Testimony Date: 02/18/2021
Congress Session Name: 117th Congress (First Session)
Witness: Stephen Pacala
Witness Credentials: Frederick D. Petrie Professor of Ecology and Evolutionary Biology, Princeton University and Chair, Committee on Accelerating Decarbonization in the United States: Technology, Policy, and Societal Dimensions, Board on Energy and Environmental Systems, Division on Engineering and Physical Sciences, National Academies of Sciences, Engineering, and Medicine
Chamber: House
Committee: Energy and Commerce Committee, Subcommittee on Energy
Accelerating Decarbonization in the United States
Testimony of
Stephen Pacala
Frederick D. Petrie Professor of Ecology and Evolutionary Biology
Princeton University
and
Chair, Committee on Accelerating Decarbonization in the United States:
Technology, Policy, and Societal Dimensions
Board on Energy and Environmental Systems
Division on Engineering and Physical Sciences
National Academies of Sciences, Engineering, and Medicine
before the
Subcommittee on Energy
Committee on Energy and Commerce
U.S. House of Representatives
February 18, 2021
A transformation of the world’s energy system is already underway, from one dominated by fossil fuel combustion to one with net-zero emissions of carbon dioxide (CO2), the primary anthropogenic greenhouse gas (GHG). This decarbonization is the result of revolutionary decreases in the cost of non-emitting technologies, public policy, changing economics of energy options, and growing preferences for renewable and zero-carbon supply. In the United States, the energy transformation will require not only a shift from fossil fuel-based to low-carbon sources of energy but also an equally fundamental economic and social transition to strengthen the economy, promote equity and inclusion, and support communities, businesses, and workers.
Because of revolutionary decreases in cost, renewable and other clean sources of electricity can now become the cornerstone of a net-zero emissions economy, as fuel for electric vehicles, efficient heat pumps, and a source of heat and clean hydrogen for industrial processes. The past decade has seen the levelized cost of wind and solar power drop nearly 70 percent and 90 percent, respectively, while the cost of lithium-ion batteries for electric vehicles dropped by 85 percent. Although the variability of wind and solar makes it impossible to maintain a reliable electricity system with these sources alone, hydropower, energy storage, bioenergy, nuclear energy, geothermal energy, and natural gas with carbon capture and sequestration are available for building a reliable system.
Most near-term emissions reductions during a transition to net zero would come from the electricity sector and the electrification of light and medium duty vehicles and home heating. Light-duty transportation and home heating are ready to deliver significant emissions reductions because low-cost, reliable, and clean electricity can be used as fuel for electric vehicles and efficient heat pumps. Substantial improvements in energy efficiency are achievable across all sectors, from buildings to transportation and industry, and can help to meet future demands for energy services cost-effectively. Although technology exists to decarbonize all parts of the energy system, some sectors remain at precommercial or first-of-a-kind demonstration stages and will require significant improvement in cost and performance to become commercially viable. These include aviation, shipping, and industrial subsectors such as steel, cement, and chemicals manufacturing.
This energy transformation is central to mitigating climate change. A transition to net-zero emissions in the U.S. economy would directly reduce global CO2 and other GHG emissions by approximately 10 percent. The country’s innovation during the transition would help build a suite of affordable clean energy and climate mitigation solutions for export and use around the world. A transition to net zero in the United States would nearly eliminate adverse health impacts of fossil fuel use, which may be responsible for half a million premature deaths or more over the next decade—public health impacts that fall disproportionately on low-income communities and communities of color. Recent polling indicates that a clear majority of Americans now support action to control the country’s anthropogenic GHG emissions, as do large majorities of citizens in most other countries.
