Changes to PJM's Capacity Market: What is the Impact on Consumers?

PJM’s capacity market results in higher-than-necessary electric bills for consumers as a result of two problems: (1) high clearing prices, and (2) over-procurement of capacity. When high clearing prices appear in a capacity market, they are a reflection of overestimating customer demand and generator costs—which ultimately get passed on to utility customers. As discussed in our recent report on PJM’s capacity market, over-procurement occurs when the grid operator overestimates its peak demand and cost of new generation (or “net CONE”), resulting in avoidable spending on additional capacity payments and generator investments and, as a result, extra costs charged to customers.

In the past year, PJM capacity market rules have experienced significant changes affecting customer bills. For instance, the latest revision to the PJM’s Minimum Offer Price Rule (MOPR) in September 2021 changes how the floor price that generators receive for capacity is determined for various resource types, which also impacts the price of electricity on customer bills. The most recent change came on January 20, 2022 when the Federal Energy Regulatory Commission (FERC) ordered PJM to halt the use of an adder used to raise generators’ expected costs in its 2023/24 capacity auction. According to FERC Commissioner Richard Glick, methods to maximize prices in PJM’s capacity market conflict with FERC’s regulatory mission:

“Sometimes I felt like we were just making stuff up in order just to increase prices...It's important that we go back to basics and figure out what is truly just and reasonable and not focus extensively on bolstering uneconomic generation.”

FERC’s January 20th order targets the 10 percent adder used in calculating generators’ fuel cost risks; without the adder, capacity charges on customer bills should be lower. Estimated fuel cost risks are used in PJM’s methodology for calculating the cost of new generators (called “net CONE”) and impact the price generators receive in the capacity market. The 10 percent adder raises costs to consumers by: (1) increasing generator bids which, in turn, increases the clearing price, and (2) inflating the demand curve (due to a higher net CONE) which results in increases to both the clearing price and cleared amount—all of which gets passed on to consumers as higher electric bills.

What concerns remain after these substantial changes? For the issue of high costs to consumers, FERC’s order removing the adder should have the effect of lower capacity charges on customer bills, but it’s complicated. As long as PJM overestimates demand in constructing its capacity market, over-procurement of capacity will persist. “Fat market” conditions due to over-procurement allow power plants to remain online (as well as new ones to be built) despite being uneconomic and not needed to provide reliable electric service for meeting peak customer demand. The impacts of over-procurement could be resolved by PJM reconsidering its methodology for estimating future demand and by implementing changes in market design to address the concerns of communities in close proximity to power plants. Actions, such as FERC’s January 20th order, act to lower PJM customer bills, but there is still more that needs to be done to eliminate flaws in PJM’s capacity market design that have kept uneconomic, unnecessary generating capacity online across the PJM region.

Sagal Alisalad

Assistant Researcher

Joshua Castigliego

Researcher

This is a part of the AEC Blog series

Appalachia Ahead: How Renewable Energy Can Change Coal Country

Communities across the United States are in the midst of an energy transformation. While regions such as the East Coast and California are already planning and implementing a switch from fossil fuels to clean energy production, Appalachia faces a different challenge: how to quickly and effectively transition from coal-powered electricity to zero-emission renewables.

Appalachia spans 13 states, including all of West Virginia and parts of Alabama, Georgia, Kentucky, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, and Virginia. The region is known for its extensive coal reserves and mining industry. However, as the number of coal mining jobs dwindles, Appalachia faces high unemployment, exceptionally high poverty rates, and a diminishing tax base as thousands of people move away to find work. The availability of jobs in West Virginia and eastern Kentucky is especially impacted; extensive networks of local coal mines and a heavy reliance on coal mining present a special challenge to the local economy in a clean energy transition. At the same time, Appalachia is rich in energy infrastructure such as electric transmission lines and generation stations, powered by coal and often exporting electricity to areas outside of the region. The existence of such infrastructure combined with central Appalachia’s proximity to numerous large electric markets has caught the attention of clean energy companies looking to site new solar and wind generation to meet rising demand for carbon-free energy.

Climate advocacy groups are also taking notice of opportunities for renewable development in Appalachia. For example, in West Virginia the Nature Conservancy met with community members and other stakeholders in December 2021 to address the idea of placing solar infrastructure on top of former mines. The potential to use former coalfields as renewable energy sites is especially strong in central Appalachia, as hundreds of abandoned mines and coalfields provide thousands of acres of land for redevelopment and clean energy production.

The U.S. Environmental Protection Agency maintains a list of Superfund sites across the country—contaminated properties not likely to be used for commercial or residential development that could be cleaned up, repurposed, and redeveloped. The Agency prefers that developers utilize sites such as former mines or abandoned industrial sites for clean energy developments, and some developers in Appalachia are working to do just that. One company, Edelen Renewables, will use Superfund sites for six of its 18 planned clean energy projects, repurposing former mines in central Appalachia into solar farms. Superfund sites provide a major opportunity for renewable energy growth, meaning more jobs and less dependency on coal to meet energy needs.

Changing to new forms of energy production and use can be costly and disruptive, but clean energy also presents significant opportunities for communities to reimagine and redevelop local lands and infrastructure. Appalachia is taking note. Coal country is ready for a transformation into a hub for renewable energy production.

Levi Bevis

Communications Assistant

This is a part of the AEC Blog series

Five of Nine Planetary Boundaries Have Now Been Crossed

This month, researchers from the Stockholm Environment Institute, University of Gothenburg, University of Reading, Stockholm Resilience Centre, Stockholm University, University of Toronto, Technical University of Denmark and ETH Zurich assessed the impact of synthetic chemicals such as plastics on the stability of the Earth’s physical, chemical, and biological systems for the first time.

The nine planetary boundaries—which include climate change (i.e. greenhouse gas emissions and associated warming), the ozone layer, land-system change like deforestation or desertification, biosphere integrity (i.e. biodiversity loss), and freshwater use—were first identified in 2009 by a team of 28 international researchers. These nine boundaries are representative of the Earth system conditions—including land, ocean, and atmospheric processes as well as naturally occurring cycles like the carbon cycle and their many interactions—that have remained relatively stable over the course of the Holocene era (i.e. the last 10,000 years or so). Crossing any these boundaries increases the risk of abrupt and/or irreversible environmental changes (often called “tipping points”) like the melting of ice sheets or coral reef die off. In 2009, the researchers determined that three of the nine boundaries had been crossed—climate change, biodiversity loss, and biogeochemical flows (nitrogen and phosphorous, which are more commonly occurring than they would be naturally, largely because of fertilizer application). In 2015, the research was updated showing that four of the nine boundaries had been crossed—with land-system change added to the list.

