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Getting to Zero: Energizing the Green New Deal

A combination of new incentives, a modest carbon tax, and attractive financing for energy upgrades all will help

Reducing carbon emissions with a greater reliance on renewable energy is an essential part of reducing global warming. Photo: Jerry and Pat Donaho / CC BY-NC-ND / Flickr

Editor’s note: This is the first in a series on Energizing a Real Green New Deal. You can read the introduction to the series here.

Both climate denial and the Green New Deal fail to solve the crucial challenge of our era: How will we create and implement a plan for reaching net zero greenhouse gas emissions that is effective, practical, affordable, and rapid.

Denial is obviously not a solution and leaves society with the enormous cost of coping with the worst impacts of climate change. On the other hand, the Green New Deal offers solutions that are heavily reliant on federal government control, borrowing, taxation, and spending. And it includes social goals which extend beyond climate change and are destined to become mired in side issues and political gridlock. Neither approach is viable. In this first of three installments, we present a model for an incentive-driven plan to reduce greenhouse gas emissions in ways that enhance social equity and job creation, while minimizing government regulation.

Key goals, objectives, and incentives

As with all effective strategies, we must first determine our key goals and supporting objectives followed by the specific tasks needed to achieve them. In a market-based economy, the most pain-free and effective way to achieve objectives is to create incentives for actions that support our objectives. To encourage a reduction in fossil fuel use, we need to set specific carbon reduction targets and outline an array of actions needed to reach the objectives.

Offering a range of potential actions allows businesses and the public to choose a set of actions they can implement, consistent with their economic and personal situations. Finally, we need to be sure the actions have a positive return on investment. For example, if we want farmers to rebuild soil so it can store significant amounts of carbon, they need to be economically rewarded to make this transition. If we want homeowners to install solar panels, their return on investment needs to be not only positive, but rapid.

Incentives can be extrinsic (coming from outside), based on regulations, taxes, subsidies, favorable financing, and tax breaks, or intrinsic (coming from within), based on a positive return on investment, or other less tangible benefits such as improved health and comfort. In most cases, all that is needed to get people and businesses to take action based on intrinsic incentives is to provide education and motivational appeal—a commonly recognized strength of the marketplace.

Combining small extrinsic incentives to support intrinsic incentives may create the quickest and most effective road to significant change. State and local governments and utilities have a long history of creating successful financial rebates and educational programs that utilize this strategy to reduce energy use.

Defining our goal 

Unlike the numerous, diverse goals embodied in the Green New Deal, we should be laser focused on the one central goal that is the challenge of our era:

To incentivize individuals, companies and governments at all levels to bring greenhouse gas emissions low enough to keep global warming within 2 degrees C or lower. In the U.S., we will do our part to achieve this by reducing fossil fuel and other greenhouse gas emissions to zero by 2040 in a manner that promotes equity, good paying jobs, and prosperity and that utilizes the minimum government involvement needed to leverage our free market system to rapidly reach this goal.

The following low- or no-cost approaches are minimally intrusive:

  • Market the intrinsic incentives already in existence, such as the lower cost of ownership and improved performance of electric vehicles and zero-energy homes.
  • Shift tax breaks from fossil fuels to clean energy development, including energy efficiency in buildings and transportation, renewable energy sources, energy storage, and a smart electric grid.
  • Apply a modest tax to carbon-based fuels where they are produced, stored, or refined.
  • Create attractive financing packages for making energy efficiency improvements and adding renewables to homes, businesses, and transportation.
  • Build job growth and social equity into all greenhouse gas reduction efforts.
  • Pursue infrastructure improvements that directly address carbon reductions.
  • Enhance existing government R&D programs and develop new ones in conjunction with industries and universities to create or improve energy efficiency and renewable technologies.

Market existing intrinsic incentives at little or no cost

The good news is that the intrinsic incentives for all players to move to zero greenhouse emission technologies and strategies already exist and are growing rapidly.

One reason is that more and more people, small businesses, large corporations, and local governments are internally motivated to take positive steps to help avoid catastrophic climate change. More importantly, many technologies, such as zero-energy homes, electric vehicles, solar panels, and large-scale renewable electric power, give a greater return on investment and offer more benefits than fossil fuel alternatives.

