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How to Design a Clean Energy Standard

WRI's response to the Bingaman-Murkowski White Paper on the design of a clean energy standard in the United States.

In response to President Obama’s goal of generating 80 percent of the U.S. electricity from clean energy sources by 2035, Senate Committee on Energy and Natural Resources Chairman Bingaman and Ranking Member Murkowski issued a white paper posing six basic questions and 36 clarifying questions on the design of a Clean Energy Standard (CES).

A CES would require electric utilities to purchase a minimum amount of clean energy as a percentage of the total electricity they deliver annually. While what would qualify as “clean energy” has yet to be defined by Congress, a CES could include renewables and nuclear, as well as natural gas and fossil fuel generation equipped with carbon capture and storage technology. A CES would specify what would qualify and what level of credit qualifying technologies or fuels could receive.

Senators Bingaman and Murkowski are now reviewing responses and exploring options for a process to generate legislation. It is anticipated that hearings on CES design could be held in May. WRI has submitted a response to a majority of the questions posed by the senators’ white paper. WRI’s complete response is available here. In the submission, we make the following points:

A Clean Energy Standard is first and foremost a clean energy deployment policy

  • A CES can enhance the diversity of energy use in the United States

  • While a CES can contribute to other national goals such as climate change mitigation and cleaner air, it is not a substitute for policies that specifically address these critical issues

  • If a CES is enacted, revisions to some related energy statutes may be warranted but environmental statutes such as the Clean Air Act should not be revised

A well designed Clean Energy Standard can minimize costs to utilities and consumers

  • Program costs can be minimized by:

    • the development of a robust national energy credit market
    • the establishment of long-term targets to provide investment certainty, and
    • through limited use of flexible compliance mechanisms such as the banking of credits for future use
  • An alternative compliance payment (ACP), setting a limit on the price of clean energy credits is unlikely to be necessary and could undermine national clean energy goals

A target of 80 percent electricity from clean energy by 2035 should be achievable and can benefit U.S. manufacturing

  • The target will be more achievable if a variety of technologies are eligible to meet the standard and complementary policies aimed at reducing energy demand are in place

  • Technologies that clearly meet certain emissions benchmarks should be allowed, though eligible technologies that produce emissions should only receive partial credit towards the standard

  • A CES could also include tiers to provide added market certainty for subsets of eligible technologies

  • Improving energy efficiency is critically important but is best supported through a separate standard and through other complementary policies; energy efficiency should not be eligible for credit under a CES

  • Stable, long-term policy support through a CES should result in greater domestic manufacturing of clean energy technologies as has been the case in other countries around the world that have similar policies in place

States’ ability to innovate should be preserved

  • A federal CES should preserve in full the states’ ability to generate innovative policy approaches to clean energy technology deployment

  • A federal CES should establish a minimum standard to which all states must adhere but may exceed

  • Options are available to preserve state programs while minimizing complexity and costs

To further inform the congressional CES discussion in the months ahead, WRI plans to publish a working paper based on this response. The paper will dive deeper into these and other CES design elements providing an analysis of the implications of policy choices on issues such as greenhouse gas emissions, clean technology deployment, program costs and effects on U.S. manufacturing.

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