On the Issues: State Regulations in California, Fuel Economy Standards, and More

Matt Fleck, Maquelle Drummond, and Elizabeth Wason

Twice a month, 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. Keep reading, and feel free to send us your feedback.

Here are some questions we’re asking and addressing with our research chops this week:

How have California’s regulations for the transportation sector affected federal transportation policies and US greenhouse gas emissions?

A California rule that will boost the share of heavy-duty electric vehicles in the state has been approved by the federal government. The rule, which six other states also have adopted, requires half of all heavy-duty vehicles sold to be fully electric. California has a history of influential transportation policy. The state’s recent rule, which says that a certain percentage of passenger vehicles sold in the state must be plug-in or fuel cell vehicles, may complement the rule for heavy-duty vehicles, says Joshua Linn, a senior fellow at Resources for the Future. In a new article on the Common Resources blog, Linn discusses that California’s passenger vehicle standards may in fact reduce overall US greenhouse gas emissions and influence federal rulemaking. “California’s recent regulations for plug-in and fuel cell vehicles probably will prompt the US Department of Transportation and the US Environmental Protection Agency to adopt more stringent federal standards for fuel economy and greenhouse gas emissions,” he says.

Who really benefits from federal transportation policies such as tax incentives for electric vehicles and fuel economy standards?

Improvements in fuel economy were rare for new passenger vehicles in 2021, according to the US Environmental Protection Agency (EPA), which publishes data on fuel economy in the year after automakers introduce new fleets. The stagnation in fuel economy stems partly from the relaxed standards during the Trump administration and the growing share of trucks and SUVs sold in the United States. Ahead of the new fuel economy standards that EPA is expected to release this spring, RFF University Fellow Benjamin Leard, RFF Senior Fellow Joshua Linn, and HEC Montréal Assistant Professor Katalin Springel discuss who sees the benefits of such standards in a recent Common Resources blog post. “Consumer benefits account for most of the gains in societal benefits,” they say; furthermore, “lower-income households have benefited disproportionately more from the tighter standards.”

How can environmental economics research help address racial and social inequities?

The US Environmental Protection Agency recently announced various allocations of funding for projects that advance environmental justice. The allocations, which come from provisions in the Inflation Reduction Act, are part of the Biden administration’s efforts to address issues of environmental justice through climate policy. Environmental economics research often informs such policy; whether this research supports the mitigation, rather than the perpetuation, of social and environmental injustices is a research question of its own. In a recent Common Resources blog post, RFF University Fellow Amy Ando and a team of coauthors highlight ways in which environmental economics research may facilitate racial inequity and share insights about how scholars in the field can address issues of racial inequity moving forward. “Getting perspectives from scholars outside of economics can help,” they say. “The interdisciplinary field of environmental justice scholarship and the environmental justice advocacy community have a lot to teach economists.”

Expert Perspectives

In Focus: The Future of Energy Generation

The US Energy Information Administration (EIA), the federal agency that analyzes energy data for the US government, has released its Annual Energy Outlook for 2023. The outlook is a review of energy trends in the United States and includes projections of how those trends may change in the future. In the latest installment of In Focus, RFF President and CEO and former EIA Administrator Richard G. Newell breaks down how the Annual Energy Outlook incorporated the Inflation Reduction Act and how the law may affect the future of energy in the United States.

Virginia Nears Decision on Potential Withdrawal from Regional Emissions-Reduction Program

The window for comments that can be submitted by the general public to the Virginia government about the state’s potential to withdraw from the Regional Greenhouse Gas Initiative, known as RGGI, closed last week. RGGI is a cap-and-trade program comprising mostly northeastern states that aims to reduce greenhouse gas emissions from member states. Virginia joined the program in 2020.

Virginia justifies the proposed withdrawal from RGGI by citing the risk of increased electricity costs for ratepayers in the state, but it’s “unlikely to be the case” that costs will go up, say RFF scholars Dallas Burtraw, Maya Domeshek, and Karen Palmer. “Additionally, research identifies several benefits to Virginia’s continued participation in RGGI,” they say. “Virginia has committed to achieving a zero-emissions power sector by 2045, for example, and participation in RGGI is the lowest-cost way of achieving that goal.”