Given these opportunities, a large and growing number of countries, states, cities, and corporations have pledged to reduce their net GHG emissions to zero over the next 30 years, including the U.S. under the Biden Administration. Although some groups call for a shorter or longer transition period, most target net-zero emissions by 2050 because if this goal is adopted globally, future warming would be limited to a target of 1.5 degrees Celsius. A quicker transition would require expensive replacement of long-lived capital assets before the end of their useful lives. Most proposals call for net-zero emissions with carbon sinks rather than zero emissions because some emissions sources are likely to be too difficult or expensive to mitigate with current and projected technology.
To help policy makers, businesses, communities, and the public better understand what net zero would mean for the United States, the National Academies of Sciences, Engineering, and Medicine (NASEM) convened a committee of experts to investigate how the United States could best decarbonize its energy system. This committee’s statement of task (shown in Chapter 1, Box 1.2) called for the committee to “assess the technological, policy, social, and behavioral dimensions to accelerate the decarbonization of the U.S. economy” and “focus its findings and recommendations on near- and midterm (5–20 years) high-value policy improvements and research investments.” The statement of task calls for two reports. This first report focuses on the electricity, transportation, industrial and buildings sectors, which comprise most of the energy system, and CO2 emissions, the GHG with the greatest climate impact. In what follows, “energy system” is used as a shorthand for the union of the electricity, transportation, industrial, and buildings sectors. The report provides a technical blueprint and policy manual for the first critical 10 years of a 30-year effort to transform the U.S. energy system to net-zero GHG emissions. It focuses on “no-regrets” actions—essential near-term policies that are valuable under any feasible pathway to a net-zero emissions energy system—and the need for some hedging actions during these first 10 years to maintain optionality in the face of substantial uncertainty. For example, renewable sources of electricity will inevitably play a major role given their current low cost, but there are multiple candidates for zero-carbon firm sources of electricity needed because renewable supplies are intermittent. This implies the need for robust research, development, and demonstration (RD&D) across the range of possible candidates, and infrastructure that is specifically planned to be robust to uncertainty in the final mix deployed. It should also be noted that the committee was specifically not tasked to determine whether the nation should pursue deep decarbonization, but rather to evaluate options for decarbonization and the highest-priority actions to pursue, given that goal.
Net-zero policy is about more than non-emitting energy technologies, because a host of other issues that people care deeply about are also strongly impacted by the ways the U.S. economy produces and consumes energy. The transition represents an opportunity to build a more competitive U.S. economy, increase the availability of high-quality jobs, build an energy system without the social injustices that permeate our current system, and allow those individuals, communities, and businesses that are marginalized today to share equitably in future benefits. Maintaining public support through a three-decade transition to net zero simply cannot be achieved without the development and maintenance of a strong social contract. This is true for all policy proposals described here, including a carbon price, clean energy standards, and the push to electrify and increase efficiencies in end uses such as vehicle and building energy use. The United States will need specific policies to engage and cultivate public support for the transition, ensure an equitable and just net-zero energy system, and facilitate the recovery of people and communities hurt by the transition.
GOALS AND POLICIES
The NASEM committee agreed on the following five technological goals and four socioeconomic goals for net-zero policy during the 2020s.
Technological Goals
Recent techno-economic analyses of the net-zero transition in the United States identify five near-term actions in virtually every study that are critical in the 2020s while not locking in a technological mix that might change because of technological advances or breakthroughs. At the same time, a 30-year transition would require that some significant parts of the transition be completed early, either as critical foundations to facilitate other actions, or because expensive pieces of long-lived emitting capital stock reach the end of their useful lives in the 2020s and need to be replaced with a non-emitting alternative (e.g., a gas furnace replaced by an electric heat pump) to avoid lock-in.