Now, in 2022, researchers were finally able to quantify the impact of synthetic chemicals like plastics on Earth’s systems (called the “novel entities” boundary) and determined that this boundary, too, has been exceeded—five of nine planetary boundaries have been crossed (and one—atmospheric aerosol loading—has yet to be quantified). The researchers determined that chemical production has increased by a factor of 50 since 1950, and is anticipated to triple between now and 2050. Plastic production increased by nearly 80 percent between 2000 and 2015 alone. This drastic uptick in synthetic chemicals entering the environment outpaces our ability to understand and predict their risks—only a “tiny fraction” of the approximately 350,000 synthetic chemicals created to date have been analyzed to determine their health and safety risks. However, we do know that the risks of many synthetic chemicals are long-lasting and include increasing pollution, harming biodiversity and altering biogeochemical cycles (the processes by which essential chemical elements—like carbon, nitrogen or oxygen—are circulated within and among ecosystems).

Amid mounting evidence of the global scale and severity of chemical pollution, there are growing calls for governmental action: In 2021, more than 1,800 scientists from across the globe signed an open letter asking for the creation of a science-policy panel—similar to the Intergovernmental Panel on Climate Change (IPCC)—to address chemical pollution. Negotiations around a global treaty to combat plastic pollution are set to launch next month at the U.N. Environment Assembly. (In November 2021, the U.S. indicated it would support such a treaty.) If these negotiations are as successful as those that established the Montreal Protocol for hydrofluorocarbons from aerosols and effectively saved the ozone layer—there is reason for hope.

Bryndis Woods
Senior Researcher

This is a part of the AEC Blog series

An Update on Building Electrification in Boston

Boston’s pledge to become a carbon free city by 2050 will rely on significant emission reductions from buildings—the city’s largest source of greenhouse gas emissions—where utility gas, fuel oil, and electricity together account for almost 70 percent of total emissions. Research has supported electrification (the transition away from fossil fuels in favor of electric heating and cooling) as a critical step for building emission reductions, and although the city has begun to address this sector with a transition plan for all large buildings (>=35,000 square feet), there is no explicit plan for building electrification. Rather, Boston’s Climate Action Plan (CAP) calls for emission reductions from retrofitting and renewable energy investments including biofuels and hydrogen.

In July of 2021, Boston’s Air Pollution Control Commission passed a series of amendments to the Building Energy Reporting and Disclosure Ordinance (BERDO) setting the CAP’s decarbonization plan into motion. These amendments allow the city to track emissions from large buildings, which make up nearly half of the city’s total emissions, while also investing in equitable clean energy technology that prioritizes underserved communities. Moving forward, the city will use data collected from the BERDO amendments to develop a decarbonization program, meaning that Boston’s building decarbonization strategy is dependent on their findings in the coming years.

Large buildings are the focus of the city’s decarbonization strategy because of their disproportionate contribution to the city’s emissions, but research on small building electrification could serve as a promising example for Boston’s strategy for all buildings moving forward. Rocky Mountain Institute released an analysis on new single-family homes in Boston in which they compare the costs of all-electric versus mixed-fuel appliances and heating in new construction projects. They found an average Boston home could save nearly $1,600 in utility bills and 51 tons of carbon dioxide emissions over a 15-year period.

Electrification is an effective and affordable decarbonization strategy. Building electrification is not currently being emphasized by Boston city planners despite research that supports its cost effectiveness but a least-cost decarbonization plan for Boston requires this cost-effect option.

Eliandro Tavares
Assistant Researcher

This is a part of the AEC Blog series

Hidden Cost of PACE Lending for Energy Efficiency Improvements

It can be hard to afford the up-front cost of green investments such as solar panels, efficient heating and cooling equipment, or energy-efficient roofs—even when these investments are guaranteed to pay for themselves in a few years. The traditional way to fund such investments is through taking out loans or (if you are a government or business) issuing bonds, but homeowners, small business owners, and local governments are increasingly debt-laden and cash-strapped, leading them to seek new sources of financing.

Property Assessed Clean Energy (PACE) financing is often advertised as a new way to get money up front for green energy investments—without down payments, without monthly payments, without a good credit score, and without increasing government spending. To many, this sounds like a good deal: Since their invention around 2010, PACE programs are now in use in 22 states and legal in 37 states, and total investment in U.S. PACE projects increased from around $3 billion in 2016 to $8 billion in 2019.

But there’s a catch: In exchange for PACE financing, the lender gets a "priority lien" on the borrower's home or business. A priority lien is similar to a mortgage, except that payments are made as increased property taxes (which are paid yearly, so technically there are no monthly payments). That means that missing a PACE payment is legally akin to not paying one's property taxes, and one's home can be seized for even a single missed payment, depending on local law. In addition, PACE financing is substantially more expensive than traditional financing, making nonpayment more likely: PACE interest rates are 2 to 4 percent higher than a standard mortgage, plus additional "administrative fees" of 4 percent or more. Furthermore, while in principle PACE projects are supposed to pay for themselves through energy savings, in practice they often do not; PACE regulations do not include oversight mechanisms to ensure that the promised energy savings materialize, or even that the green energy technology actually functions.

Whether or not the borrower sees savings from their PACE project, they must pay the costs: "Priority" in PACE’s priority liens means that repayment will be extracted from the borrower with precedence over virtually every other financial obligation except property taxes, including mortgage payments, utility bills, and car loan payments. So, missing payments on even a minor home improvement project funded by PACE entitles your lender to foreclose on your home even if you have a mortgage with another institution, and even if you own your home outright. Indeed, advertising materials for PACE lenders tout the certainty of being repaid, guaranteed by the right to seize a debtor's home, as one of the primary selling points of PACE liens.

While some PACE borrowers may be fully aware of the unusually high interest rate, the administrative fees, and the fact that their home is at stake, some borrowers are not, leading to financial catastrophe. In the absence of national oversight or systematic data collection, the extent of this problem is difficult to estimate. However, a joint study by ProPublica with the St. Louis Post-Dispatch and The Kansas City Star of 2,700 PACE loans in Missouri found that 100 PACE loans (3.4 percent) had at least two years of missed payments, leaving homeowners in danger of foreclosure. For comparison, the St. Louis foreclosure rate among all residential properties was far lower, 0.43 percent in 2019. In predominantly Black neighborhoods, 28 percent of PACE borrowers were at least one year behind in payments, compared to 4 percent in predominantly white neighborhoods, indicating that PACE lending may be exacerbating racial wealth disparities.

The National Consumer Law Center (NCLC) writes that "legal services agencies throughout California have been overrun with complaints related to PACE, including fraud, forgery, identity theft, price gouging, undisclosed costs and fees, and unpermitted or uncompleted work." NCLC has recorded over 40 cases where borrowers unexpectedly lost tens or hundreds of thousands of dollars, and sometimes lost their homes, from what were represented as guaranteed money-saving investments: cases where construction contractors and lenders aggressively pursued PACE contracts with elderly people (including three diagnosed with dementia) and with non-English speakers (who in some cases signed contracts in English without translation); cases where lenders' signatures were forged; cases where the terms of the lien were misrepresented, or where construction costs were thousands of dollars higher than those agreed upon, or where costs exceeded savings by tens and in some cases hundreds of thousands of dollars; and cases where construction was shoddy, incomplete, or damaging to the home. In an ongoing series, the LA Times is investigating numerous possible PACE abuses that have left families in financial ruin.

