The start of a new year is often a time for reflection and goal setting. Climate change and climate policy are no different. While last year had its ups and downs, 2022 should be a year for climate urgency and optimism. One where policymakers elevate and empower the problem solvers – the innovators, entrepreneurs and investors delivering climate solutions in all sectors of the economy.
Before jumping into what 2022 can deliver, it is important to review what transpired in 2021. Last year was the fifth hottest on record (fourth in the United States). That should come as no surprise as the planet has warmed 1.18 degrees Celsius since 1880 and is warming at an accelerated rate.
U.S. emissions increased 6.2 percent in 2021 compared to 2020, driven by a 17 percent increase in coal-fired generation and an increase in road transportation. Again, these numbers should not surprise anyone as states and cities relaxed economic restrictions and demand for energy increased. Coal generation increased 17 percent as utilities switched away from higher natural gas prices. Transportation emissions increased as air travel topped pre-pandemic levels and consumers aggressively shopped online, requiring more delivery trucks.
Encouragingly, 2021 emissions were 5 percent below 2019 levels and 17.4 percent below 2005 levels. Another encouraging takeaway from 2021 is the size and scope of climate innovation. Tesla’s market capitalization reached $1 trillion, Ford unveiled an electric F-150, and there have been groundbreaking advancements in advanced nuclear, zero-emissions natural gas, offshore wind, and energy storage. The world’s largest direct air capture and storage plant opened in Iceland. That’s just to name a few. It felt as if new developments for cleaner, more efficient technologies occurred daily, whether it was in the electric, transportation, agriculture or manufacturing sector.
On the policy front, the bipartisan infrastructure deal will bolster research, development and demonstration on a wide range of cutting-edge technologies. It will also invest in infrastructure resiliency and improve permitting processes.
2022 will similarly excite and frustrate proponents of climate action. For instance, 2022 should be a record year for wind and solar deployment in the U.S. Globally, however, the International Energy Agency projects that coal consumption will reach an all-time high this year, driven mostly by consumption in China, India and other parts of Asia. Not only do these regions represent the largest percentage of global emissions, they will also represent the largest share of emissions growth as their populations, economies and energy demand all grow. Addressing global emissions is the only way net zero targets in the U.S., Europe and elsewhere have a chance of making any meaningful climate impact.
What should the U.S. do about it? Does the fate of America’s climate leadership and the fate of the planet hinge on President Biden’s climate and social spending agenda, the Build Back Better plan? The short answer is no, Build Back Better is not the last, best shot.
Locking in billions of dollars in subsidies for mature technologies is not visionary climate policy but a recipe for extending and further entrenching cronyism. Rather than establishing technology-neutral policies, continued preferential treatment to specific technologies could make it more difficult for innovative, zero-emission technologies that do not receive targeted tax credits to compete in the market.
Congress and the administration should consider an alternative vision that unlocks innovation and investment in all clean energy technologies and removes government-imposed barriers to their deployment. It should prioritize energy affordability and reliability for families and businesses. A bottom-up, private sector-led vision for climate resiliency and emissions reductions will more rapidly build the cost-competitive technologies today and usher in the technologies of the future. That leadership will make it more economically enticing for developing countries to pursue cleaner fuels and technologies.
The climate vision policymakers should pursue in 2022 is:
- Build faster. For anyone worried about the pace of an energy transition or the need for more climate resilient infrastructure, building faster will go much further than spending more taxpayer money. Streamlining environmental reviews and permitting will bring more renewables, transmission, nuclear, more efficient manufacturing, and sturdier buildings online faster. Permitting efficiency will create jobs and deliver clean, affordable energy to families and businesses. More resilient infrastructure will save lives and minimize damage from extreme weather events.
- Invest and trade freely. The global market for electricity, transportation, food, steel, and cement are worth trillions of dollars. Open, competitive markets will not only create opportunities for more climate-friendly alternatives, but it will also help developing countries develop, increasing their means to care for the environment and reduce emissions.
- Lower taxes for all technologies. Pro-growth climate policy should not use the tax code to pick winners and losers but instead lower rates for sources and technologies. A much-preferred alternative to technology-specific tax credits that have lasted decades would be to base any credit on nascent technologies or the amount of greenhouse gas emissions reduced.
- Stand up research, development and demonstration initiatives. The Department of Energy (DOE) received $62 billion from the infrastructure bill signed into law last fall. More than one third of that funding will go to DOE’s new Office of Clean Energy Demonstrations that will fund hydrogen hubs, carbon capture, energy storage and much more. While there is urgency to address climate change, there is also an imperative to be good stewards of taxpayer money. The focus of DOE, research partners, contractors and the private sector should be to maximize efficiency of the allocated money.
The Biden administration should expand the tools in its toolbelt beyond subsidies and regulation. Removing domestic and global barriers to innovation, investment and deployment would really make 2022 the year of climate action.