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Six Key Policies for Cutting Emissions in the Latest Climate Bill

Last Tuesday, the House Select Committee on the Climate Crisis released its Climate Crisis Action Plan report, which maps a comprehensive federal response to climate change. Many of these ideas are included in the “Moving Forward Act” (H.R.2) that passed the House last Thursday and now goes to the Senate.

This combination of ambition, concrete details, and urgency in climate policy for the United States is unprecedented, so we’ve waded through the 547-page report and 2,309-page bill and pulled out six policy elements that struck us as worth noting. We have also provided preliminary commentary on how these measures stack up against the target of aligning our economy with a 1.5°C pathway.

 

1. Ambitious climate targets ahead of 2050 make it clear that action needs to be taken today

The report sets ambitious climate targets, including before mid-century, which is necessary to align the United States with a pathway to limit warming to 1.5°C. Sub-national commitments already have us roughly halfway to meeting this goal, but it isn’t enough. US greenhouse gas emissions should be reduced almost 50 percent below 2005 levels by 2030 as a steppingstone to net-zero emission by mid-century, as outlined in the IPCC’s 1.5 degree analysis. Comparatively, the Committee’s report seeks 37 percent reductions from 2010 levels (or 41 percent below 2005 levels) by 2030, and 88 percent by 2050.

States, companies, and local governments have set commitments that would get us 50 percent of the way to the Committee’s 2030 goal. A federal commitment is essential to achieve the goals through 2030 and to 2050. Critically, the report acknowledges how reducing direct use of fossil fuels in buildings, industry, and transport is a necessary part of the solution.

 

2. Electrification is a key driver for national decarbonization

The Committee’s report places newfound federal emphasis on electrification of end-uses as a means to reach deep decarbonization targets, describing electrification of end uses in the transportation, buildings, and industrial sectors as “essential” to cutting emissions. However, it acknowledges that electrification only works as a decarbonization strategy if the grid is as clean as possible as soon as possible.

While emissions reductions in the power sector establish the threshold for when electrification becomes lower-carbon than direct fossil fuel use, one should consider not just the first year emissions from any electrification effort. Instead, we should be evaluating the lifetime emissions of new investments.

For example, electric solutions for heating buildings were already lower-carbon than fossil fuel alternatives in 2018, while often saving customers money. At least six states (plus the District of Columbia) must reduce fossil fuels from buildings in order to meet their self-prescribed climate targets, and as the electric sector becomes a smaller share of total greenhouse gas emissions, the case for reducing fossil fuel use in buildings becomes stronger. Unless projects for power sector decarbonization significantly deviate from what’s expected in the coming decades, it is already lower-carbon to electrifying home heating in 99 percent of buildings in the United States.

In the transport sector, the Committee’s recommendations include requiring 100 percent sales of zero-emissions cars by 2035, and heavy-duty trucks by 2040, in addition to net-zero emissions from power generations by 2040. And finally, both the Committee report and H.R.2 provide technology-neutral frameworks for industrial decarbonization. The combination of end-use electrification for vehicles and buildings, combined with decarbonization of industry and much lower power sector emissions, is a key recipe for meaningful economy-wide decarbonization.

While the report fails to propose solutions for existing legacy infrastructure—particularly investments in fossil fuel generation and pipelines which are likely to be stranded due to economics—there are follow-on solutions available. These include drawing down fossil fuel debts and paying for them with savings from clean energy, as we describe in our analysis of coal retirement. The question is how these goals will be achieved en masse, and this is where H.R.2 starts to put together a vision for a market-based decarbonization solution.

 

3. Comprehensive climate action requires tackling transportation and land use

As RMI outlines in its recent US Stimulus Strategy, tackling transportation emissions—our highest-emitting sector—will require a holistic strategy that includes improvements to vehicle technology, pedestrian infrastructure, public transit, and land use and housing policies and practices. H.R.2 includes $100 Billion in funding for affordable housing, including a $10 Billion fund to help cities reform outdated—and in many cases, auto-centric—zoning requirements.

