The United States’ delegation is attending the United Nations climate summit COP27 in Egypt with something it has often been missing: a credible foundation for decarbonizing its economy by the middle of this century. Meeting this goal requires clear-eyed responses to unavoidable trade-offs.
The challenge is steep. The U.S. and other countries must scale clean electricity production and transmission, electrify large swaths of the economy that currently run on fossil fuels, and deploy new, lower-emission technologies for sectors that are difficult to electrify. Climate, economic and energy security imperatives require rapid technology development and deployment supported and spurred by ambitious and enduring public policies, along with changes to operational norms and behaviors across society.
There are reasons for optimism. The recently passed Inflation Reduction Act (IRA) uses incentives, the public purse and targeted regulation to chart new U.S. decarbonization paths. It sends vital market signals to energy, transportation and industrial sectors that investing in low-carbon solutions is economically smart and aligned with a durable regulatory landscape. The new law also puts resources toward research, design and demonstration work that could spawn and scale the next generation of low-carbon solutions.
The IRA, however, is no panacea. While it steers roughly $369 billion in financial provisions toward climate (with some uncapped incentives that could drive this figure higher), the U.S. cumulative GDP over the period of IRA implementation may actually exceed $300 trillion. The U.S. recently spent $1.9 trillion on the American Rescue Plan in a single year. The IRA is significant, but likely not sufficient.
For the IRA and wider U.S. decarbonization efforts to succeed, stakeholders must acknowledge that these efforts will not be defined by a litany of win-wins, but rather will entail wide-ranging and often divisive trade-offs. Many Americans want to reduce emissions rapidly to address climate change, enjoy cheap fuel for transportation and home heating in the meantime, wean the U.S. off unsavory foreign sources for this fuel, quickly curtail the influence and production of domestic oil and gas companies, as well as avoid disruptive or unsightly solar, wind and transmission lines in their own neighborhoods. These desires are in tension.
Responding to this tension requires coordinated progress across multiple fronts, beginning with equity. Clean energy systems require diverse and dispersed infrastructure. For example, even if less impactful in the aggregate than many fossil fuel facilities, wind, solar and hydro power have large land and resource footprints, often in rural and/or developmentally marginalized areas. Overcoming local resistance to this energy infrastructure, and the transmission lines needed to move power to demand centers, requires meaningful incentives for impacted communities such as jobs, tax breaks and local revenues, new investment streams, lower energy costs and other quality of life improvements. More creative policymaking is needed to craft workable bargains among key energy production, transmission, and consumption zones to address these equity issues in a decarbonized economy.
In addition to being necessary to address the climate crisis more equitably, such bargains can help address the U.S.’ second decarbonization imperative: improving siting and permitting processes. The White House Council on Environmental Quality found that the average environmental impact statement completion time was 4.5 years. Bringing major infrastructure projects online can take more than a decade. When such projects span political boundaries, they become still more difficult. Existing and new policies need to rapidly shrink administrative burdens and reduce permitting times, and both national and site-specific work is needed to understand and address siting and licensing barriers.
Siting and permitting challenges likewise constrain supply chains — which may be amplified by IRA domestic content provisions that seek to onshore substantial portions of low-carbon materials supply and processing. Sourcing such materials domestically will drive near-term decarbonization only if there are viable pathways to license and build these systems this decade. Cost-competitiveness in these spaces is complicated by sprawling international supply chains for clean energy inputs — particularly for solar and batteries — and substantial penetration of these markets by China, from which the U.S. seeks to progressively decouple.
The IRA is not blind to these realities, and it provides $760 million in Department of Energy grants through 2026 to facilitate and accelerate the siting and permitting of interstate transmission projects and $350 million for an Environmental Review Improvement Fund. This is a good start, but reforms at the Federal Energy Regulatory Commission and in both Regional Transmission Organizations and Independent System Operators that run the grid are needed to facilitate the siting and cost allocation of new regional or interregional transmission. On materials and processing, American stakeholders need to accept that domestic low carbon supply chains that are fit for purpose are years away and redouble international efforts — including those that grudgingly include China — accordingly.
Third and finally, U.S. decarbonization efforts require balancing subnational solutions that are fit for purpose locally with select policy and infrastructure connectivity across the country. In temperate regions adjacent to strong solar and wind resources, such as California and the Pacific Northwest, near full electrification of power, heating, industry may prove both possible and cost-effective. In colder regions like the Northeast and upper-Midwest, combinations of clean electricity (including geothermal) and blends of hydrogen and renewable natural gas supplies may be the most pragmatic route forward. In each case, there remains a need for national goal-setting, incentives and regulatory signals that embolden rather than impede state and regional efforts. Such coordination is difficult but necessary — and the stakes are high.
Jackson Ewing is a senior fellow at the Duke University Nicholas Institute of Energy, Environment & Sustainability, where he helps lead the Energy Pathways USA project.