capacity. In total, more than 140 international corporations have pledged 100 percent renewables, driving 19GW of renewable energy demand since 2008. While these companies may be investing in renewable energy for the green bona fides, they are ultimately doing it because renewables are cheap. Strong procurement commitments on the part of large corporate entities could do the same thing for EVs. UPS, FedEx and DHL are now conducting large-scale testing of EVs in their trucking fleets and their doing it because their delivery costs will fall. Total ownership cost of EVs is lower due to fuel, maintenance, and operations savings. EV trucks are also smarter than ICE vehicles, through IoT sensors and routing technologies, allowing for increased efficiency and reduced delivery times. Finally, consumers may come to demand it as the environmental costs of same-day shipping are more widely appreciated.   Corporates can drive EV adoption in the passenger fleet as well. Uber recently announced a pilot program in seven cities that pays drivers an extra dollar for each ride they do in an EV. Lyft has an ambitious, multi-year plan to become a carbon-neutral transportation company, predicting that by 2025 they will provide one billion rides per year in electric vehicles. In the same way that corporations leaned on states and cities for favorable renewable energy policies, corporations interested in electrifying their fleets could put pressure on states and cities to invest in electric vehicle infrastructure such as public charging, preferential lane access, and license fee waivers. Cities could also require that ride-sharing services switch to EVs over a certain number of years, effectively shifting millions of drivers into vehicles that are cleaner and cheaper to operate. Cities also did their part to drive demand with commitments to 100 percent renewable energy. More than seventy U.S. cities made 100 percent renewable energy pledges, including Atlanta, Madison, Portland, and San Diego. Similar commitments can drive increased EV adoption. Cities could commit to converting their municipal vehicle fleets to EVs. The public sector can drive down battery costs through electric public bus procurement commitments, in addition to fleet-wide conversions of public vehicles. Cities all around the country are already transitioning to electric buses, but they are not doing it fast enough. New York City aims to switch all 5,700 MTA buses to electric by 2040. San Francisco, Washington, D.C., Salt Lake City, and other have made similar pledges. The average life span of a public bus is twelve years. Speeding these commitments up to within the next decade would fuel growth in the EV bus sector and drive down costs throughout the technology stack. Electric buses are popular with city transit officials because they are cheaper, cleaner, quieter, and popular with riders. In addition, city school boards could push to electrify the nation’s 480,000 diesel school buses. This alone would save roughly $2.9 billion, annually, in fuel and maintenance costs, money cities can reinvest into schools. Corporate and public commitments like these can move the needle on EV market demand, battery technology costs, and public infrastructure requirements. In addition, states and cities could begin to compete with one another to have the most favorable EV policies, attracting investment from logistics and transportation companies, automakers, and utilities. Large Corporates Don’t Like Managing Multiple Platforms When Xcel Energy CEO Ben Fowke announced last year that the western utility with 3.3 million customers would be backing a long term business strategy centered around “steel for fuel”, investors and industry analysis were supportive. The strategy refocuses the utility through massive long term investments in cheap wind and solar, while divesting from expensive coal. A number of other utilities have announced similar plans to back away from costly fossil generation and focus heavily on renewables. Ultimately, some utilities see running two platforms, a fossil-fuel one and a renewables one, as a long term losing strategy. The major U.S. automakers are currently running multi-platform businesses with ICE vehicles that serve the dominant segment of the market and smaller EV design, production, and marketing divisions. As consumers and corporates begin to demand increased EV options automakers could find that running multiple, parallel production platforms is costly and inefficient. China, as one senior official noted, is working to end the production and sale of ICE vehicles, increasing the pressure on major U.S. car makers like GM, Ford, and Chrysler to build and sell more EVs. In addition, major foreign automakers like Volkswagen, Diamler, Volvo, and BMW have made ambitious commitments to transition away from ICE vehicles and toward all electric platforms. The Big Three automakers have been slow to adapt, but they may find that maintaining two parallel assembly lines, one that builds traditional ICE vehicles and one the builds EVs, is increasingly more expensive and less profitable than optimizing production on just one line. With the global focus on increased EV adoption, together with state, city, and corporate policies to drive further growth in the United States, automakers might start feeling the pressure to compete on their EV offerings. Focusing only on ICEs, as the Trump administration is doing, is not a good global business solution. While ICEs are cheaper today throughout the world, EV costs are falling rapidly. U.S. car manufacturers may lose global market share if they are not able to keep up with global EV demand. In addition, ongoing federal litigation will increase regulatory uncertainty for automakers.   Just as some utilities have made the choice to invest in renewables for future generation, it is important for U.S. automakers to keep forward looking global strategies. Federal policy should not discourage American automakers from a transition away from fossil-driven technologies if it becomes too costly to maintain two engine platforms or they risk being placed at a global competitive disadvantage to foreign automakers. The Clean Transportation Transition Going Forward The Trump administration has shown its hostility to state-level emissions and electric vehicle mandates. While the legal challenges work their way through the court, states, cities, and corporations, including U.S. automakers, can drive the clean transportation transition forward through ‘feebates’, procurement commitments, supportive state EV policies, and a transition away from multi-platform business strategies. Using lessons learned from the successes of the clean energy transition, states, cities, and corporations can advance EV adoption in the absence of Federal leadership. In addition, the clean energy transition shows that an economy-wide shift in a major sector of the economy is possible and can happen within a short amount of time. While a potential compromise between California and the Federal government is conceivable, in its absence there is much that states, cities, and corporations can do.