Regulators are beginning to take note. Los Angeles County recently shut down its PACE program, saying that the program could not ensure "sufficient protection for all consumers." Missouri and California both added greater consumer protections and oversight to their PACE programs in 2021. It remains to be seen whether other states follow suit, and whether these reforms lead to better outcomes for people hoping to make green investments.

Gabriel Lewis
Research Assistant

This is a part of the AEC Blog series

Integrating Energy and Environment into Biden’s Infrastructure Plan

In March 2021, AEC published a blog titled What is missing from Biden’s Climate Plan?, which focused on a $2 trillion plan to tackle climate change. The Administration’s initial commitment while campaigning was to leverage $1.7 trillion over the next ten years into climate and environmental justice. In November 2021, President Biden passed a major $1.2 trillion infrastructure bill into law (originally the $2.25 trillion American Jobs Plan). However, a second proposal, known as the Build Back Better bill invests an additional $1.75 trillion into more sectors, including environment and climate. The Bill was passed by the House of Representatives but remains to be voted on by the Senate; the Democrats’ hope to pass it before the end of December. While the American Jobs Plan focused on improving infrastructure at large—like roads, bridges, airports, and water systems—each component can integrate clean energy and decarbonization strategies, beyond what the Build Back Better Bill is proposing.

Biden’s infrastructure bills, along with his general federal policy plan, has had an emphasis on environmental justice. A press release from the White House emphasized that President Biden was committed to boosting clean energy jobs in order to strengthen resilience and advance environmental justice as a part of his two-part plan. In additional, President Biden signed an executive order his first two weeks into office highlighting the importance of incorporating environmental justice into the work of all agencies, and more recently, in July 2021, the administration announced Justice40, a government-wide initiative to bring clean energy investment to environmental justice communities.

While the American Jobs Plan, now law, does not specifically call upon Justice40, the law integrates environmental justice principles into its energy specific goals. The law dedicates $100 billion towards renovating the electric grid, though cost estimates range closer to $400-$500 billion. Components include building a more resilient electric transmission system, generating clean energy jobs (especially within underserved communities), and fully decommissioning orphan oil and gas wells along with abandoned coal mines. Non-explicit electric grid components that still integrate energy and environment include a push to retrofit homes, commercial and federal buildings, and veterans’ hospitals to make them more energy efficient.

In contrast, the Build Back Better Plan, yet to be made law, mentions Justice40 and has a more specific focus on the energy sector. The plan proposes a $440.2 billion investment into environment and climate, and includes a massive push for renewable electricity tax credits. Other components include domestic building of clean energy technology (citing specifically wind turbine blades, solar panels, and electric cars) in order to stimulate jobs, a Clean Energy and Sustainability Accelerator with a focus on disadvantaged communities (under the Justice40 initiative), and investment in coastal restoration, forest management, and soil conservation.

In April 2021 the administration announced a target 50-52 percent reduction from 2005 levels in net greenhouse gas pollution for the entire country by 2030. Getting there will require actions like the American Jobs Plan and Build Back Better Plan, with integrations of the Justice40 initiative across the board, to ensure a sustainable, just, and green transition.

Myisha Majumder
Research Assistant

This is a part of the AEC Blog series

Deep Water Cooling Systems Provide an Alternative to Traditional Air Conditioning

With climate change leading to record summer temperatures, access to cooled spaces can mean the difference between life and death for many. However, air-conditioning can be prohibitively expensive and is energy—and greenhouse-gas emission—intensive. As of 2018, cooling systems accounted for roughly 10 percent of global energy consumption and 12 percent of residential energy expenditure in the United States. As an alternative, some areas have invested in deep water cooling systems (DWCS) as a low energy way of keeping buildings cool. DWCS use sea or lake water as a coolant rather than relying on electric-powered AC systems. DWCS work by running a closed loop of water through the buildings being cooled. The water chills the buildings and absorbs excess heat. The water then is cycled through a cooling station where it is rechilled by sea/lake water that has been pumped to the surface. The sea/lake water is either returned to the sea/lake or continues on to be processed in desalination centers or drinking water treatment facilities.

Toronto is currently home to the world’s largest deep lake water cooling system—the largest deep seawater cooling system has just launched in Tahiti. Launched in 2004, Toronto now used DWCS to cool over 100 buildings in the downtown area, including Toronto General Hospital, City Hall, and the Scotiabank Arena. Due to its popularity, the system has nearly reached capacity and Enwave, the company that runs it, has committed to a (CAN) $100 million expansion, adding a fourth pipe to the three that already pump water in from Lake Ontario. Enwave estimates that the system saves 90,000 mega-watt hours of electricity annually—enough to power a 25,000-person town—and 220 million gallons of water annually when compared to traditional cooling systems that rely on evaporation to dissipate heat.

DWCS save energy and reduce emissions, but they are not without their drawbacks. The initial cost of installing a DWCS system is high. Toronto’s system initially cost Enwave (CAN) $170 million to install and the Honolulu Seawater Air Conditioning LLC, after spending 16 years and $25 million obtaining regulatory approval, recently ended their DWCS plans due to an increase in estimated construction costs from $275 million to $400 million. Location and geography are also critical. The body of water used needs to be deep enough to ensure a permanently cold bottom level. Much of the ocean shelf along eastern United States, for example, is too shallow for deep water cooling. The amount of water that can be safely withdrawn for cooling also varies. While large bodies of water such as the great lakes and the ocean are effectively limitless as a cooling resource, smaller water bodies can only have so much water withdrawn before the returning warmed water effects the overall temperature. In the locations where it is feasible, however, deep water cooling can serve as an energy efficient way to cool a single large building, college campus, or a whole downtown area.

Claire Marie James

Research Assistant

This is a part of the AEC Blog series

Climate Change and the Forced Relocation of Native American Nations

Once again, many Native Americans find themselves facing the loss of land and home. In 1889, President Grover Cleveland issued an executive order that set the stage for an almost impossible situation facing a Native American community in Washington State today. President Cleveland’s order confined the Quileute Nation to one-square mile of land on the tip of the Olympic Peninsula. The Quileute traditionally used this portion of their land as a fishing community for part of the year due to its tendency to flood. Confined to this tiny patch of land, the Quileute community faced frequent flooding. Today, due to rising sea levels and intensifying storms caused by climate change, the Tribe increasingly experiences power outages, flooding, and storm damage, which prevent them from using the one road that connects the community with the rest of the world. Nations like the Quileute face a difficult choice: remain on their home land and suffer from the effects of climate change, or leave their ancestral land to find refuge further inland. Unfortunately, the Quileute Nation is not the only Native Nation in this position.

