Five Key Climate Solutions
A new first-of-its-kind tool just made the state clean energy transition easier.
The energy transition is a big, complex problem that involves a whole suite of policy options — often without clarity about which ones will be most effective. Time and effort can be wasted focusing on the “pebbles,” policies that each only have a small emissions impact — requiring dozens of them to achieve goals. Instead, policymakers can make better use of limited resources and focus on the “boulders,” the small number of policies that have the biggest impact. For many people, it’s not clear which policies are which. Until now.
A new, first-of-its-kind tool will make it easier for states to embrace the clean energy economy and achieve the nation’s climate goals. Right now, policymakers on the state level are asking: how can we use the Inflation Reduction Act (IRA) to not only accelerate our state clean energy transition, but also reap the economic benefits that go along with it?
To get to that answer more quickly and easily, RMI and Energy Innovation’s Energy Policy Simulator (EPS), supported by Bloomberg Philanthropies, shows how specific strategies for each of the 48 US mainland states can effectively achieve our climate goals. This marks a significant expansion of our previous models and is the first tool of its kind: it’s free, open-source, and lets any user test different pathways.
In June, RMI used the EPS to uncover five strategies that cut emissions quickly, effectively, and affordably. And in August, Congress passed comprehensive climate legislation that provides a robust set of incentives to accelerate these strategies.
1. Deploying Clean Electricity
The IRA makes a clean electricity standard easier with the following programs:
- Production and Investment electricity tax credits incentivize all zero-carbon generators of electricity.
- Storage tax credits provide first-of-a-kind energy storage incentives to improve the reliability of the grid.
- Rural electrification loans provide financing to expand the rural grid.
- Interstate transmission loans provide financing for national transmission corridors.
- The Energy Infrastructure Reinvestment program provides loans to help communities transition from fossil generation to clean electricity
2. Speeding Up Electric Vehicles Sales
The IRA’s incentives give electric vehicles the green advantage, and the IRA also offers substantial manufacturing incentives to create economic development opportunities.
- The EV tax credit incentivizes new and used electric vehicles, including heavy-duty trucks.
- The EV charger tax credit supports building EV chargers in low-income and non-city regions.
- Battery manufacturing tax credits provide incentives for battery production in the United States, and for key battery supply chain steps.
3. Using Electric Equipment in Buildings
The IRA includes a comprehensive set of incentives to make electrification and efficiency upgrades more affordable for families and businesses.
- Electrification and efficiency rebate programs (HOMES and HEERHA) provide incentives for electric equipment and efficiency upgrades, with a bonus for low-income households, distributed by state energy offices.
- Residential and commercial tax credits support efficiency and electrification projects.
- A national green bank will provide financing tools to reduce the up-front-costs of home and equipment retrofits (details are still forthcoming).
4. Setting Industrial Emissions Standards
The IRA includes several grants and tax credits to support cleaner industrial processes with efficiency and electrification, making it far easier for state policy to accelerate industrial decarbonization without imposing additional costs.
- More than $6 billion is available from the IRA and the Infrastructure Investment and Jobs Act (IIJA) to invest in major industrial retrofits to reduce emissions.
- A hydrogen production tax credit eliminates the “green premium” for low-carbon hydrogen.
- The Environmental Product Declarations Assistance program provides $600 million in grants that increase the market and visibility to support the procurement of low-carbon products.
- The Loans Programs Office received over $100 billion in loan authority to finance innovative climate solutions, lowering the barriers to commercialization for new industrial projects.
5. Slashing Methane Pollution
Several states have major methane pollution sources, due largely to oil and gas production. The IRA includes a number of provisions that bolster and accelerate state action.
- The Methane Emissions Fee creates a fee for excess methane emissions, with revenues reinvested in projects that mitigate methane.
- The Methane Emissions and Waste Reduction Incentive Program provides $1.5 billion in grant money to monitor and reduce methane emissions.
Using the Energy Policy Simulator to Visualize Impact
Our emissions wedge tool — a direct tool on the EPS — visually reveals just how impactful these policies will be in cutting emissions in individual states:
How Is this Possible? Historic Federal Investment.
The IRA makes it easier to pursue these ambitious policies because it changes the economics of clean energy. Thanks to tax credits that will stimulate historic investment from industries and clean energy developers, clean energy in our homes, businesses, cars, big trucks, and the grid are now the economic winners in most cases.
For so long, clean energy strategies have faced a tough uphill battle economically, requiring additional investment to overcome a “green premium” because clean technologies were often more expensive than their fossil fuel counterparts due to less scale and less public and private investment. However, we are now on the precipice of a green advantage across many sectors, driven by tax credits and declining costs of clean technologies. With federal climate policies already in place, it is now the responsibility of states and local governments to deploy the infrastructure of a net-zero economy.
State-Specific Clarity is Critical
The EPS provides a public and free-to-use tool to evaluate over fifty climate policies and their impact on emissions, public health, and economic growth. The EPS, based only on open-source data, such as the US Energy Information Administration’s Annual Energy Outlook and State Energy Data System lets users look at different options for climate policy and determine which ones will be most effective for their state in cutting emissions, creating jobs, boosting public health, and more. No one said the clean energy transition would be easy, but it just got easier.