Many of the actions advocated for in this series are intrinsically incentivized because they are good investments for homeowners, car owners, businesses, utilities, and governments. The return on investment and the improvements to people’s lives these new technologies offer will drive the market.

The only action needed for these technologies to become the new normal is for utilities and the companies who offer them to harness the marketing powers of American free enterprise. Businesses can readily identify needs, research possible solutions, develop products and services, manage supply chains and distribution networks, set competitive prices, and advertise with gusto. The government’s role is to set overarching goals, provide adequate direction, level the playing field, offer strategic incentives, and build public infrastructure.

Local, state, and federal governments can catalyze the formation of marketing alliances to mount effective campaigns that promote the intrinsic benefits of clean energy technologies to the general public. These alliances would include energy utilities, manufacturers of energy-related products, and committed non-profits. Utilities and manufacturers will benefit from business growth. The general public will benefit from positive financial returns. All this with no, or very low, cost to taxpayers.

Redirecting existing tax breaks

Without creating an additional tax burden, we can realign existing tax breaks and subsidies at the state and federal level to promote measures that will help us reach our net zero greenhouse gas emission goal.

According to one estimate, over $20 billion a year in state and federal tax credits are going to the fossil fuel industry. Redirecting these tax credits could make this whopping $20 billion available to incentivize the industries and initiatives focused on greenhouse gas emission reduction while removing support for fossil fuels. The Clean Energy for America Bill, introduced in the Senate, would replace 44 different existing energy tax incentives with incentives for clean electricity, clean transportation fuel, and energy conservation. Passing this bill would be an important step in the right direction.

Tax credits should be designed to have the maximum effect on the market. Priority should be given to encouraging those projects where money invested in greenhouse gas reduction will bring a positive return on investment, such as zero-energy homes and buildings, a smart grid, zero-carbon electricity production, and electric vehicles.

Because of their positive return on investment, incentives for these new technologies can be modest, effective, and quickly phased out when goals are met or market momentum grows. Tax credits should not be targeted at more expensive, less mature technologies such as electric or hydrogen planes, trains and ships, until R&D has reduced the price enough so that incentives will promote rapid market acceptance.

Low- and middle-income households should be offered more generous tax credits to purchase zero energy vehicles, homes, and buildings so they can reap the energy/cost savings and health benefits of these superior technologies. A national advisory board of experts should be created to adjust these tax credits based on market conditions and the evolution of prices in order to leverage the maximum return from each and reduce them as soon as sufficient market momentum is established.

A modest carbon tax at the source

The market can only make good decisions when it has good information. Unfortunately, the price of fossil fuels ignores many hidden costs, such as increased sickness, toxic spills, mining waste, air pollution and a rapidly changing global climate. Currently, carbon-dependent industries get a free ride with cheap access to public lands, a huge and unregulated dumping area for their waste, i.e., the air we breathe, and even direct government subsidies. These have a real cost to citizens and society.

To provide the free market with the information it needs on these costs so it can make rational decisions about fossil fuel use versus clean carbon alternatives, a modest, predictable and stabilizing carbon tax should be levied at the source of fossil fuel production or distribution.

While it is not a complete solution in itself, a small carbon tax will begin to price in the hidden costs of fossil fuels, and will be the most cost-effective, least intrusive, and most equitable way to reduce carbon emissions to zero. It is a market-based approach that is supported by more than 3,500 economists, including 27 Nobel laureates.

An optimal carbon tax will add a very small but steadily increasing fee to fossil fuels at their source, which will create a predictable, long-term incentive to move toward clean energy. As it gradually increases, it will change the decisions made by citizens, business people, and government officials about cars, trains, aircraft, buildings, generating plants, manufacturing plants, agricultural operations, and military installations.

Business and industry will respond to new opportunities, resulting in widespread carbon emission reductions. Electric and hybrid vehicles will become the new normal; all electric zero-energy and positive-energy buildings and homes will dominate the housing stock; clean-fueled trains, ships and airplanes will move goods and people; government and military facilities and operations will be more secure and resilient; and a non-fossil fuel-based, smart electric grid with battery storage will connect it all.

This tax can be easily be collected on oil, gas, and coal as they come through pipelines or at refineries or storage facilities. It can be adjusted by a formula to stabilize fuel prices during both price declines and price spikes. Over 30 years, it will very gradually increase the base cost of all fossil fuels.