In an October 2021 article in the journal Science, a team of researchers examined the forced relocation of hundreds of Native American Tribes in the United States by European and American settlers and the continuing impacts of their relocation on the Tribes’ environmental and economic conditions today. More than two-fifths of the 380 Tribes that were forcibly relocated have no federal or state-recognized land base, while Tribes with land bases saw their land size reduced by up to 99 percent after relocation. Furthermore, relocated tribes often were moved to land with less hospitable climates that now expose these Tribes to higher climate change risks, increasingly severe environmental hazards, and disadvantageous economic conditions. These results further confirm the deep interconnection between environmental justice, racial justice, and economic justice.

The increasing frequency and severity of environmental disasters has also amplified economic inequality for Native Nations. According to Northwestern University’s Institute for Policy Research, approximately one in three Native Americans live in poverty, with a median income of approximately $23,000. The Institute also points out that, even though more Native Americans are receiving a high school and college degree than ever, wage gaps are increasing and employment levels are dropping when compared to white populations in the same areas. The effects of climate change are exacerbating this economic inequality by prompting many to leave their Tribes for cities with more economic opportunities, which means Tribes often face a shrinking tax base. For example, the Yupik of Newtok, Alaska, have been forced to relocate to nearby Mertarvik due to sea level rise, increased flooding from the Ninglick River, and the erosion and shifting buildings caused by melting permafrost. Likewise, two Tribes on Isle de Jean Charles in southern Louisiana, the Biloxi-Chitimacha-Choctaw and the United Houma Nation, are considered the United States’ first climate refugees as of 2016 when they were awarded a $48 million federal grant to relocate their communities. Isle de Jean Charles is sinking, with flooding becoming more frequent, and nine-tenths of the island’s land mass lost to rising sea levels since 1955.

Centuries of systemic racism and widespread inaction on climate mitigation have left Native Nations vulnerable to the increasingly severe effects of climate change. The existing challenges facing Native Nations have been amplified by the effects of climate change, such as rising sea levels and intensifying storms. The past is rarely ever left in the past; it continues to shape our present world and inform our future.

Levi Bevis

Communications Assistant

This is a part of the AEC Blog series

Pipelines Threaten Indigenous Safety, Land, and Sovereignty

As of 2019, 26,545 miles of oil and gas pipelines were proposed or planned, and another 9,542 were already under construction in North America. Countless more existing pipelines leak pollutants into the air and soil every day. Not only does further oil and gas development directly interfere with the policies and investments necessary to tackle climate change, the pipelines cross Indigenous lands; many cross lands whose use is governed by treaties.

In Minnesota, Enbridge’s Line 3 faced tremendous public pushback—countless demonstrations against the pipeline were held, defending water and land resources that are critical for many Indigenous communities. This Enbridge replacement project cuts through an area of northern Minnesota on and near treaty lands belonging to the Ojibwe and Anishinaabe First Nations, but no analysis (required under the Clean Water Act, the Environmental Policy Act, and tribal treaty rights) has been done to examine the impacts of the project. The Ojibwe and Anishinaabe signed treaties with the United States government that relinquished ownership of 10 million acres of northern Minnesota lake country in 1855. However, the Tribes retained the right to hunt, fish, gather, and hold ceremonies on the land. In only the second “rights of nature” case ever brought to trial, the White Earth Nation of Ojibwe sued the Minnesota Department of Natural Resources on behalf of wild rice; the case argues that nature itself has the right to exist and flourish and that the Minnesota Department of Natural Resources violated the rights of manoomin (wild rice), which grows in lakes. The plaintiff’s case described allowing Enbridge to pump up to 5 billion gallons of groundwater as an egregious decision on the part of the State.

The current Line 3 pipeline caused the United States’ largest inland oil spill in 1991; in total, 33 spills have occurred on Line 3 since 1968, totaling more than 1 million gallons of spilled oil. With the new line crisscrossing several waterways, including the Mississippi River, 290 interconnected streams and rivers are jeopardized.

In addition, the sudden influx of pipeline workers into predominantly poor and rural Indigenous communities coincides with increases in violence, illicit drugs, and sex trafficking. Multiple human trafficking “sting operations” have resulted in arrests including at least four Line 3 workers in 2021 alone. A crisis center for Northwest Minnesota had responded to over 40 reports of harassment against women and girls by Line 3 workers as of June 2021; construction began in December 2020. Before the Line 3 project was launched, Minnesota’s Public Utilities Commission acknowledged that “cash rich” workers on projects increases the risk of sex trafficking and yet still permitted the project to go forward. Enbridge reimbursed a local Violence Intervention Project for the expense of transportation and hotel costs to get the victims to safety after three assaults by Line 3 workers. But the influx of pipeline workers also crowds local hotels and limits safe rooms that could be used to house women facing violence. Tribal courts are limited by Federal law in their ability to protect women from rapists, even when there is sufficient evidence to result in a conviction: the courts cannot pass sentences greater than five years. Meanwhile, the U.S. Justice Department has only prosecuted 35 percent of rapes reported on Tribal lands. Of the 5,712 reported cases of missing and murdered Indigenous women nationwide in 2016, just 116 were logged in Justice Department databases.

By contrast, law enforcement’s response to the protests against the pipeline have emphasized punitive action. In Minnesota the Public Utilities Commission has required Enbridge to reimburse police for responding to protests, giving local police a perverse incentive to arrest protestors demonstrating against the pipeline. As of October 2021, $2.4 million had been paid by Enbridge to U.S. police and records indicate the company met frequently with police to discuss ongoing gatherings and protests. Reimbursements were requested for batons, tear gas, and flash-bang devices. Moreover, information on police activities has been classified as “security information,” leaving it ineligible for public records requests, making these reimbursements all the more difficult to track.

Indigenous communities opposing existing and proposed gas and oil pipelines emphasize their lack of control over their own lands, including: treaty rights to natural resources, the distribution of benefits and costs of development on their land, and their own safety and autonomy. Winning the cancellation of new pipeline projects is an important first step. In a previous post, we also highlighted the importance of Tribal access to capital and financing so that they can invest in renewable alternatives to oil and gas. The ability to own the new resources if they so choose is crucial to ensuring Tribes can access the benefits of investment in generation and efficiency as they strive for a future without climate change and for the protection of their lands. And that ownership may also be key to preventing fossil-fuel-intensive investment projects— particularly pipelines and the violence they bring—from harming other indigenous communities in the future.

Liz Stanton, PhD.