Resources Roundup

Updates to Benefit-Cost Analysis of Federal Regulations

The US Office of Management and Budget has proposed updates, for the first time since 2003, to the way that the federal government conducts benefit-cost analysis of regulations. Benefit-cost analysis considers how regulations may affect economic growth, environmental impacts, and other aspects of social welfare. On April 11, RFF will host Sally Katzen, Zachary Liscow, and Richard Revesz from the US Office of Management and Budget to discuss the proposed updates and their significance for US policy and decisionmaking. RFF President and CEO Richard G. Newell will moderate the discussion. RSVP here to attend this RFF Live event in person or virtually.

Unpacking New Federal Guidance about the Tax Credit for Energy Communities

The Biden administration has clarified which areas in the United States can qualify for a bonus tax credit in the Inflation Reduction Act. The credit incentivizes developers to build clean energy projects in so-called “energy communities.” RFF Fellow Daniel Raimi, who has written previously on the energy communities tax credit, unpacks the federal guidance in a new Common Resources blog post. “If the goal of the ‘energy communities’ policy was to provide a bonus tax credit of 10 percent across large swaths of the United States, then I think the policy has done that,” says Raimi. “If the goal of the policy was to specifically target the most vulnerable energy communities, I don’t think it’s accomplished that goal.”

Developing a Workforce for the Clean Energy Transition

A transition to clean energy in the United States is predicated on a workforce that can manufacture, install, and support clean energy technology. In a recent episode of the Resources Radio podcast, Adewale OgunBadejo discusses clean energy workforce development and opportunities for social mobility in the clean energy transition. OgunBadejo is vice president for workforce development at GRID Alternatives, the nation’s largest nonprofit solar installer. “We envision a rapid, equitable transition to a world powered by renewable energy that benefits everyone,” he says.

What’s Holding Up Clean Energy Projects?

Project delays caused by permitting holdups are a central challenge in the clean energy transition. On this week’s episode of the Resources Radio podcast, Katie McGinty and Jim Connaughton discuss how the federal government and state governments can accelerate the permitting process for clean energy projects. McGinty is vice president and chief sustainability and external relations officer at Johnson Controls, and Connaughton is chair of Nautilus Data Technologies and a member of the board of directors at Resources for the Future. “While I would not bet the kids’ college tuition, I think this subject of permitting reform is among a very small number of subjects that has some bipartisan mojo and a decent chance of seeing its way across a finish line this year,” says McGinty.

Financial Dimensions of a Transition to Clean Energy

The US Senate held a hearing on March 29 to discuss the economic implications of fossil fuel dependence as the United States transitions to clean energy sources. During the hearing, RFF Fellow Daniel Raimi testified about his research on government revenue from fossil fuel activities, along with recommendations for replacement revenue and energy alternatives that the government can pursue in the coming decades.

Sowing the Seeds of an Energy Transition

Last week, scholars and industry experts discussed projections for the future of energy across the globe at an RFF Live event. RFF scholars aggregated and analyzed many of these projections in the Global Energy Outlook 2023 report. “The theme of this year’s report is that policies in the United States, the European Union, and elsewhere are sowing the seeds of the energy transition. But there are questions about how quickly, and at what scale, these seeds will bear fruit,” said RFF Fellow Daniel Raimi during the event. Watch the full recording of the RFF Live event.

#ChartOfTheWeek

Global warming has a 50 percent probability of exceeding 1.5°C by 2030, according to projections in a new RFF issue brief. The chart above shows the cumulative probability that warming will surpass the 1.5°C and 2°C thresholds that are the focus of the 2015 Paris Agreement—in other words, how likely it is that nations will not keep warming to below 1.5°C and 2°C in future years. “The fact that we do not reach a 90 percent probability of crossing over the 2°C threshold before 2100 … provides hope that nations may still prevent the worst impacts of climate change through actions of sufficient speed and scale,” say RFF scholars Jordan Wingenroth, Brian C. Prest, and Kevin Rennert, who coauthored the issue brief.

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