Macroeconomic Implications for Decarbonization Policies and Actions: Proceedings of a Workshop (2025)
Chapter: Barriers to Decarbonization and Solutions
Barriers to Decarbonization and Solutions
Barriers are defined as obstacles that hinder or obstruct progress, as Carley clarified during the workshop welcoming remarks. A myriad of potential technical, social, legal, and political barriers can impede progress toward decarbonization goals. Carley and Känzig moderated the workshop’s second session, which focused on the potential implications and interactions of such barriers, along with potential solutions. The speakers were Shelley Welton, University of Pennsylvania Carey Law School; Jonas Meckling, University of California, Berkeley; Costa Samaras, Carnegie Mellon University; and David Victor, University of California, San Diego.
INSTITUTIONAL BARRIERS TO DECARBONIZING THE ELECTRIC GRID
Shelley Welton, University of Pennsylvania Carey Law School, discussed institutional barriers to decarbonizing the electric grid. Given the reliance on electrification as a key pathway toward decarbonization, she emphasized that a strong, well-planned grid is essential to realizing the full emissions reduction benefits of policies such as the IRA (117th Congress 2022b). To this end, she posited that there is a need to implement changes at the intersection of governance and institutional design to interconnect clean energy resources much faster, build stronger regional and interregional ties, and use resources more efficiently.
She pointed to two challenges in particular that undermine effective institutional design in the context of the electric grid. The first issue is that various elements of the grid operate under different authorities. While individual states have jurisdiction over clean energy adoption, generation planning, and transmission siting, the North American Electric Reliability Corporation is the primary body that addresses reliability; while regional transmission organizations and the Federal Energy Regulatory Commission (FERC) influence transmission planning and interconnection. These different bodies are often siloed, creating divisions
and limitations that impede the holistic planning necessary to enable effective change, Welton said. A second issue is that electricity has been outsourced to private governance, whose interests are sometimes at odds with public good. For example, utilities are not incentivized to build the large, expensive regional and interregional transmission lines needed to facilitate decarbonization, while at the same time utilities may overspend in other areas that align with their incentive structures, Welton explained.
To overcome these challenges, Welton suggested a greater effort to align and coordinate the missions and powers of the many entities that run the electric grid. In addition, she suggested a need for stronger governance of public utilities, potentially through the creation of a new public electric reliability organization that is positioned and incentivized to push utilities to advance reliability, decarbonization, and equity goals.
POLITICAL BARRIERS TO DECARBONIZATION AMONG THE PUBLIC AND INDUSTRY
Turning to the political barriers to decarbonization, Jonas Meckling, University of California, Berkeley, said that two core barriers are opposition from the public and opposition from industry. He explained that although the resistance to decarbonization policies has generally declined over time in both spheres, increasing polarization around climate policies has led to markedly different policy paths in communities with different political leanings, a pattern that is likely to influence the near- and long-term trajectory of decarbonization policy in the United States.
Meckling pointed out that one question is the degree to which the IRA will help more people appreciate the upside of decarbonization investments and drive an electoral coalition of voters who benefit from the IRA along with a policy coalition of business interests and politicians that benefit from the IRA. In the short term, he suggested that a rapid turnaround of public support is unlikely given the temporal mismatch between short electoral cycles and the amount of time it takes to see economic benefits from IRA investments, the challenge of determining whether benefits come from state or federal policies, and the climate of ideological polarization. However, he posited that even in the absence of an electoral coalition, a policy coalition may be more likely to emerge as industries and politicians in states that benefit from the IRA see that it is in their interest to sustain it. In the long term, he suggested that effective decarbonization will require federal policies that complement IRA incentives and focus on technology-specific deployment and performance mandates to make clean energy cheaper, build public support, and nurture and align the fractured clean energy ecosystem.
OPPORTUNITIES TO OVERCOME BARRIERS AND ACCELERATE DECARBONIZATION
In light of the goal to achieve net-zero emissions by 2050, Costa Samaras, Carnegie Mellon University, emphasized the urgency of translating science into policy decisions and actions to accelerate decarbonization. “The barriers that we face are primarily about time,” he said. “We can make more money, [and] we can make more stuff, but we can’t make more time.” Since time is a factor that we cannot control, he examined how overcoming some of the barriers that slow progress could help to speed action.
One opportunity lies in addressing trust and information, he said, underscoring the importance of considering whose voices are included and elevated, how information is shared, and what builds trust in order to facilitate alignment among policies, infrastructure, systems, and social aspects. A second consideration is the physical equipment and infrastructure needed to achieve net-zero emissions. To deploy clean energy infrastructure, EVs, battery storage, solar power, and other elements of the decarbonization future at the scale necessary to meet emissions goals, he highlighted the urgency of addressing a variety of supply chain, workforce, cost, community, and efficiency challenges.
