Recent federal policy incentivizes the construction of renewable energy projects to reduce emissions from the electricity sector, but opportunities remain to address environmental justice and economy-wide electrification.
Experts project that most of the emissions reductions spurred by the Inflation Reduction Act will come from the electricity sector—power plants, in other words—given that the law incentivizes the construction of renewable energy projects. But the Inflation Reduction Act likely will not bring the United States all the way to the nation’s climate goals; additional policies may be necessary to further reduce emissions and electrify other sectors of the economy while addressing issues of environmental justice.
Karen Palmer, a senior fellow at Resources for the Future (RFF) and director of RFF’s Electric Power Program, recently discussed climate policy and the electricity sector with Robert N. Stavins, an RFF university fellow, co–vice chair of RFF’s Board of Directors, and professor at Harvard Kennedy School. Their conversation originally was released as an episode of the Environmental Insights podcast, hosted by Stavins and produced by the Harvard Environmental Economics Program. We share a portion of it here.
The original version of this conversation was released as this episode of Environmental Insights. The transcript of the conversation has been edited for length and clarity.
Robert N. Stavins: What’s your assessment of the current administration’s energy policy—or, for that matter, its climate change policy?
Karen Palmer: The administration’s climate change policy largely focuses on using subsidies in the form of tax credits to encourage clean electricity. That’s true in terms of legislation, but other activities also are going on. The fact that the administration wasn’t fully able to price carbon doesn’t mean that we won’t see efforts to address emissions from emitting sources, which aren’t directly targeted under the subsidies. We have seen the administration’s proposed form of the third try at using the Clean Air Act to regulate emissions from existing and new fossil fuel–powered electricity generators. So, we see not only the carrot, but also a bit of a stick.
Beyond the federal level, a lot of activity is happening in the states on both fronts: subsidizing clean sources of power and imposing increasing prices on power producers. As economists, we like carbon pricing, because it’s efficient. We often pose this dichotomy between either pricing carbon or subsidizing clean energy. That’s a false dichotomy; policies are going to build both ways from both ends.
When I started working on climate change policy out in California, I first heard the phrase “environmental justice,” which was politically quite important early on there. But, at that point in time, I didn’t hear about environmental justice a lot in Washington, DC. The world has changed since then. Now, both nationally in the policy world and in the scholarly world of research, environmental justice and the idea of a just transition have become very prominent, particularly in the context of climate change policy, but not exclusively. What’s your reaction to that increased attention?
The attention is important, in terms of both making progress on the climate issues and also taking actions to rectify past injustices and finding ways to make these two efforts work together. The recognition that undertaking actions to reduce emissions of carbon also can help reduce emissions of other air pollutants that affect local air quality is important. Finding ways to jointly reduce emissions and local pollutants is a good thing. The combination probably is going to require tweaks in places where governments are using cap-and-trade systems to address concerns, for example, but a marriage of the two reductions is not impossible.
Does the Electric Power Program that you direct at RFF include attention to environmental justice and just transition issues?
RFF certainly works on environmental justice and just transition issues. Our plans, starting now and going into the coming year, will include more focus on energy justice–related issues. As we look to decarbonize the economy more broadly, the costs of electricity are going to play an important role, in terms of people’s incentives to adopt or do things that likely will be necessary to get rid of fossil fuel use in buildings, like adopting heat pumps, and electrifying other energy end uses, such as vehicles.
Keeping electricity prices low in general will be part of these decarbonization efforts. But important up-front costs also are associated with adopting these new technologies, which substitute more investment costs for less energy costs. Costs are lower because not only are the new technologies electrified, but they’re often extremely efficient. Finding ways to make the adoption of new technologies work across the board for all types of consumers, including low-income consumers and historically disadvantaged communities, is going to be an important part of the policy puzzle.
What research gaps exist? Are some areas, questions, and issues in the broad area of energy and environmental economics and policy, perhaps within the electricity sector or elsewhere, not receiving sufficient attention? Do you see any low-hanging fruit—a little bit of research that could have tremendous gains?
This question about electrification is an important one; another important area is understanding what motivates consumers. Change has to happen across the economy. A lot of consumers are skeptical of climate change; a lot of voters are skeptical of climate change. Convincing the broad populace to move toward electrified appliances, vehicles, and other technologies, maybe even electric bikes, is going to involve some nuance. Research on that front could be important.
We’ve also been frustrated in terms of getting carbon pricing to work nationally, but carbon pricing is an important part of moving toward a decarbonized economy. If work on carbon pricing is happening at the state level, then understanding ways to link various state programs together is going to be an important policy challenge. Research that can inform those links would be helpful.