The scheduling of this gradual tax increase along with stabilization of prices gives businesses and families the predictability they need to plan for the future. Revenues from the tax, combined with internal and external incentives, can be used to jump start us on the path to zero in ways that create equity for low income people faced with higher energy costs.

Loans and financing

Everyone agrees that energy-saving improvements pay off over time. The problem has been that initial costs for these improvements act as disincentives. To overcome this first-cost obstacle, we must create clean energy financing vehicles that make the monthly payments for loans on building, transportation, and infrastructure improvements lower than the monthly energy savings.

When the monthly earnings from energy savings exceed the monthly loan costs, it is called profit. When structured properly, loans for energy saving and renewable investments, provide a profit from the very first month, not only benefiting the borrower, but also benefiting suppliers, local economies, and the global climate.

Tax credits and/or income from the carbon tax can be used to encourage lenders of all types to offer or underwrite low cost revolving loans to low income people and small businesses for electric vehicles, for zero-energy and positive-energy homes, for solar panels, and for energy efficiency upgrades to existing homes. Similar low cost loans can be offered to small farmers and small forest landowners to provide funds to lower their carbon footprint and to sequester more carbon. Whether they are homeowners, landlords, farmers or small businesses, these revolving loans would be structured to make the earnings from lower energy costs exceed the financing cost so everybody wins.

Equity

The first priority for tax credits and some of the revenue from the carbon tax will be to create higher tax credits and rebates for low income people to make their homes energy efficient, install solar collectors, buy zero energy homes, upgrade to hybrid and electric vehicles, including used EVs.

Landlords of low- and middle-income apartment dwellers should be incentivized to upgrade the energy efficiency of their units and add solar panels, provided they reduce their tenants’ energy bills or rents. Landlords should also be incentivized to provide EV chargers for tenants.

Helping lower income families acquire zero-energy homes and electric vehicles will allow them to reap the benefits of low or no utility costs for their homes and reduced fuel costs for their vehicles, and can be a major factor in helping minimize the disproportionate impact of the carbon tax on them.

A small portion of the revenue can be returned directly to very low-income individuals by means of a monthly check or a refundable tax credit, as the carbon tax gradually increases. But unlike the current carbon tax bill before Congress, which only uses the tax revenue to give all citizens—rich and poor alike—a check each month, a portion of the carbon tax revenue, along with other incentives, should be used to help lower income individuals reduce their fossil fuel consumption to zero. This approach would save them more money than if they were to continue using fossil fuels while receiving a check to cover some of the higher costs.

Infrastructure and jobs

The market incentive provided by the carbon tax can be supercharged by devoting a significant portion of the funds to build out a carbon-free infrastructure. For example, revenue could be used to construct a network of highway rest areas with charging stations for electric cars and trucks, to incentivize utilities to convert to non-carbon-emitting energy sources connected by a smart grid, to finance the decommissioning and recycling of fossil fuel facilities that can no longer be used, to transform coal mines and power plants into wind and solar farms, and to retrain the workforce for new clean energy jobs.

Fossil fuel companies can be rewarded for restructuring their energy businesses to become clean energy utilities, as Royal Dutch Shell is planning on, so they can enjoy continued success in business and save jobs. And where still needed, federal grants can be made to schools, hospitals, airports, rail lines, and local governments to incentivize building out their share of this carbon-free infrastructure. Using some of the revenue to build out a carbon-free infrastructure will create thousands of good-paying jobs that can’t be replaced by automation or exported.

Research and development

Some of the revenue form the carbon tax should be used to increase the budget for R&D. To make that funding go even further, national research laboratories can be refocused to conduct more basic research and development to get us quickly and as cheaply as possible to zero greenhouse gas emissions.

This can be done in conjunction with university researchers and industry innovators to make it even more cost effective. Areas for R&D should include increasing solar PV and battery efficiency, developing electric and/or hydrogen planes, trains and ships, creating safer, more efficient, and less costly nuclear power, and a developing a highly-effective, renewable-powered smart grid with battery storage.

Joseph Emerson is a co-founder of the Zero Energy Project where this article originally appeared. Emerson writes that this series of blogs on the Green New Deal is inspired by Chris Martinsen’s Deconstructing the Green New Deal.