Describing decarbonization as a “megaproject,” he emphasized the value of bolder emissions reduction efforts in order to build a buffer or contingency into the process. Given the complexity of achieving net-zero emissions and the lack of scalable solutions in some sectors, he urged the scientific community to focus on near-term or real-time research that can help decision makers better understand the feedbacks that can be anticipated as different types of decarbonization investments are implemented. In addition, he suggested a need for greater collaboration among researchers analyzing cross-cutting policy impacts, from physical infrastructure to social, workforce, and financial impacts, in order to inform strategies to overcome key barriers, support equity, and scale up solutions.
THE ROLE OF FINANCING AND DEMAND IN ADDRESSING UNCERTAINTY AND SUPPORTING DECARBONIZATION SOLUTIONS
In the context of large systems-level transformations such as decarbonization, David Victor, University of California, San Diego, cautioned that the term “barrier” can lead people to make too many assumptions, lay blame, and fail to see opportunities within problems. He noted that issues that are perceived as barriers can evolve over time and even present new opportunities. Instead of a black-and-white perspective where optimal solutions are either employed or not, he posited that shifting the focus to sector-specific policy solutions that respond to on-the-ground realities can help to garner self-sustaining public and political support.
He also highlighted the role of financing in accelerating—or creating barriers to—decarbonization. The capital-intensive projects needed to achieve deep decarbonization are likely to be mostly financed through debt, which is highly impacted by market credibility and policy arrangements. As a result, the demand arrangements behind a given project will play a large role in success or failure. He also noted that U.S. decarbonization is occurring in both a national and international context, with imported materials and exported technologies being impacted by global events.
Such barriers are amenable to modeling, and modelers are collaborating with researchers who study institutions and politics to predict outcomes. Victor noted that institutions and their behavior—in particular, how they deal with the uncertainty and disruption stemming from deep decarbonization—can have an important impact on the success of the clean energy transition.
DISCUSSION
In an open discussion following their remarks, panelists discussed specific barriers to decarbonization in more detail, considered a variety of policy suggestions, and addressed opportunities and challenges related to influencing consumer behavior.
Costs, Logistics, and Local Opposition as Barriers to Decarbonization
Känzig asked panelists to identify specific barriers to decarbonization. Victor highlighted three: a lack of support and understanding from the public, an overall lack of knowledge of the macroeconomic implications, and issues related to facility siting. For the first two barriers, he posited that the primary source of misunderstandings relates to costs. He suggested that the costs of clean energy technologies have often been overstated, and the degree to which cost considerations influence decision making can also be overblown. For example, he noted that the cost of rooftop solar is often quite high, but homeowners are enthusiastic about it because they feel it benefits them directly. “What’s much more important [than cost] is disruption and political support,” Victor said. “When it comes to studying politics, we should not use cost as a simple proxy for what’s going to be accepted or not.”
Regarding the issue of facility siting, Victor said that in order to gain support for facility siting a project must generate clear local benefits, deliver environmental justice and extension services, and identify strong allies who can balance public opposition. He also added that creative new incentives could help to address interconnection barriers. Welton agreed that local opposition to facility siting can represent an important barrier to the implementation of clean energy projects. In addition to FERC, Victor and Welton suggested that state and regional authorities
have an important part to play in promoting just, durable projects with upfront public engagement. Welton stressed the importance of encouraging community involvement in ways that help to build trust and buy-in without unnecessarily impeding development. Speculating that siting and local opposition issues are likely to grow more common in the future, she suggested that more research into successful processes could help to inform community engagement approaches going forward. Drawing a comparison with the process through which the federal highway system was built in the 1960s—another large and transformational project in U.S. history—Samaras underscored the importance of investing in state and local capacities to engage the public, create job opportunities, and offer services to ensure that benefits reach every community.
Panelists also discussed how equity considerations, political polarization, and consumer perceptions play into support for—or opposition to—decarbonization strategies. Meckling agreed with Victor’s points about cost perceptions and noted that a discussion of costs must acknowledge that clean energy has lower profit margins than fossil fuels. He named equity dynamics as another key issue and stressed the importance of taking steps to ensure that the clean energy transition does not further damage vulnerable communities. He also suggested that barriers related to political polarization may be overcome if the IRA helps companies and regions restructure their economies and aid communities. While IRA incentives make clean energy more cost-effective for industry, Welton pointed out that many consumers have yet to see those benefits and therefore lack confidence that the provisions will actually make energy more affordable for them. Samaras agreed and noted that policies often attempt to influence consumer behavior without fully accounting for the real-world conditions in which people make decisions. For example, if a person needs to replace a broken air conditioner during a heat wave, that person is going to choose the one that is available immediately, which might not be the one that is most energy efficient. To accelerate adoption of a broad spectrum of decarbonization technologies, Samaras suggested that “the next several IRAs need to be thinking about making to plug-and-play for every single type of consumer—homeowner, renter, high income, low income—to make adoption easy.”