Invest in energy efficiency and productivity. Over the next 10 years, energy used for space conditioning and plug loads would be reduced in existing buildings by 3 percent per year and total energy use by new buildings reduced by 50 percent. The rate of increase of industrial energy productivity (dollars of economic output per unit of energy consumed) would be increased from a recent pace of 1 percent per year to 3 percent per year. Note that energy efficiency in transportation, buildings, and industry overlaps with electrification, because switching to electric heat pumps and motors also significantly increases the efficiency of heating and transportation relative to fossil-fueled boilers and internal combustion engines. Further, electrification provides opportunities to install broadband and smart grid technologies that enable demand-side management and grid optimization. Also, improvements in efficiency and productivity help to reduce the power loads for equipment, which can reduce the cost of capital and operations lowering hurdles for electrification in these sectors.
Electrify energy services in transportation, buildings, and industry. The most significant actions to accomplish this goal are as follows: reach zero-emissions vehicles as approximately 50 percent of new vehicle sales across all classes by 2030 (light, medium, and heavy); increase the share of electric heat pumps for heating and hot water to 25 percent of residential and 15 percent of commercial buildings, replacing fossil furnaces and boilers; initiate policies for new construction to be all electric in all practical climate zones; and transition low- to moderate-temperature process heat sources to low-carbon electrical power (e.g., by replacing or supplementing conventional units with electric boilers, heat pumps, or noncontact thermal sources such as infrared or microwave) totaling approximately 10 GW of capacity.
Produce carbon-free electricity. During the 2020s, the nation would need to roughly double the share of electricity generated by non-carbon-emitting sources to roughly 75 percent by 2030. Until 2025, this would require an average pace of wind and solar installation that each year matches or exceeds the record historical yearly deployment of these technologies and accelerates to an even faster pace from 2025 to 2030. Emitting coal plants would continue to retire at the current or an accelerated pace. Existing nuclear plants would be preserved wherever it is possible to continue safe operations. Emitting gas-fired generation would decline 10 to 30 percent by 2030 and total capacity would be roughly flat. Some new gas-fired capacity in certain regions could be built during the 2020s to replace aging assets, including coal, because it is more economical than coal regardless of age and can be used to replace aging assets and where coal retirements require replacement capacity for reliability purposes, and where new gas capacity is prepared to retire by 2050 or retrofit to combust hydrogen or be equipped with carbon capture.
Plan, permit, and build critical infrastructure. Build or upgrade electrical transmission facilities to increase overall transmission capacity (as measured in GW-miles) by as much as 60 percent by 2030 to interconnect and harness low-cost wind and solar power across the country. Accelerate the build-out of the nation’s electric vehicle (EV) recharging network, including at least 3 million Level 2 chargers and 120,000 DC fast chargers by 2030. This infrastructure should be a mix of private and public ownership and operation, including fleet operators. Plan and initiate a national CO2 transport and storage network to ensure that CO2 can be captured at point sources across the country, including in industry, power generation, and low-carbon fuels production (including hydrogen).
Expand the innovation toolkit. The committee proposes a tripling of federal investment in clean energy RD&D to provide new technological options, to reduce costs of existing options, and to better understand how to manage a socially just energy transition. Innovations that would fundamentally enhance the net-zero transition include next-generation energy systems for transportation, buildings, and industry; improved energy storage and firm low-carbon electricity generation options to complement variable renewable electricity; low-cost zero-carbon fuels including hydrogen from the electrolysis of water or biomass gasification; lower-cost carbon capture and use technologies; and lower-cost direct air capture. Progress is needed in particular on net-zero options for aviation, marine transport, and the production of steel, cement, and bulk chemicals. As important will be innovations in how federal policies and programs support RD&D, particularly for technologies in the demonstration and deployment stages.
Please note that regulatory reforms will also be necessary to achieve many of the above technological goals In particular, timely siting and permitting of the new electricity transmission infrastructure is likely to prove difficult or impossible without regulatory reform. Also, the above goals reflect the committee’s judgment that a net-zero energy system able to meet the nation’s projected business-as-usual demand for energy services will be much easier to achieve than one requiring dramatic reductions in demand for energy services. Thus, the goals do not include greatly reduced mobility or home size.