13 Comments

  1. Doug McEvers | | #1

    Energy efficiency improvements for buildings do pencil out especially for those without access to the natural gas grid. On average, heating with oil, propane or electricity will cost at least 3 times that of natural gas. There is a great opportunity to see a significant return on investment for building envelope improvements for these off grid properties.

  2. David Kaiser | | #2

    Hello Joe and Bruce. I would recommend you submit your ideas to Congress via the following request for information. https://climatecrisis.house.gov/inforequest They will be looking for documented evidence that a plan works, so you would need to back-up more of your proposals and conclusions with research papers etc. However, the larger arc of your narrative is worth writing up for this audience.

  3. User avater
    Jon R | | #3

    > ... encouraging those projects where money invested in greenhouse gas reduction will bring a positive return on investment, such as zero-energy homes and buildings

    This is a wasteful, market distorting idea. It should read "...will bring the best return on investment". An example where the difference is significant is putting 1W of PV solar on a residential roof or, for the same cost, putting 2W of PV solar or wind in a large scale farm. The former may have a positive return on investment - but the latter is almost always the better alternative. Lots of it - as much as the grid can handle (so don't argue for both). Forget about net zero energy residential buildings (they are carbon inefficient on a macro-level).

    > low cost loans ... small forest landowners to provide funds to lower their carbon footprint and to sequester more carbon

    As a forest owner, I don't see any financial reason to borrow money to sequester carbon. If you want to motivate me to do more - pay me $X per ton. Ie, change "loans" to "credits".

    1. David Kaiser | | #4

      Jon R - In terms of whether it is better to install solar at the utility scale or get homeowners to install PV on their roofs, the answer is YES. We only have 10 years-and-change to lick this global warming thing and we are WAY past the "bud" phase of this problem. There is really no time like the present to pull on every single global warming-reduction lever as possible. So if a homeowner has the gumption and cash to install solar on the roof, go for it. It will take a minute for it to provide a payback (depending on how one financed it or not), but in terms of global warming reduction it is tops. However, it is also beneficial to "green the grid" so that people who still have their heads suck in the sand on global warming improve their overall carbon footprint.

      This earth-ship has many holes in it, so we need all hands on deck to pick up a bucket and to bail 'er out!

      1. Zephyr7 | | #13

        >”We only have 10 years-and-change to lick this global warming thing and we are WAY past the "bud" phase of this problem. ”

        You should be aware that we’re told “we only have ten years” about every ten years or so. I’m aware of at least three times now over as many decades that this has been going on. The reality is no one really knows for certain what is going to happen 10, 20, 100 years out.

        Solar has a big weak spot commonly known as nighttime. Don’t be thinking wind is going to fill in the night hours either. Solar is great for helping with peak demand during the day, especially in the summer when peak solar output is a pretty close match with peak air conditioning load.

        There are existing zero emission clean energy sources that also need to be involved here. There are MASSIVE amounts of hydroelectric potential by completing the James Bay project for example. Some of the newer nuclear designs also have a place. Solar and wind alone are not going to be able to meet demand, regardless of how much efficiency improvements can be made.

        Bill

    2. Tyler Keniston | | #5

      "An example where the difference is significant is putting 1W of PV solar on a residential roof or, for the same cost, putting 2W of PV solar or wind in a large scale farm."

      Tax credit-wise it makes sense to incentivize where the greatest effect will be felt. Is the suggestion, then, that individuals could contribute capital (and get tax credit) towards community/large scale solar? Perhaps some credit for rooftop but more for community?

      I might still wonder if roofs don't make sense if trees are being cut for solar plantations... not sure how the math works out on that one and how it would be reflected economically.

      1. User avater
        Jon R | | #6

        > Tax credit-wise it makes sense to incentivize where the greatest effect will be felt.

        Exactly. We need more incentives for utilities to move faster towards renewables and away from coal. The money flow should be as close to a free market as possible (not complicated schemes like taxpayer->gov->taxpayer->project).

        > if a homeowner has the gumption and cash to install solar on the roof, go for it

        I agree - using their own money. Just don't provide subsidies in the form of % of cost tax credits and "sell back at retail" terms that exceed ~1/4 of what is being offered to the utilities. Such subsidies divert limited funds away from the more efficient solution.

        1. Andy Kosick | | #7

          We should be covering roof tops in PV and planting trees in fields. What you are saying looks good on paper but is an example of something markets get wrong all the time. Until every externality is in the equation markets are insufficient in many cases, which exactly why governments are involved, and for that matter how we ended up here in the first place. "Dollars" do not always make "sense".