This is a major development, as many proposals for decarbonizing transportation emissions have relied only on EV deployment and have missed non-automotive solutions as well as the role of housing and urban planning. 

This bill also prioritizes infrastructure repair over new highway construction and safety measures that will directly improve infrastructure for includes complete streets, bus only lanes, bike safety, and funding for zero-emission bus fleets.

Finally, H.R.2 throws a significant amount of support behind vehicle electrification. It lifts the federal tax credit’s automaker production credit from 200,000 to 600,000 vehicles, increases the Federal Transit Administration’s Low or No Emissions Program by 500 percent, and directs the United States Postal Service to electrify 75 percent of its fleet.

 

4. Market-based solutions to climate change are not dead

In just two paragraphs, H.R.2 asks the Treasury to submit a report to Congress on “the utility of the data from the Greenhouse Gas Reporting Program [to determine] the amount of greenhouse gases emitted by each taxpayer for the purpose of imposing a fee on such taxpayers with respect to such emissions.” This action would offer the first step toward a national carbon price, a policy that most Americans support to combat climate change, and which in theory would lead to more economically efficient decarbonization than mandates or targets.

This data could also lead the way for federal incentives for decarbonization through performance-based debt forgiveness, where utilities, municipalities, states, and other entities could receive federal investment and these debts could be repaid through achieving decarbonization goals. Such an approach creates an effective carbon price but targets financial resources at the communities and companies that are feeling the most vulnerable now and subsequently have the capacity to reduce their emissions. Its cost is likely to be modest due to the significant cost decreases in clean energy and this approach could drive rapid economy-wide decarbonization without picking winners.

 

5. Zero energy-ready homes are approaching (and in some cases achieving) cost parity

To be 1.5 degree aligned, all new buildings will need to be net zero (efficient, electric buildings either producing as much clean electricity as they use or tied to an 100 percent carbon free grid) by 2030. Section 90424 of the bill would help bring zero energy ready homes to cost parity in some locations by extending the new energy efficient home credit (the 45L credit) through 2025 and increasing the incentive to $2,500 per unit.

Based on analysis in our report Economics of Zero Energy Homes, the incremental cost to construct a new zero energy-ready home compared to the local code baseline home ranges from $1,200 to $6,500 in the 50 most populous US cities, before factoring in local incentives. Bringing these homes to cost parity will allow them to penetrate the market, resulting in a better, healthier, and more resilient building stock while reducing energy insecurity across the community.

 

6. Expanded applicability of federal clean energy incentives would allow local governments to benefit

Tax incentives play a role in making clean energy cost effective, yet historically non-taxable entitles, such as local governments, could not utilize them. Section 90404 of the bill would not only extend the investment tax credit (ITC) and production tax credit (PTC) through 2025, but also allow entities with little or no tax liability to utilize them.

State and local governments and nonprofits would get 85 percent of the value of the credits, while Indian tribal governments would receive the full value of the credits. Local governments are already leading the way in renewable procurement, procuring over 8.2 GW in the last five years. However, having access to the investment and production tax credits will significantly reduce project costs likely spurring even faster renewable deployment.

Achieving the scale of collective action required to meet the climate crisis involves multiple government entities and impacts the entire US economy. In the coming decade, these efforts will not only require new investment in lower-carbon solutions in the power sector, buildings, industry, and transport, they will also require thoughtful planning to minimize stranded assets and slowly deconstruct legacy infrastructure. Special attention must also be given to the distribution of benefits and costs and ensuring a just and equitable transition, particularly among vulnerable communities.

While recent federal efforts don’t provide all the answers, a framework is beginning to emerge that includes decarbonizing electricity production and using that clean electricity to efficiently electrify fossil fuel end-uses. In parallel, data, price signals, and smart planning can support building an equitable, resilient, lower-cost energy future. Should these or other federal approaches to climate change become law, they lay the groundwork for greater diffuse actions at the state and local level, as well as within companies, communities, and households.