Money Alone Won’t Solve Climate Change

It will take a pro-growth culture shift

Editor’s note: This is the first guest post in our Good Growth series, where we explore what a consistent and cohesive center-left economic agenda should look like. 

Sam-Evans Brown is the director of Clean Energy New Hampshire, an organization dedicated to creating a cleaner, more affordable, and more resilient energy system in the Granite State.

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Thanks to the passage of the Inflation Reduction Act and Bipartisan Infrastructure (IRA) Law we are spending more federal treasure on fighting climate change than ever before, but we’re still not on track to reduce emissions fast enough to stay below 2 degrees celsius of warming. More than just throwing money at the climate issue, we need a pro-growth culture shift to unlock the energy transition. There will obviously be many interventions (“silver buckshot” not “a silver bullet”) needed to address climate change, but here are three ideas hard-won from a decade in the trenches of watching clean energy infrastructure proposals crash and burn in New England.  

Reduce Local Barriers

If you’re at all paying attention to the climate debate, you’ll know the advocacy community is currently consumed in argument over the Manchin-Barrasso permitting bill, an effort to reform and expedite federal permitting processes for all types of energy projects. This was born out of legitimate concerns that the United States is failing to effectively implement the IRA and reduce climate emissions fast enough due to painfully slow permitting requirements in this country. While I’m inclined to agree with those who see this permitting deal as one worth taking, I also can’t help but feel that it does not go deep enough to truly deal with the problem. My early career as a journalist was marked by watching one major clean energy infrastructure project after another rejected by local regulators. I watched a single, modestly-sized wind farm have to go through the local permitting process two separate times—a process which took more than seven years—in order to win its approval. None of these projects were rejected by the federal government; it was always local deciders who were the bottleneck. 

While federal permitting reform may be part of the solution to achieving speed and scale, something must be done to encourage local siting authorities to take a hard look in the mirror as well. The locus for action here is state or local jurisdictions.

We might look to the transportation and planning space for answers: can block grants or other funds be conditioned on local governments adopting siting frameworks that do not disadvantage clean energy technologies? Can encouraging zoning that favors clean energy construction become an issue for the national bully pulpit?

Or do the forces aligned in the desire to encourage Good Growth need to simply recognize that trying to solve this problem through an act of Congress will not work, and we need to lean into the much messier work of state-by-state trench warfare. 

Navigate Complexity

I lead an organization called Clean Energy New Hampshire, which advocates for eliminating carbon from the economy of the Granite State. As part of that, I had the good fortune of inheriting a program called the Energy Circuit Riders, whose job is to assist local communities complete projects that both save them money and reduce their emissions. The work of this team has been formative to my view of how to navigate the troublesome complexity of government incentives for clean energy projects. 

Just one example: when a local municipality considers installing a solar array, it is confronted with a dizzying array of challenges. Until only very recently, they were not able to take a tax credit, so they were pushed towards signing a power purchase agreement that allowed the tax credit to be monetized through a complicated tax equity deal. Upon the passage of the IRA, municipalities learned that there would be a new option to take the value of the tax credit as “direct pay”, which led to a flood of local energy enthusiasts to the IRS website to figure it out. Unfortunately, it took nearly two years for the rules to be finalized, and when the program was finalized it was so complicated that the federal government decided it needed to fund local “blueprints” to explain how to take them.

Imagine you are the part-time town manager for a small, low-income rural community in New England. How on earth do you imagine navigating this morass to figure out if a solar array makes sense for your voters? And this is just one small project. Now imagine we’re asking you to do the same for municipal EV charging, for heating and cooling municipal buildings, as well as a myriad of private projects that will need to get built in your town?

We need to fund a nation-wide corps of clean energy navigators and advisors to help clear away these barriers. An army of local decarbonization concierges. 

This would be the case, even if there weren’t a dizzying array of new federal climate programs to navigate. In the future, there will be a thriving industry of installers and service providers who will help us navigate this landscape, just as happens now with plumbers, electricians and furnace installers. And just like now, we will learn by asking our friends and neighbors who have already purchased low-carbon technologies. But until the market is transformed, we will need to teach people the basics of how to finance and buy 25-years worth of fuel up-front by investing in their own local electricity production, as it’s not a skill most folks have learned yet.

Reform Utilities

The electricity sector is a highly balkanized system of local monopolies, organized into regional “power pools” that operate much like cartels when it comes to defending their business model. 

Currently, utilities are “cost of service” entities: they show regulators the cost of providing electricity and are allowed to set rates to recover those costs plus a healthy profit for their shareholders. This system introduces a systematic bias towards making the electricity system more expensive, because the higher the cost of service, the greater the shareholder return.

This 100-year-old monopoly business model needs muscular reform. Utilities will resist it but we must be ready to overcome that resistance. The tradeoff for utilities should be simple: participate in reform and get rewarded with the tripling of your business thanks to the electrification of huge swaths of the economy. Without reform, we run the serious risk of increasing costs for regular people and suffering political backlash.  

Reforms could take a number of different forms, such as shifting toward performance-based ratemaking, where utilities earn a return on equity only when they hit certain goals or benchmarks. They could also include stripping many of the core functions of a utility away, and “quarantining” their monopoly only to the pieces of their business that truly are a “natural monopoly”. This has been the approach of Texas, which has achieved remarkable results in both keeping their electricity cheap and deploying clean energy at scale. States across the nation are experimenting with these frameworks, and the time to accelerate that experimentation is now. 

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Ultimately, the solution to climate change is market transformation. The speed and scale we need simply cannot be achieved by government action alone. It’s time to get beyond the easy answer of trying to write ever-bigger checks to combat climate change, and drill into the effective measures that will unleash market forces. These are the changes that will prove durable, affordable and which will match the scale of the challenge.