Last week, Democrats on the House Energy and Commerce Committee released a preview of the CLEAN Future Act, their upcoming proposal for comprehensive climate reform. The Committee expects to release a fully articulated draft bill in the coming months. When it becomes draft legislation, it will aim to establish policies to achieve a 100 percent clean economy–i.e. net zero greenhouse gas emissions–by 2050. 

To accomplish that goal, the Democratic proposal takes a sector-by-sector approach, establishing new regulations and subsidy programs for the power sector, transportation, buildings, and industrial goods. It also directs federal agencies to use already existing authority to pursue net zero emissions, implying continued reliance on regulations from EPA and other federal agencies.

In this post, we will summarize some key aspects of the proposal, which would introduce significant new regulatory programs for the power sector, cars, industrial goods, and buildings and establish binding state-based emissions targets. There are other provisions for environmental justice, methane and other short-lived climate pollution, a national climate bank, and worker transition.

Among the key aspects of the proposal are:

A Federal Clean Electricity Standard: The electricity sector is responsible for 28 percent of U.S. GHG emissions (all emissions figures in the post are from the 2017 EPA Greenhouse Gas Emissions Inventory). The framework proposes a federal clean electricity standard that would require, by 2050, all electricity be generated by clean sources. Retailers selling electricity to customers would be required to sell a certain percentage of clean energy starting in 2022, with the standard ramping up in severity until 2050. In years when they produce too high a percentage of emissions, retailers can comply with the mandate by buying credits in a marketplace or pay a compliance fee

According to the proposal, a clean source is one that emits less than 0.82 metric tons of CO2 equivalent per megawatt hour. Generators that fall within this definition receive credits, but the credit value is varied based on the emissions intensity of the generator. Zero-emission sources, such as renewables or nuclear, would receive a full-credit, while coal or natural gas powered generators with carbon intensities lower than the 0.82 threshold would receive a partial credit. The average fleet-wide emissions rates of coal and natural gas combustion generators are 0.96 and 0.6 metric tons of CO2 per megawatt hour. This means that natural gas, at least initially, gets partial credit.

Beyond the clean electricity standard, the proposal includes complementary policies focused on modernizing the U.S. electrical grid, increasing interregional transmission, encouraging energy storage, and increasing consumer choice in power purchasing. 

National Energy Efficiency Targets: Buildings in the United States are responsible for 12 percent of U.S. GHG emissions and are trending upwards. In order to address this growing source of emissions, the proposal establishes a national energy savings target for building efficiency standards, leading to a requirement that all buildings be zero-energy ready by 2030. 

The Department of Energy presently has a voluntary program that defines a zero-energy-ready home as one that is 40 to 50 percent more efficient than a typical new building and is “so efficient that a renewable energy system can offset all or most of its annual energy consumption.” The DOE has created a checklist with specific requirements for water efficiency, lighting and appliance efficiency, and solar PV readiness, that houses must meet to be considered zero-energy ready. We will have to wait for the draft to know if these requirements would be updated to increase participation (or will they be made mandatory) and how they will be extended to commercial buildings. 

The proposal also incorporates a host of complementary policies. These initiatives include a rebate program that will provide cash rebates to homeowners for performing retrofits that achieve home energy savings. Additionally, the proposal will authorize and expand the Weatherization Assistance program, as well as establish grant programs to promote smart energy water efficiency management initiatives.

Greenhouse Gas Emission Standards for Cars:  The transportation sector accounts for 29 percent of U.S. GHG emissions, having recently surpassed the power sector to become the largest source of emissions in the country. The framework directs EPA to set increasingly stringent greenhouse gas emission standards for vehicles–including non-road modes of transportation–and requires that these standards ramp up annually consistent with a net-zero goal for midcentury. To get emissions from transportation close to zero, that must mean either that vehicles will be universally electrified, run on low-carbon fuels, or purchase offset credits.

As complementary policy, the framework will have the federal government subsidize charging infrastructure, transition the federal fleet to low or zero-carbon vehicles, and establish pilot programs to electrify bus and truck fleets. 

New federal procurement standards: The industrial sector is responsible for 22 percent of U.S. emissions, and is one of the most challenging sectors to decarbonize. The lack of low-cost alternatives and the exposure of industrial actors to global competition create large barriers to decarbonization. In order to incentivize the production and deployment of low-carbon industrial products, the proposal will establish a Buy Clean Program that sets performance standards for construction materials and products used in projects that receive federal funding. 

The proposal includes complementary policies to support industrial decarbonization, including:updating DOE’s Loan Guarantee Program to include industrial decarbonization projects and lower barriers to entry for new applicants. It will also establish a technology commercialization program that will award prize funding for facilities that incorporate carbon capture and utilization and direct air capture technology in their industrial processes. Additionally, the proposal reauthorizes programs that facilitate the deployment of combined heat and power systems on industrial facilities and provides rebates to facilities that purchase and install more efficient electric motor systems. 

State Net-Zero Targets: None of the above deal specifically with regulating emissions. Yet they are indirect measures that would regulate efficiency in sectors jointly responsible for about 90 percent of emissions. But even when combined, they cannot enforce the goal of the legislation, either because emissions fall out of those sectors or because production and efficiency standards can only be made so severe. To achieve net zero requires a different regulatory paradigm. 

Thus, the proposal will require states to devise and implement net-zero emissions plans, which will have binding force within each state similar to air quality standards. Federal regulators will evaluate state plans and oversee reporting and compliance. If states do not achieve their net zero plan, all GHG emissions sources with emissions greater than 25,000 metric tons of CO2-equivalent per year will be subject to a compliance fee. 

It’s not yet clear what these plans will look like or what mechanisms will be included in state plans. To achieve net zero emissions, states will need to find mechanisms of accounting for carbon removal and negative emissions, either through land-use or industrial means. The framework says that states will be able to work cooperatively to build net zero plans, which may allow for regional or national trading systems that allow states with gross emissions to buy offsets from states with substantial ag, forestry, or carbon capture industries. 

Conclusion

In essence, the proposal is implementing at least four strict regulatory initiatives in the hope that they will put the U.S. on a path towards net-zero GHG emissions by 2050. Each of those programs will need credits or compliance payments as a backstop. We will need to see the full bill to know how complex each regulatory initiative will be in isolation, but it is already clear that coordinating them will present a significant task for the EPA. 

For the U.S. to set course on a sustained pathway to decarbonization, climate policies should be clearly defined and cut across sectors in a way that drives emissions reductions across the economy. In its current form, the CLEAN Future Act demonstrates how tricky that might be in a sector-by-sector approach.