Director and Senior Economist

Chirag Lala

Researcher

This is a part of the AEC Blog series

Exxon given negative rating on racial justice actions

A recent report by corporate accountability advocacy group As You Sow rated Exxon Mobil last out of all S&P 500 companies on measures of racial justice. The San Antonio based company received an overall score of negative 23 percent out of a possible 100 percent:

Zero percent for Racial Justice Statement, Corporate Responsibility, DEI (Diversity, Equity, and Inclusion) Department, and External Actions, meaning they took no actions in any of those categories.
7 percent on its disclosure of Diversity, Equity, and Inclusion data, earning 2 out of a possible 27 points within that category.

Within the category of Environmental justice:

Zero for Acknowledgement of Environmental Justice.
Negative 5 for Abides by Environmental Regulations.
Negative 6 for Environmental Fines and Penalties.
Negative 2 for Adverse Effects to BIPOC Communities, for a total score of negative 13 out of 16, or negative 81 percent.

As You Sow’s report listed Exxon as having over 100 environmental regulation violations since 2015 and found that, more generally, companies with a low environmental score were often repeat offenders. As of March 2021, a federal judge ordered Exxon to pay a $14.25 million fine for 16,386 violations of the federal Clean Air Act between 2005 and 2013—this averages out to approximately 5 to 6 violations per day at less than $900 per violation—in their flagship Baytown, Texas refinery alone.

Residents living near Exxon’s Beaumont, Texas refinery face elevated health risks likely due to the 135 toxic chemicals, including carcinogens, released in the refining process. The risk of cancer for those living in this historically black neighborhood is 54 in a million, much higher than the zero-to-one in a million national average. The local community suffers from elevated health issues related to their elevated exposure to pollutants. The Beaumont refinery is the third largest polluter in the United States. The top two polluters are Exxon’s Baton Rouge and Baytown facilities, respectively. Similar to Beaumont, the Baton Rouge refinery is located in a predominantly black neighborhood that suffers from elevated health risks.

Overall, the energy sector had the lowest average score, 3 percent, compared to Consumer Staples at 21 percent and Materials at 9 percent. By defining specific racial justice actions, As You Sow provides companies with a potential road map for improving their social impact and consumers and stakeholders with information on and a methodology for assessing company actions.

Claire Marie James

Research Assistant

This is a part of the AEC Blog series

Uncertain about how much to discount the future? You're discounting too much.

Our most important decisions—about slowing climate change, funding childhood education, eating ice cream—often require weighing present costs and benefits against future ones. Crucially, we are usually pretty uncertain about how much, if at all, to discount the future in favor of the present. A federal Interagency Working Group (IWG) is about to pick a single number to try to answer this complicated question, a "discount rate." Whatever number IWG settles on, the U.S. government will use it to decide if the future benefits of green energy investments are worth the present costs.

The point of this blog post is to show, using a bit of math, that picking a discount rate while ignoring our uncertainty about the number we've picked makes us systematically undervalue future costs and benefits. Ignoring uncertainty makes us short-sighted.

Ask an economist about weighing present and future benefits, and they will give you an answer like this: if you received $100 now, you could invest it at some rate of return "r" (for example r might be 0.03 or 3 percent) and in a year you'd have (1 + r)*$100 (in our example, $103). But if instead you just received $100 a year from now, well, you'd just have $100. With some hand-waving, the economist concludes that a dollar benefit is worth 1 + r times more if we get it now, instead of getting it a year from now. Or turning things around, that same future benefit is worth 1/(1 + r) times less if we get it a year from now, instead of now; and if we get it t years from now, the value is further reduced to 1/(1+r)t. Here, r is the "discount rate": the bigger it is, the more we discount future benefits when considering them in the present; and the further into the future the benefits will occur, the more we discount them.

Source: IWG, 2021

Now, even if we buy this story (and the sneaky shift from "benefit" in general to "dollars" in particular), there's a catch: we don't really know what rate of return our investments will actually deliver. At best, we might have a range of plausible values for r, some values perhaps more probable than others.

For example, suppose we believe there are three equally probable values for r: 0.01, 0.03, and 0.05—this is roughly the range that IWG is considering for discounting future climate damages. If you are a policymaker considering a cost of climate change (e.g. $1 billion of storm damage) that will occur in 50 years, you need some way to turn $1 billion in 50 years into a what it's worth today, the expected present value of that climate cost. How should you do it?

It turns out there are two ways to calculate an expected present value: 1) the easy way, and 2) the easy and correct way. Both are just a matter of taking an average.

The first way is to calculate the average of the plausible values of r, then plug that average into our present value formula. In our example, the average value of r is 0.03, so we get ($1 billion)/(1.03)50 = $230 million. This method is simple, but wrong: it's equivalent to pretending we know r will be 0.03, ignoring our uncertainty about that prediction. It's not clear whether IWG will end up taking an average, but they do seem to be trying to pick a single number to use in any given analysis.

The second way, the correct way, is to plug each plausible value of r into the present value formula, one at a time, then take the average of the resulting present values. In our example, this is ($1 billion)*(1/1.0150 + 1/1.0350 + 1/1.0550)/3 = $310 million. That's 80 million dollars higher, or 35 percent higher, than the mistaken estimate.

The difference between these two estimates comes from uncertainty: the first ignores uncertainty about the discount rate, and the second correctly accounts for it.

This is just an example; a more realistic calculation would use more than three possible discount rates, giving greater weight to the more likely discount rates. But the phenomenon we've illustrated — that ignoring uncertainty necessarily leads to an underestimate of present values —is extremely general. It comes from a theorem of probability called Jensen's Inequality, which applies regardless of the form the uncertainty takes.

Underestimating the present value of future costs and benefits could be catastrophic. Such myopia may lead to the erroneous conclusion that the long-run benefits of green infrastructure investments are not worth their present costs, when they are; or that present inaction on climate change is cheap, when it is not. Such myopia endangers long-run prosperity and survival. To avoid the dangers of short-sightedness, the first step is to admit to uncertainty regarding how much to value things that will happen in the future.

Gabriel Lewis Research Assistant

This is a part of the AEC Blog series

Indigenous Opposition to Line 3 Shows a Path Forward on Climate

Enbridge’s Line 3 is a pipeline carrying crude oil from Alberta, Canada, through Minnesota, into Wisconsin. It was built in the 1960s and is scheduled for replacement, and construction began in December 2020. However, a coalition of local Tribes is fighting the replacement in Federal Court; the Tribes argue that the U.S. Army Corps of Engineers did not properly evaluate the potential damage to wetlands and waterways in Minnesota, including the impacts of a potential oil spill. Other groups argue the Line is in violation of treaties between the United States and the Anishinaabe and Ojibwe peoples, especially of provisions that grant Tribes sovereignty over the land, and harm their ability to use the land for rice cultivation. This is just one of a number of ongoing disputes between Tribes across the United States and pipeline projects: Keystone XL, Dakota Access, Enbridge Line 5, and others.

