Each week, we’re compiling the most relevant news stories from diverse sources online, connecting the latest environmental and energy economics research to global current events, real-time public discourse, and policy decisions. Here are some questions we’re asking and addressing with our research chops this week:
What tools are available to the Biden administration as it aims to decarbonize the buildings sector?
As part of the Biden administration’s goal of achieving 100 percent clean electricity by 2035, the US Department of Energy has laid out plans for an essential but often overlooked sector: buildings. Last month, the administration announced key details behind its efforts to reduce emissions from buildings, including plans to set new performance standards for federal buildings and expand Energy Star standards to heat pumps. Notably, updating both of these standards would not require congressional approval. The Department of Energy also is working on plans to encourage retrofitting old buildings, often considered to be the most difficult component of decarbonizing the buildings sector. Most state and local energy standards apply only to newly built or renovated homes; however, roughly 130 million of the 137 million American homes today were built before 2000. The American Jobs Plan recommends allocating funds for retrofitting old buildings, in addition to including money to develop new energy-efficient homes. Crucially, the future of these initiatives depends on congressional negotiations over the infrastructure bill.
An article in the new issue of Resources magazine—themed on a comprehensive view of the tools that policymakers can use to help decarbonize the major sectors of the US economy—outlines various strategies that federal policymakers can employ to reduce emissions from commercial and residential buildings. The article authors, RFF’s Kathryne Cleary and Karen Palmer, note the benefits and challenges associated with certain policy tools; for instance, they point out the downsides of technology mandates, like appliance standards, because these mandates do not address variable usage of the appliance and therefore cannot guarantee energy savings. Another challenge that affects the buildings sector is the sheer number of stakeholders involved. As the scholars discuss, some policy initiatives directly impact building developers and construction companies, while other regulations affect utilities companies or individual households. For more on this topic, attend an upcoming event on Tuesday, June 29, at which Cleary, Palmer, and other experts will discuss the recently announced initiative, led by the Council on Environmental Quality, to develop building performance standards for federal buildings.
Related research and commentary:
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Given the available evidence on the economic consequences of existing carbon pricing policies around the world, how might a hypothetical carbon tax impact the US economy?
Next month, the European Commission will propose expanding the emissions trading system in the European Union (EU) to encompass the buildings and transportation sectors, in a bid to strengthen the bloc’s climate regulations. Carbon prices within the EU Emissions Trading System, which currently impacts just the power sector, have surged this year (to the frustration of some European leaders) and could rise further as the commission considers a variety of emissions reduction policies. The initial carbon price applied to these new sectors likely will be lower than the carbon price that impacts the power sector, but this expansion of the world’s largest carbon pricing system nonetheless could have drastic economic consequences. The European Commission has prepared for potential resistance, especially from lower-income and fossil fuel–dependent member states; the plan includes a fund to support vulnerable households through potential economic hardship caused by the expanded carbon price. But worries remain about the broader economic impacts of a larger carbon pricing system as the bloc recovers from the coronavirus pandemic.
RFF University Fellow Gilbert Metcalf has closely studied the impacts of the EU Emissions Trading System, concluding that the EU’s carbon pricing policy to date has had no discernible detrimental effects on employment and GDP. On a new episode of the Resources Radio podcast, Metcalf builds on that research and reflects on the possible effects of carbon pricing—specifically, a carbon tax—in the United States. Describing a recent working paper he coauthored alongside Tufts University’s Alan Finkelstein Shapiro, Metcalf contends that a modest carbon price could prompt a slight uptick in GDP, reduce emissions, and reallocate jobs away from carbon-intensive sectors. But Metcalf notes that positive economic and environmental impacts are less likely if uncertainty exists about the future direction of a carbon price. “Businesses are much less likely to make these expensive, long-lived capital investments if they risk facing policy changes that lower or eliminate a price on carbon pollution,” Metcalf says. “That means we may not get the kinds of reductions that we need.”
Related research and commentary:
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Private vehicle ownership in China has risen significantly in recent years. How will this demand for more cars impact China’s climate goals?
Although China has committed to achieving carbon neutrality by 2060, its climate goals could be imperiled by surging oil demand as the nation recovers from the coronavirus pandemic. Much of this surge can be attributed to an increasing demand for passenger vehicles: for 13 consecutive months since April 2020, vehicle sales in China were higher than in the same month the previous year. Data also show that a growing proportion of these sales represent bigger, heavier vehicles, rather than more efficient options. China had planned to phase out its long-running subsidies for “new energy vehicles”—electric vehicles and plug-in hybrids—in 2020, but demand for such vehicles plunged as subsidies were reduced and as the coronavirus pandemic prevented travel; the government slowed its plans as a result. China has hoped that other policies can reduce emissions, including increasingly stringent fuel economy standards and a goal for half of all vehicles sold by 2035 to be new energy vehicles.
In a new working paper, RFF Senior Fellow Joshua Linn and Chang Shen—both of the University of Maryland—explore the environmental challenge of rising private vehicle ownership in China. Examining the recent relationship between China’s growing wealth and consumer interest in personal vehicles, Linn and Shen contend that recent projections of vehicle ownership in China—which largely assume that future patterns will mirror trends in other countries—likely underestimate future sales, oil consumption, and greenhouse gas emissions. A higher-than-expected increase in vehicle sales could complicate China’s future climate commitments, especially if emissions standards for vehicles do not become more stringent as vehicle ownership rises. “Meeting China’s pledge under the Paris Agreement would require more aggressive policies than if the forecasts had proven to be accurate,” Linn and Shen write. “Future work may assess how much policies would have to account for China’s unexpectedly large increase in car ownership.”
Related research and commentary:
- Working Paper: The Effect of Income on Vehicle Demand: Evidence from China’s New Vehicle Market
- Blog: The Role of Federal Subsidies in Decarbonizing the Transportation Sector
- Working Paper: China’s Unconventional Nationwide CO₂ Emissions Trading System: The Wide-Ranging Impacts of an Implicit Output Subsidy
This week's #FactOfTheWeek revolves around the challenge of decarbonizing the buildings sector.
For more insights, RSVP for an RFF event next week on the Biden administration's efforts to set performance standards for federal buildings.
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130 million out of 137 million
While efficiency standards for new construction could curb emissions from the buildings sector, policymakers also must grapple with renovating older buildings—which make up the majority. Of the 137 million homes that exist in the United States, an estimated 130 million were built before 2000.