Socioeconomic goals
A complete transformation of the energy system would affect most aspects of life in this country, with impacts far beyond the installation of new technologies. The U.S. energy system does not currently serve all Americans well. Historically marginalized and low-income populations have energy bills that they struggle to pay and lack the capital to reap benefits from higher-efficiency technologies. They also suffer disproportionate exposure to health and environmental hazards from power generation and climate change with diminished ability to eliminate or mitigate that exposure, have comparatively little say in decision making about siting of energy infrastructure, and receive a disproportionately small share of financial and other benefits from the energy system.
The United States has long been the world’s leading technological innovator, but has not effectively used this advantage to sustain domestic manufacturing that could supply domestic and international markets with low- and zero-carbon energy technologies. The decline of the manufacturing sector has cost the economy high-quality jobs, increased income inequality, and contributed to public dissatisfaction.
One cause for optimism is that the country is the best-resourced nation in the world for a transition to net zero. The United States has abundant solar and wind resources both onshore and offshore. Additionally, 40 million acres already are devoted to producing biofuels. The country has plentiful and economically accessible natural gas, and enormous geologic and terrestrial reservoirs for CO2 sequestration.
A transformation to a net-zero economy could combine these natural assets with the nation’s culture of innovation to produce an energy system that ameliorates ongoing social injustices in today’s energy system and fairly distributes both opportunities and costs. Studies estimate that the transition could increase net employment in the energy system by roughly 1 million to 2 million jobs domestically over the next decade, although the impacts on the location and other characteristics of employment are complex. The innovation and capital expenditures required for a successful transition could revitalize the U.S. manufacturing and commercialization sectors. But the United States will achieve these benefits only if it has the appropriate policies in place. Otherwise, the transition might exacerbate inequity, concentrate opportunity in the hands of a few, accelerate the offshoring of manufacturing, and fail to mitigate job losses in industries and regions that are left behind.
The four socioeconomic goals that net-zero policies should be designed to advance are as follows:
Strengthen the U.S. economy. The transition to net zero provides an opportunity to revitalize U.S. manufacturing, construction, and commercialization sectors in clean energy and energy efficiency, while providing a net increase in jobs paying higher wages than the national average. The transition would enhance U.S. leadership in clean energy and climate mitigation solutions for which global demand will reach trillions of dollars over coming decades. The net-zero policy portfolio should be designed to strengthen the U.S. economy, with comprehensive policies that enhance the manufacturing sector and promote the innovations needed during the transition.
Promote equity and inclusion. Policies should promote equitable access to the benefits of net-zero energy systems, including reliable and affordable energy, opportunities to benefit from the best available technology, new employment opportunities, and opportunities for financial returns and wealth creation. Net-zero policy should work to eliminate inequities in the current energy system that disadvantage historically marginalized and low-income populations. Net-zero policy must include regular opportunities for, and responses to, community input, as well as ensure fair access to benefits and fair sharing of costs, for the pragmatic reason that public support must be maintained for decades to complete a successful net-zero transition.
Support communities, businesses, and workers. Any fundamental technological and economic transition creates new opportunities as well as job losses in legacy industries and other associated impacts. In particular, the loss of a critical employer could devastate jobs, tax revenues, and other economic impacts in a community or even in whole regions, unless new opportunities can be attracted to replace it with low-carbon competitive employment in a timely manner. Policies should promote fair access to new long-term employment opportunities, provide financial and other support to communities that might otherwise be harmed by the transition, and ensure that jobs created through the transition are high quality, providing at a minimum a safe and secure working environment, family-sustaining wages and comprehensive benefits, regular schedules and hours, and opportunities for skills development.