These critical, and time sensitive, disagreements contesting Indigenous land rights raise an important related question: Why is the United States government continuing to support pipeline construction projects at all?

The United States became an energy exporter during the Obama and Trump Administrations. Oil production doubled and gas production increased by 60 percent between 2008 and 2019. Pipelines are critical infrastructure to continuing this expansion. If the United States does not rapidly shift to renewable generation—an indispensable step in its decarbonization policy—its continued reliance on oil and gas will create additional pressure on firms and policymakers to continue or even expand pipeline projects. The International Energy Agency has already argued that funding for new oil and gas projects must be halted today if the world is to reach net zero emissions by 2050 and limit temperature increases to 1.5 degrees Celsius above pre-industrial levels.

Opposition from Tribes to new and existing pipeline projects amplifies the voices of climate activists across the world. The Canadian Government’s Missing and Murdered Indigenous Women and Girls (MMIWG) report highlighted the role of worker camps on oil and gas projects—the so called “man camps”—as centers of perpetuating violence against and disappearances of Indigenous women. Stop Line 3, a campaign organizing against Enbridge’s Line 3 replacement, has highlighted the State of Minnesota’s calculations showing a cost to society from emissions enabled by the pipeline totaling $287 billion over the project lifespan of 30 years . Stop Line 3 demands decommissioning the old Line 3 and justly transitioning to a “renewable and sustainable economy.” EarthJustice recommends a number of additional steps for the Biden Administration to take that build on the precedent-setting cancellation of the Keystone XL pipeline earlier this year, including: cancelling cross-border permits for oil and gas pipelines, directing the Department of Energy to research the climate impacts of exporting liquified natural gas, eliminating the nationwide permit system for pipelines and only permit pipelines on an individual basis, and require a federal review of life cycle emissions from pipeline projects.

But even these steps would be insufficient to do both what Indigenous groups demand and what would help meet regional and international climate goals. Real transformation requires large and sustained investment in the dissemination and production of renewable energy and energy efficiency measures, just transition assistance for Indigenous workers who would be affected by the transition, and financial guarantees that empower Tribal governments to take proactive investment of their own, such as the Kayenta Solar Project on Navajo Land. Other legal changes should make it easier for Tribes to own and operate renewable generation without onerous regulations; a 2005 Federal Law enabling Tribes to own wind and solar generation on reservation land has yet to be used in part because it includes a requirement to partner with external parties. This forces Tribes to lease their land to energy developers instead building and owning their own energy sources. Facilitating Tribes’ financial and legal agency to chart their own path would not only be in the spirit of treaties between Tribal governments and the United States, it would represent a meaningful alternative to leverage against pipelines like Line 3.

Chirag Lala Researcher

This is a part of the AEC Blog series

Investing in a Clean Energy Future

Universities around the country and the world are making headlines for investing in a greener future for their students and communities. Harvard University joined several other U.S. colleges and universities on September 10 in divesting its nearly $42 billion endowment, the largest of any university in the United States, from the fossil fuel industry. This eye-popping divestment is part of a larger trend among numerous higher education institutions and systems that has gained steam over the past few years.

Some universities, like Rutgers University, George Washington University, and the University of California system, have fully divested their endowments from fossil fuels. Other universities are enacting gradual divestments from fossil fuels. Stanford University, for example, has only divested from coal companies.

Harvard is also not the only university in the Greater Boston metro area to divest its endowment from fossil fuels. The University of Massachusetts Foundation, Boston University, and Tufts University have also approved measures to divest their endowments from coal, tar sands, and/or all fossil fuels. Boston University’s announcement came only a few days after Harvard’s announcement, illustrating the powerful message sent by a university’s decision to divest.

The divestment trend is not unique to the higher education sector, and the broader push for divestment is making waves across the economy. Cities, faith-based organizations, NGOs, and other institutions are divesting funds, all chipping in towards a valuation of just under $15 trillion of worldwide institutional divestment in fossil fuels according to Fossil Free—a fossil fuel divestment data tracking project of the environmental advocacy group 350.org. As more individuals and institutions pull money from direct and fossil fuel-adjacent investments, banks and financial institutions are taking notice. A 2021 study published in the Journal of Economic Geography found that, after analyzing trends in 33 nations, countries with the strongest fossil fuel divestment movements in a given year also saw their oil and gas industries raise less money in that same year compared to historical averages. Given this current economic backdrop, it comes as no surprise that equity funds investing in fossil fuels were among the worst performing funds in 2020.

The power of divesting university endowments is clear, and it has the potential to reshape our economy in the near future. Environmental equity and climate change mitigation will take more than concrete government policies and scientific models to be successful—it will require a conscious shift in our institutions and economy. Universities are leading the way in taking action to benefit students and their communities alike by investing in a clean energy future.

Levi Bevis

Communications Assistant

This is a part of the AEC Blog series

Youth Mental Health and Climate Change

This month, researchers from the University of Bath, University of Helsinki, The College of Wooster, New York University, the University of East Anglia, Stanford University and Oxford Health published the results of a survey of 10,000 young people (aged 16 to 25) across ten countries that asked about their thoughts and feelings regarding climate change and government responses.

They found that a large majority of youth respondents are worried about climate change (84 percent were at least “moderately” worried while 59 percent were “very” or “extremely” worried) and that over half of respondents said that they feel sad, anxious, angry, powerless, helpless and guilty.

About 40 percent of the young people surveyed indicated that they are hesitant to have children because of the climate crisis and over 45 percent said that their feelings about climate change negatively affect their daily life.

Seventy-five percent agreed with the statement that the “future is frightening,” 56 percent believe humanity is doomed, and more than 50 percent agreed that they would have fewer opportunities than their parents did.

Sixty-four percent felt that governments are not doing enough to address the climate crisis or to protect them or future generations. A similar number said they felt betrayed by older generations and governments. Less than 40 percent of respondents across nine of the ten countries agreed that government “can be trusted”—with just 21 percent of American respondents agreeing with that statement. The study found significant, positive correlations between feelings of worry, anxiety, and distress and feelings of betrayal and negative feelings about governments responses to climate change.

In sum: Youth are worried and angry about the climate crisis, and they lay the blame squarely at the feet of governments that have failed to reduce global greenhouse gas emissions.

One of the study’s authors, Caroline Hickman from the University of Bath, said that the study “paints a horrific picture of widespread climate anxiety in our children and young people. It suggests for the first time that high levels of psychological distress in youth is linked to government inaction. Our children’s anxiety is a completely rational reaction given the inadequate responses to climate change they are seeing from governments.”

Feelings of worry, anxiety, and betrayal about climate change and the lack of government response to it threaten the mental health and wellbeing of an entire generation of young people who have contributed the least to the problem of global climate change but are all too aware that they will suffer its worst impacts.

Bryndis Woods Senior Researcher

This is a part of the AEC Blog series

What Happens to Consumption when we Decarbonize?

