Greening the Grid: Implementing Climate Change Policy Through Energy Efficiency, Renewable Portfolio Standards, and Strategic Transmission System Investments

Abstract

Climate change policy has crossed a tipping point over the past five years: there are now widespread calls for action on the problem after decades of debate about whether climate change is happening, whether it is human-induced, and whether it is a significant problem that we need to deal with seriously. Nowhere does this have more profound ramifications than in the electric utility industry. Nationally, electricity generation accounts for 41% of carbon dioxide (CO2) emissions from fossil-fuel combustion while the transportation sector accounts for 33%. These two sectors therefore account for three-fourths of all CO2 emissions in the United States. Any U.S. strategy to reduce greenhouse gas (GHG) emissions therefore requires a serious reduction in GHG emission from the electricity sector. This is especially important to the extent that increased electrification of the transportation sector is pursued as a strategy for reducing either GHG or other air pollutants in that sector. This Article evaluates policy options and recommends principles to guide policy design and implementation for the transition to the Climate Change Era for electricity regulation, industry structure, and generation technology choice. It describes the primary institutional forums and tools that will affect the electricity sector’s response to climate change, as well as to the obstacles that impede an economically efficient and environmentally responsible response. In particular, this Article demonstrates that an integrated regulatory approach is required to encourage significant investment in energy efficienc, renewable generation, and new transmission. This investment will further the climate change policy goals necessary to stabilize global temperatures. Moreover, lessons from California’s extensive experience promoting significant improvements in energy efficiency and investments in renewable generation capacity show how both the states and the federal government have important roles to play in this transition. State policy innovation is a key component of future electricity sector regulation regardless of the outcome of international negotiations under the United Nations Framework Convention on Climate Change (UNFCCC) or the passage of new climate change legislation by the U.S. Congress. This Article offers a set of implementation lessons important for greening the grid through energy efficiency, renewable portfolio standards, and strategic transmission system investments.

Keywords: United Nations Framework Convention on Climate Change (UNFCCC), climate change policy, greenhouse gas, GHG, CO2, Climate Change Era, California, United States, Climate Change