Maximize cost-effectiveness. This goal begins with an objective to be accomplished—in this case, achieving a net-zero economy by 2050—and finding the least-cost (or most cost-effective) path to accomplish it. Here, the cost of a particular policy is the material consumption that households must give up, including any changes in taxes or government services, to achieve net-zero emissions. A policy’s cost-effectiveness measures how this cost compares to the least-cost alternative that achieves the same net-zero outcome and associated benefits. Cost-effectiveness is important because society has multiple objectives, including material well-being. If the country can avoid spending more than necessary in order to achieve net-zero emissions, additional resources are available for other aspirations. However, cost-effectiveness analysis ignores how costs and benefits are distributed within an economy. A U.S. net-zero policy will necessarily need to balance cost-effectiveness with equity and other goals.
RECOMMENDATIONS
Table 1, linked here in printable form, provides a list of highest-priority federal policies for the next 10 years to put the United States on a net-zero path. Column 1 lists these policies, which are further summarized in the table’s notes, in the discussion at the end of this testimony, and in Chapter 4 of the NASEM report. Every policy received a score for each of the technological goals (shown in column 2, and described in Chapter 2 of the report) and socioeconomic goals (shown in column 3, and described in Chapter 3 of the report). The technological and socioeconomic goals are represented by icons (defined above). Icon shade indicates how important each policy is to achieving the goal: darkest shade indicates highest priority—that the policy is indispensable to achieve the objective; medium shade means that the policy is important to achieve the objective; and lightest shade indicates a supporting role. Absence of an icon indicates that the policy would have a small positive role in achieving the objective (and might in some cases have a small negative impact). Column 4 identifies the branch of the federal government that would be responsible for the policy, and column 5 specifies the required congressional appropriation, if any.
System-Wide Policies
Many of the policies listed in Table1 would affect the nation’s economic and social systems as a whole, given the pervasive (but often invisible) role of carbon in so many elements of Americans’ day-to-day experience. The committee’s set of recommended policies include some that address these system-wide impacts, facilitate the net-zero transition as a whole, and help advance most of the technological and social-economic goals.
The policy for a U.S. emissions budget covers CO2 and other GHG emissions and calls for a target of net zero in 2050 along with regular review of emissions progress and the tracking of specified milestones for technological and social goals. The committee considers a quantitative budget and regular review to be essential for the nation to keep up with the challenging pace required for the net-zero transition, to point out the need to augment policies where progress lags, and to save money where new innovation obviates the need for continuing standards or incentives or costly solutions in markets.
Table 1 also includes an economy-wide price on carbon beginning at $40/tCO2 and rising by 5 percent per year. The advantages of an economy-wide price on carbon are that it would unlock innovation in every corner of the energy economy, send appropriate signals to myriad public and private decision makers, and encourage a cost-effective route to net zero. However, assuming that the country implements a carbon price before key trade competitors, a mechanism that levels the playing field for domestic firms and avoids emissions leakage will be necessary. Because the direct impacts of an economy-wide price on carbon would fall disproportionately on people with the lowest incomes and the fewest choices, it should be augmented by rebates and by funding programs that promote a fair and just transition. The proposed carbon price is deliberately set at a level that would not by itself cause a 30-year transition to net zero because of concerns about equity, fairness, and competitiveness. For example, the NASEM committee was not confident that it could design a package of policies that would address competitiveness and mitigate unfair impacts of a carbon price that starts at or climbs rapidly to $100/tCO2.
In addition, the Table calls for the establishment of entities within the federal government to bring equitable access to economic opportunities and wealth creation during the energy transition. These policies are designed to help achieve diversity and fairness goals and to support workers, families, and communities through the transition. The recommendations include the establishment of a 2-year federal National Transition Task Force to evaluate the long-term implications of the transition for communities, workers, and families and identify strategies for ensuring a just transition, and a White House-level Office of Equitable Energy Transitions to act on the recommendations of the task force, establish just transition targets and to track progress in achieving them by federal programs. The primary policy to help communities achieve new opportunities or mitigate impending damages is the establishment of a new independent National Transition Corporation. The NASEM committee debated many alternative mechanisms and chose this option because an independent corporation could take the steady long view required to guide the transition initiatives to success.