A commonly expressed concern about climate models used in policy making is that they place too much emphasis on achieving economic growth, even kinds of growth that interfere with greenhouse gas emissions reduction targets. For example, a report by the European Investment Bank warns against letting economies grow too fast, suggesting that higher growth—say from a massive climate investment program—might increase emissions if the investment unintentionally drives fossil fuel investment as well. In the EIB’s view, climate investment and a healthy economy are benefits to be traded off against one another: We can only have one or the other.

But this argument is unnecessarily bleak. Investment in new renewable generation, energy efficiency improvements, zero-carbon manufacturing, and clean transportation makes green goods and services for workers to purchase, and gives workers and income with which to make these purchases. Even though climate investment increases the size of the economy, emissions continue to fall because the new investment is replacing money spent on dirtier technologies, not adding to it.

Instead of facing a tradeoff between climate investment and economic well-being, rich nations can make climate investment succeed by facilitating the rapidly increasing market in cleaner goods and services. For businesses to invest in zero emissions products they need to see a track record of success: customers buying those products. That increased certainty will lead businesses to spend more on improving green products, making them cheaper, and disseminating them widely.

Effective government policy can accelerate this process. In the United States, the government could use an aggressive clean energy standard. Direct federal purchases of cleaner technologies, such as by electrifying the government’s entire fleet of vehicles or transitioning all government properties off fossil fuel energy sources, would kickstart an enormous market for greener production. Any effort to tax goods that result in greenhouse gas emissions should be paired with dividends to consumers, giving them funds to spend on cleaner alternatives. All of these policies to boost green consumption are necessary complements to policies that focus specifically on green technological innovation, commercialization of new technologies, or policies that help businesses overcome capacity or supply chain problems. These actions can also cement the political viability of decarbonization by ensuring that workers and communities reap the rewards of clean investment.

Chirag Lala Researcher

This is a part of the AEC Blog series

Give States the Room to Decarbonize

In a previous blog post, I wrote about steps the U.S. federal government can take to invest sufficiently in decarbonization despite the self-imposed limitations on congressional appropriation. Similar steps are needed for states and municipalities. They are the first governments to feel the impact of natural disasters and increased pressure on public services. And they play an outsized role in the financing of American infrastructure.

Unlike the federal government, most state governments are constitutionally required to balance their budgets. This restrictive practice can result in undesirable outcomes during recessions when additional government spending is badly needed to turn the economy around, but states and municipalities are experiencing dramatic declines in tax revenues. A bad enough economic crisis could force states to cut allocations to renewable energy and efficiency investments. The bond market for state and local governments is not much better. According to Yakov Feygin at the Berggruen Institute, the smaller size of municipal bonds, sheer variety and lack of standardization, and number of municipal governments limit the bond market’s ability to effectively finance infrastructure. The lack of a permanent emergency lender also means interest rates sharply increase in financial crises—making borrowing more expensive.

Three specific reforms should be enacted to give states and local governments more room to respond to the climate crisis. First, Congress should institutionalize a permanent system of grants to state and local governments that rise automatically when unemployment increases. Second, the Federal Reserve should revive an improved version of the Municipal Liquidity Facility that it used to stabilize interest rates in the municipal bond market during the early months of the Covid-19 pandemic. This time, it should lend at more generous rates instead of at a penalty, accept bonds of longer maturity, and expand the eligibility of borrowers. The Federal Reserve should also specify that it will specially seek out bonds for purchase that fund climate investment (so-called “green bonds”). Finally, Congress should create mechanisms by which the Federal government can borrow money on states’ behalf, provided they use it for specific purposes like decarbonization. This would effectively bypass the straitjacket on state-level fiscal policy imposed by balanced budget amendments or local laws that limit tax increases.

State and local governments have a lot of agency to address the climate crisis. The Political Economy Research Institute (PERI) publishes climate plans for specific states with tailored policies for pursuing ambitious climate targets. Carrying out those plans will be expensive. California climate plan’s would enable it to become a zero emission economy by 2045 by spending 3.8 percent of its GDP ($138 billion) per year on average between 2021 and 2030. West Virginia would need to spend 2.4 percent of its GDP ($2.1 billion) per year between 2021 and 2030 to reduce emissions to one-half of 2018 levels by 2030. While the PERI reports meticulously detail ways to raise the money, the additional steps proposed in this post would greatly increase the capacity of states to painlessly raise funds without making harsh cuts to other vital programs or pursuing unpopular tax increases. These actions would also ensure municipal interest rates remain low—which the reports argue would keep overall costs down—or fall even lower. Best of all, states on course to meet their climate targets could cheaply and profitably invest in more capacity to help lagging states.

Chirag Lala Researcher

This is a part of the AEC Blog series

Massachusetts' Electrification Progress is Falling Short

About one-third of Massachusetts’ emissions come from the buildings sector. In 2019, over 75 percent of households in Massachusetts used fossil fuels to heat their homes; only 17 percent used electricity (much of which is old-fashioned and inefficient “electric resistance” heating). Electrification—or switching from fossil fuels (like gas and oil) to heat our buildings, to using modern electric heat pumps—has been identified as the best least-cost strategy to reduce emissions from buildings in the Commonwealth.

A recent article from the Boston Globe calls out Massachusetts’ slow progress on electrifying homes. In order to meet the Commonwealth’s decarbonization goals, an average of 100,000 homes per year over the next 30 years must be switched over to electric heating. However, just 461 homes made the switch in 2020. More broadly, according to data from the U.S. Census American Community Survey, the share of homes in Massachusetts using electricity for heating has only gone up by about 1 percent from 2015 to 2019.

Despite the declining costs of high-efficiency electric heating equipment like air-and ground-source heat pumps, widespread adoption of heat pumps is held back by physical barriers such as incompatible infrastructure and informational barriers like inadequate information and status quo bias. Moreover, for low- and moderate-income households, access to credit and the high upfront cost of heat pumps can be a challenge.

To meet the Commonwealth’s 2050 climate goals, policymakers need to establish large incentives for heat pumps, provide subsidies for low-income and rental housing upgrades, and increase education and outreach to increase information availability and access. Without action, households will likely install new gas systems, with an average lifespan of 15 to 30 years, that will not only slow progress on meeting Massachusetts’ climate targets but will cost these families more over time.

Tanya Stasio Researcher

This is a part of the AEC Blog series

IPCC AR6 Climate Change 2021: What’s New

On August 6, the Intergovernmental Panel on Climate Change (IPCC) released the first part of its Sixth Assessment Report (AR6), focusing on the scientific basis underpinning change-related policies by the international community. More than 14,000 citations were referenced in the AR6 and a total of 78,007 expert and government review comments were included.