Carley asked what would happen if these barriers are not addressed. Welton replied that without governance and institutional reforms, it will be very challenging to overcome the main institutional barrier, which is the massive resource and coordination challenges involved in building large new infrastructure. Governance reforms are a critical precondition to accelerating progress, even if they do not have the immediate payoff of substantive policies, she said. Underscoring the importance of knowledge gaps and uncertainties, she added that existing markets and utilities are struggling to lead the transition and accelerate decarbonization goals because the future is unknown.
Robert Kopp, Rutgers University, asked whether a lack of knowledge or a lack of political will is more important to address in terms of overcoming these barriers. Victor replied that it depends on the intervention and the goal; shallow decarbonization (steps toward a modest, relatively easy-to-attain level of emissions reduction) is far easier to implement and much less disruptive than deep decarbonization (in which the goal is to eliminate all or nearly all emissions). Well-designed price incentives can be effective for pushing shallow decarbonization, even if these instruments are sometimes politically unpopular. For deep decarbonization, he said that new business models will be needed, along with the capacity to learn and manage the uncertainty associated with deep decarbonization strategies. Victor also pointed out that implementing new technology or building new infrastructure often includes financial or logistical challenges that can affect confidence in future projects, making it important for institutions to be careful to select and steward projects with a high probability of success.
Potential Policy Suggestions
Lenton asked panelists to comment on what types of policies could be most effective for accelerating progress toward net-zero emissions goals. Samaras suggested that expanding government market commitments could help to provide financial justification for companies to invest in emerging technologies and build out supply chains. Victor cautioned that true net zero is a very difficult target to reach, suggesting the importance of flexibility and focusing on what is practical. In line with Samaras’s point, he said that macroeconomic factors are ultimately more important than technology. As a result, he suggested that policies that incentivize investments in promising growth areas can help to drive progress by signaling to firms where their investments are most likely to pay off in the long run, regardless of the policy shifts that may occur from one political administration to the next.
Cleetus asked Welton to share ideas about specific policies that could be instrumental in breaking down the institutional silos that have impeded progress on shoring up the electric grid. Welton replied that the existing policy momentum, especially for reforming environmental permitting, proves that it is possible to use legislation to remove barriers and spur planning. She reiterated her suggestion of enhancing oversight of utilities and stressed the importance of making changes now instead of waiting for a disaster to befall the grid to spur a response.
Meckling highlighted that passing the IRA created a lot of political support, but he and Victor agreed that it is intervention-specific, and it is up to institutions to determine how to use the investments wisely. Meckling also pointed out that the United States has done little in the way of industrial policy over the past several decades and suggested that a more systemic understanding of how to create
effective climate-based industrial policy is needed. He added that demand-side instruments could potentially be utilized more, noting that the most effective demand-side strategy, carbon pricing, has proven very challenging to enact, which has left supply-side instruments to do most of the work.
Influencing Consumer Behavior
Recognizing that consumer choices and behaviors play a key role in decarbonization pathways, Shepard asked panelists to comment on opportunities to influence consumer behavior to support the energy transition. Victor replied that it is important to understand what consumers know, what they do not know, and what challenges they face. For example, EV drivers are not necessarily aware that timing matters when they are charging their cars on a solar-dominated grid. If such knowledge gaps can be identified, it may be possible to create tools and interventions to influence behavior. However, he cautioned that consumers can be difficult to predict, and interventions can have unintended consequences; it is possible that some interventions would bolster grid resilience while others would undermine it.
Samaras agreed and also noted that when asking consumers to make changes, especially around major assets like houses and cars, it is important for the new or alternative option to maintain the same reliability, convenience, and ease that they are used to. He added that providing incentives at the point of sale—rather than through mechanisms that only reimburse consumers when they file their taxes—could have a bigger influence on consumer choices.
Pointing to the example of an initiative in which New York State convinced consumers to transition from manufactured gas to natural gas through a door-to-door campaign, Welton suggested that a similar strategy could be employed to persuade consumers to adopt decarbonization technologies. Samaras added that a recent workshop hosted by the National Academies provided a forum for discussing social science aspects of decarbonization and resilience (Board on Environmental Change and Society et al. 2024), emphasizing that every community member, academic department, and economic sector has a role to play. He stressed that the energy transition must work for people and communities in order to succeed.