Private sources of capital are unlikely to be sufficient to finance the low-carbon economic transition, especially during the 2020s when the effort is new. In order to ensure that capital is available for this transition, the committee calls for the establishment of a Green Bank to mobilize finance, initially capitalized at $30 billion. Partial financing by a Green Bank would reduce risk for private investors and encourage rapid expansion of private sources capital. To better align the economy with the risks and benefits of transition policies and climate change, the committee includes a policy to require annual Securities and Exchange Commission (SEC) reporting of these risks and benefits by private companies and their inclusion in stress tests by the Federal Reserve and in all cost-benefit analyses by federal agencies.
The committee recommends a comprehensive education and training initiative to provide the workforce required for the transition; to improve the competitiveness of the country’s building, manufacturing, and energy sectors; and to fuel future innovation. Education and training are also critical to meet societal objectives by providing fair access to new high-quality jobs.
The committee recommends a number of policies to directly enhance and expand the energy innovation toolkit—most notably by the proposed tripling of the Department of Energy’s (DOE’s) funding in low- or zero-carbon RD&D over the next 10 years by Congress, including increasing the agency’s funding of large-scale demonstration projects, and the support for social science research on the social and economic aspects of advancing the transition and ensuring that it is just.
Policies Targeting Specific Economic Sectors or Goals
The proposed carbon price would not be large enough during the 2020s to incentivize the deployment of some non-emitting technologies that have relatively high marginal cost and yet must be deployed early, either because long-lived capital stock needs replacement (i.e., a cement plant) or because delay would make the eventual rate of transition infeasible or more expensive. Thus, the committee developed some of its policies in Table 1 to target specific energy supply and distribution goals. The committee proposes, for example, a clean energy standard for electricity to ensure that the power sector relies increasingly on non-emitting electricity. It also proposes needed policy reforms governing clean electricity markets, amendments to the Federal Power Act to allow timely siting and permitting of new long-distance transmission, and a program to plan, permit, and install the needed new electric transmission capacity. Last, it proposes accelerated installation of smart electricity meters and an expansion of broadband in rural and low-income households. This will allow the electric system to depend upon expanded flexible demand that is enabled by pricing reforms and metering and information-infrastructure upgrades.
Under the committee’s recommendations, electrification of the transportation sector and buildings would primarily be accomplished by manufacturing and performance standards for electric vehicles and building equipment. For transportation, these would specify fleetwide emissions standards for new vehicle sales that drop to zero in time for the on-road fleet to meet net-zero goals in 2050, appliance standards for the electrification of building heating and cooling, and policies for accelerating the development of electric vehicle charging infrastructure.
To increase the energy efficiency of buildings during the 2020s, the committee calls for weatherization, retrofits, and other support for low-income households, which would also further diversity and fairness goals, as well as emissions caps and efficiency standards for all federal buildings. Note that whole-building energy efficiency can be improved in a multitude of ways, all of which would be simultaneously nudged by the economy-wide price on carbon.
Last, Table 1 contains the committee’s recommendations for policies that directly or indirectly advance a comprehensive clean-energy industrial policy. These include the following policies:
- Output-based allocations and carbon border adjustments that would accompany the carbon price in order to maintain industrial competitiveness;
- A Green Bank to help finance an expansion of clean industry and clean technology manufacturing;
- Corporate climate risk disclosure rules;
- Wholesale power market reforms;
- Education and training policies for the new energy economy;
- Expanded RD&D;
- Electrification of tribal lands;
- A package of loan guarantees and sunsetting subsidies to support installation of non-emitting industrial equipment (e.g., electric boilers) and expand clean-tech manufacturing;
- A process for planning and initiating a national network to transport and safely store CO2 captured by industrial sources and perhaps by fossil electricity plants with carbon capture; and
- Procurement and other standards for companies that receive federal funds, including labor standards and Buy America/American policies.