The IPCC’s critical findings from this report include:

The global surface temperature is 1.09°C (1.96°F) warmer than it was in 1900.
It is unequivocal: Human activity is responsible for global warming.
If current emission levels are maintained, it is highly likely that global warming will exceed 1.5℃ above preindustrial levels and continue to accelerate during the 21st century.
Extreme weather, heatwaves, floods have become more frequent and intense.

Six days after this first section of AR6 was released, the third section of the report (not planned for publication until next year) was leaked by a group of scientists concerned that governments could water down the publication since they have the authority to revise the ‘Summary for Policy Makers’. The leaked report states that the rich are more responsible for global warming than the poor. According to the Guardian, the report concludes “The top 10% of emitters globally, who are the wealthiest 10%, contribute between 36 and 45% of emissions, which is 10 times as much as the poorest 10%, who are responsible for only about three to 5%.”

Under the Paris Agreement, 191 countries agreed to meet every five years to review implementation progress and prepare updated Nationally Determined Contributions to emission reductions. The first meeting, ‘Global Stocktake’ will be held in 2023 and the complete version of the AR6 will be published just before the meeting. Findings from AR6 and the leaked third report should serve as a wake-up call to nations taking part in the Paris Agreement, whose main objective is to keep global temperature rise below 2°C.

Without deep reductions in greenhouse gas emissions, particularly from wealthier nations, global temperature rise will exceed that threshold. Carbon in the atmosphere has been rising steadily and is currently at an all-time high. It’s time for governments and large corporations to innovate and take-action to drastically reduce emissions to avoid the devasting consequences of further warming.

Jimin Kim Communications Assistant

This is a part of the AEC Blog series

No Idling Allowed: Electric Vehicle Policies and Development

Filmmaker and environmentalist Chris Paine’s Who Killed the Electric Car?—a retrospective documentary released in 2006 on the rise and, at the time, fall of the electric vehicle (EV) industry in the early 2000s—raised some controversial points that are still relevant to today’s EV market. Paine makes the claim that General Motors, one of the largest car manufacturers in the country, intentionally sabotaged its original EV model, the EV1, out of fear of market repercussions. General Motor’s main argument for discontinuing the EV1 was a common myth in the automobile industry: Low customer demand for all-electric vehicles make EVs a “worthless” niche to pursue as a company. But what if producers had an incentive to expand manufacturing to include EVs?

Soon after President Biden took office, he signed an executive order to replace all government vehicles (include USPS) with electric vehicles. Since then, President Biden has made efforts to increase electric vehicle charging infrastructure with large funding opportunities from the Department of Energy, among other government agencies. In the last month, President Biden pitched his $174 billion EV proposal in the heart of the car manufacturing industry in the United States—Michigan. In addition, Senate passed a $3.5 trillion budget framework on August 11, 2021, that includes funding to make EVs more affordable for consumers, including a public charging network and financial incentives.

Lowering greenhouse gas emissions relies not only on making EV charging infrastructure available but also on getting more EVs on the road. Consumer Reports analyzed EV production plans by vehicle producer, including big names like Ford Motor Company, Volvo, Honda, and General Motors. Among its findings: Jaguar plans to be all-electric by 2025, the United Kingdom will ban diesel- and gas-powered cars affective 2030, and General Motors will become completely carbon neutral by 2040. Individual companies setting targets, however, will not be enough for a timely fleet turnover—the International Energy Agency determined that governments will need to accelerate decarbonization policies to meet their climate goals, which will involve extensive upgrades to the transportation sector.

While EVs make up 4.6 percent of car sales around the world, and more than 20 countries have electrification targets or planned bans on internal combustion engines, in the United States there are no federal targets for EV sales. Instead, states have taken the lead and incentivize businesses and consumers to make the switch from conventional internal combustion engines to hybrid and battery-operated EVs. As consumer demand for EVs increases over time, auto manufacturers must abandon the idea of EVs being a “small niche market” to promote turnover of combustion engines, facilitate meeting climate goals, and to achieve the target of half of all new domestic vehicle sales being electric by the end of this decade.

Sagal
Alisalad
Assistant Researcher

Myisha Majumder
Research Assistant

This is a part of the AEC Blog series

Gas Utilities Explore Hydrogen as a Decarbonization Strategy

To meet state and local climate goals, gas utilities across the United States are looking towards alternative fuel sources such as hydrogen and biogas—also referred to as renewable natural gas (RNG)—to decarbonize their future gas supply. Along with maximizing energy efficiency and making further investments in gas infrastructure, recent planning documents from gas utilities like National Grid and Washington Gas highlight a shift towards low and zero-carbon fuels such as RNG and hydrogen.

Hydrogen is not an energy source itself; it is an energy carrier. There are several types, or “colors”, of hydrogen that are distinguished by the energy source and process used to produce it. “Green” hydrogen—which is produced through electrolysis of water using electricity from renewable sources such as wind or solar—releases zero greenhouse gas emissions when burned for energy. Green hydrogen itself is not a zero-emission fuel source: If leaked directly into the atmosphere green hydrogen is an indirect greenhouse gas and its combustion has been found to emit nitrogen oxides (NOx), which is a criteria air pollutant. Since it can be mixed with fossil-sourced gas, green hydrogen is attractive to gas utilities who want to continue to use their existing gas pipelines while attempting to comply with climate mandates.

Several economic, technical, and infrastructure barriers stand in the way of using green hydrogen in decarbonization:

Green hydrogen is more expensive than its dirtier counterparts (e.g., hydrogen made using fossil fuels), fossil fuels themselves, and grid electricity.
Hydrogen production is inefficient. The International Renewable Energy Agency estimates that 30 to 35 percent of its energy is lost during electrolysis.
Hydrogen poses a risk to public safety. Hydrogen molecules are more likely to leak through pipeline imperfections and escape existing gas pipelines; hydrogen can also degrade the materials used for pipelines.
Due to insufficient infrastructure, and regardless of demand, hydrogen could only be injected into existing gas pipelines to make up 5 to 15 percent of total gas volume.

Even if these barriers could be overcome, an important question remains: Is the production of green hydrogen the best use of renewable resources?

Electrification, or the replacement of fossil-fuel dependent technologies (like gas and oil heating systems or gasoline-powered motor vehicles) with those that rely on electricity, is an alternative decarbonization method gaining traction across the United States. When sourced from renewables, heating our homes with electricity rather than gas or gas mixed with hydrogen, can significantly reduce emissions without the safety concerns of piped gas and costly infrastructure upgrades needed to make hydrogen work.

As the United States works towards electrifying sectors throughout the economy, the demand for electricity, and subsequently the demand for renewables, will rise. The use of green hydrogen as energy storage in time periods when the supply of renewables exceeds electric demand may be a viable option worth comparing to other storage technologies, but maintaining and improving costly gas delivery infrastructure is far less likely to make sense economically or socially.

Tanya Stasio Researcher

Joshua Castigliego Researcher

This is a part of the AEC Blog series