          If a price were to be put on carbon (putting it in the equation) my guess is that increased cost of PV roof installs would be offset by the value of leaving forests in place or reforesting land. Also, the latter is what I think those loans you mentioned are intended for, covering the costs of reforesting land.

          Your right in that commercial buildings (and parking lots) are a better place to start than single family. Some of that's starting to happen though as consumer demand drags it into the equation.

          https://www.nytimes.com/2019/10/07/business/energy-environment/rooftop-solar-panels-retailers.html?searchResultPosition=7

          1. User avater
            Dana Dorsett | | #8

            >"We should be covering roof tops in PV and planting trees in fields."

            Not necessarily. Trees are over-rated, and rooftop solar is expensive.

            A better bet is to cover PARKING LOTS and larger flat roof commercial buildings with PV to bring the net delivered cost of solar down, the plant fast growing grasses in fields as carbon sinks.

            Trees are relatively slowly accumulating carbon sinks compared to tall prairie grasses, and small scale rooftop solar is pretty expensive compared to commercial & industrial scale parking lot canopy or very large building rooftops.

            See page 3:

            https://www.lazard.com/media/450784/lazards-levelized-cost-of-energy-version-120-vfinal.pdf

            Rooftop C & I (commercial & industrial) at a big enough scale is only 2x the cost of utility scale solar, and being located within the distribution grid there is less additional transmission & connection infrastructure needed to get the power to the load compared to utility scale PV. Installing solar over parking lots provides both a shade and rain/snow shield for the parked cars & pedestrians- a combined benefit beyond mere power. But it has to be a very substantial parking lot indeed to approach utility-scale costs.

            Another good/better/best bet is to cover certain types of agricultural land with PV, and share the light, and make good use of the shade PV on taller racks provide. PV and agricultural fields coexist well sharing an acreage footprint, in some instances increasing crop yield while lowering water use (using the insolation for power rather than drying out the soil) depending on the particulars:

            https://www.pri.org/stories/2018-06-08/energy-and-food-together-under-solar-panels-crops-thrive

            https://www.pv-magazine-india.com/2019/09/27/india-prepares-to-embrace-agrivoltaics/

            https://en.wikipedia.org/wiki/Agrivoltaic

          2. Andy Kosick | | #10

            Dana

            For the record, I agree with everything you just said (I did mention parking lots), none of which is lowest-first-cost utility PV. My point is that long term we humans don't need to be taking up any more space than we have to and combining PV with what we are already doing is important. I think the transmission & connection issue you mention is big as well, putting PV near point-of-use has resilience benefits as well. Agrivoltaic is a great idea (and a cool word) I hope to see more of it. Grasses may very well be better than trees, especially in the near term, any carbon sink/natural habitat is better than the lawn covered in PV on every utility's homepage. This may largely be about to much focus on ownership of generation instead of being a good broker of it.

  4. User avater
    Peter Engle | | #9

    Not just crop yield. Grasses grow well in the partial shade of PV panels, and grazing animals can shelter in the shade as well. A sheep farmer friend has noted that the sheep are always under the tracking collectors when the weather's hot.

    Agrivoltaics often requires changes to farmland preservation regulations, as PV racks are considered "industrial" and not "agricultural." The studies you cited, and many others, are starting to show that the two are compatible and even synergistic. Plus, the income stream from leases to utilities for the space is an important potential economic boon to keep farmers doing what they do.

  5. Tyler Keniston | | #11

    "Trees are relatively slowly accumulating carbon sinks compared to tall prairie grasses"

    This is interesting. Any informative links on the subject?
    A quick look suggests that its a bit complex. Grass appears to fix carbon into the soil — good in fire prone regions— and does grow more quickly, though it appears the long-term CO2 storage of grasslands vs forests is highly variable by condition and management. The soil conditions, climate, and other factors seem to affect how well CO2 is sunk. Forests are also variable of course.

    I'm interested in how the management takes place in these grass lands. The carbon present in the grass itself would seem to be released upon cutting or grazing, but perhaps the soil retention is the bulk of it.

    1. Doug McEvers | | #12

      Tyler,

      This may explain somewhat the carbon sequestration of grasslands.

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