The Comprehensive Policy Portfolio Addressing Social Dimensions of the Transition
The NASEM report is unique in that it complements a technical blueprint for an affordable path to net zero emissions in the United States with a comprehensive policy portfolio to address the social dimensions of the transition. Many recent plans address the technical transition and forward policies to achieve it. Others highlight the importance of a fair and equitable transition that addresses environmental justice, and some offer individual policies or extensions of existing policies targeting some of the social concerns. But none offers a comprehensive package of policies, designed from scratch, to address the full array of social challenges and opportunities of the net-zero transition.
The Committee is aware how difficult it will be to ensure a just and fair transition given the nation’s handling of past transitions, and the fact that it will require local participation and proactive action everywhere. But past experience also provides a guide about what works: clear policy signals that prompt and support inclusive early local planning, policies that help establish new industries in communities where they are most needed, training for new employment opportunities, direct assistance where necessary, and clean-up of legacy infrastructure. Consider refinery workers on the Gulf coast, living in a town in which the refinery is the dominant employer. Modeling studies indicate that oil and gas demand will persist for some time at close to current levels during a 30-year transition to net-zero, but then decline after 2030. Our workers thus face both future unemployment and the loss of their community’s tax base.
The ten regional centers described in the Table would provide a forum for governors, representatives, mayors and county officials, and tribal and community leaders to learn about what is coming and the need to plan for it—information developed by a National Transition Task Force. The community block grant program would provide planning grants for communities to learn if and how they are at risk and would require direct participation across the diversity present within the community. The regional centers would also provide a clearing house of information about the assistance that is available from the National Transition Corporation, training programs, Green Bank and other policies, as well as coordinate access to federal economic and community development programs across agencies. For example, leaders and entrepreneurs from our refinery town could apply for incentives to attract new net-zero industries, funds to maintain essential local services and remediate and reclaim legacy infrastructure, and funds and expertise to train workers for the new business and net-zero companies expanding elsewhere. The regional centers and White House Office of Equitable Energy Transitions would monitor progress, develop and exchange knowledge about effective strategies, catalyze local and regional partnerships, and propose best practices and necessary course corrections. The goal for our refinery workers is to provide them with multiple options both inside and outside their community, to include them in the decision-making, and to provide direct assistance when necessary.
There is widespread consensus that many more jobs would be created than lost during a transition to net zero. Although locations for wind and solar are geographically constrained, appropriate sites do co-occur with most centers of fossil employment. This provides an opportunity to prioritize early deployment of wind and solar in regions that face the greatest loss of fossil jobs. Also, the majority of the needed net-zero manufacturing infrastructure is not geographically tethered, and so its development could prioritize regions that will suffer the greatest job loss.
Some might be tempted to view the policies aimed at accelerating the deployment of net-zero assets like renewable power, electric vehicles and heat pumps as the highest priorities, because the social consequences would lag behind technological deployment. However, this view has it backwards, because the technological transition, and the social disruption that goes with it, are already occurring. The ongoing decline in coal sector employment is already hollowing out communities across Appalachia, the Midwest, and the West. This decline will continue with or without policies that accelerate the transition. The recent announcement by General Motors that it will produce only electric cars by 2035 is a harbinger of similar inevitable declines in oil and gas employment.
The NASEM report identifies the myriad injustices built into our current energy system, with health impacts of fossil pollution concentrated in communities that receive a disproportionately small share of the benefits of fossil energy and have relatively little say in siting decisions. Many of these communities are dominated by low-income workers and their families, and by historically marginalized social groups. These workers struggle to afford energy bills, lack the capital and income to benefit from subsidies or tax credits, and may own homes that fail to qualify for upgrades because of code noncompliance. The portfolio of policies in the NASEM report would thus address problems that the nation is already experiencing and will continue to experience, even without policies that accelerate the transition to net-zero.
COST ESTIMATES AND CAPITAL REQUIREMENTS
This NASEM report contains three kinds of financial and cost estimates: the net present value of the aggregate transition costs, the sum of capital required to build all the new hardware and controls in each sector, and the needed congressional appropriations. It also quotes current costs (i.e., levelized cost of energy) of alternative new resources additions. It is important to note that only the net present value of aggregate transition costs represents a true cost to the United States. Capital requirements and congressional appropriations can be considered investments in the country’s economy that provide long-term returns to private and public sectors. Of course, all of these estimates are highly uncertain. Additionally, any direct costs are balanced against significant public and private benefits of a net-zero transition. These include the substantial avoided health impacts from air pollution within the United States, new economic and employment opportunities, significant downward pressure on global oil prices, and, if other countries also meet similar emissions reductions goals, the avoidance of a substantial portion of planet-altering climate change-related damages to the country that are not already inevitable even with a transition to net zero by midcentury. These could be in the hundreds of billions of dollars annually if estimated health benefits come to fruition and offset some, all, or more than the cost of the transition.
Chapter 2 of the NASEM report concludes that the estimated fraction of gross domestic product that the nation would likely spend on energy in a net-zero economy would be smaller than the fraction that the nation has spent on energy in the past, including the past decade (see Chapter 2, Figure 2.3). Studies reviewed in the report also estimate total cumulative incremental energy expenditures that average approximately $300 billion through 2030—a roughly 3 percent increase relative to a business-as-usual baseline of approximately $9.4 trillion (net present values of cumulative total expenditures with a 2 percent real social discount rate). It is important to note that these cost estimates do not capture general equilibrium effects, such as changes in global oil prices. Nor do these cost estimates include impacts of changes in the country’s balance of trade, which include both positive and negative factors.
Chapter 2 of the NASEM report also concludes that roughly $2 trillion in incremental capital investments must be mobilized over the next decade for projects that come online in 2030 to put the United States on track to net zero by 2050. These capital investments are not a direct cost borne by either taxpayers or energy consumers. The sum of capital investments that must be mobilized in the 2020s is much larger than the increase in total consumer energy expenditures described above because capital investments are paid back through energy expenditures over many years and because investments in renewable electricity, efficient buildings and vehicles, and other capital-intensive measures are offset by lower or non-existent fuel expenditures. Capital investment estimates are included in the report because policies will be needed to directly finance some projects and de-risk others, given that private capital markets are not currently set up for the net-zero transition.
The committee estimates that $350 billion over a 10-year period in total federal appropriations would be needed to fund the package of net-zero transition policies in Table 1. The carbon price proposed in Chapter 4 would also raise approximately $2 trillion over the decade (2021–2030), providing revenue to fully offset proposed appropriations and provide substantial funds for targeted rebates and other programs to address equity and distributional concerns
CONCLUSION
A transition to a net-zero economy in the United States by midcentury is technologically feasible, with energy system costs as a share of U.S. gross domestic product that have been manageable over the past decade, but it is on the edge of feasibility. Achieving net-zero by midcentury would thus require rapid rates of change and unprecedented levels of funding for RD&D, infrastructure planning, permitting and construction activity, and other changes in public policy and social systems that have to begin immediately across the energy economy, as well as unprecedented actions to build and maintain public support for the net-zero transition.
With an appropriate portfolio of policies, however, the transition would advance a number of national objectives simultaneously: building a more fair and just energy system that works for all Americans, improving the international competitiveness of the economy, revitalizing American manufacturing, and reestablishing leadership in energy innovation and technology. The transition would also provide new high-quality jobs, virtually eliminate the substantial health impacts of fossil fuels, reduce U.S. GHG emissions to zero, enhance the nation’s leadership in climate and energy policy, and help catalyze the global transition necessary to avert the most damaging impacts of business-as-usual climate change.
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An archived webcast of the hearing can be found on the House Energy and Commerce Committee’s Subcommittee on Energy’s Web site.