Now that we've learned about the different policy tools and the various policy actors at all scales, this lesson takes a look at the implementation of these energy policies and how they take shape. We'll explore laws, taxes, incentive programs, permitting, and how standards are put into practice by examining real examples of each.
By the end of this Lesson, you should be able to:
appreciate the complexity of energy policy implementation, and understand the strengths and weaknesses associated with different types of policy.
This lesson will take us one week to complete. You are responsible for this lesson content, external assigned readings, and lesson activities. Please refer to Canvas for deliverables and due dates.
If you have questions, please feel free to post them to the "Have a question about the lesson?" discussion forum in Canvas. While you are there, feel free to post your own responses if you, too, are able to help a classmate.
As you've explored the various energy policies that have been implemented throughout US history, what do you notice about how they influence the energy systems themselves?
Let's look at some examples.
The 2008 Farm Bill has many provisions for renewable energy. Without these provisions (and the funding they carried) much of this work couldn't be completed. The money designated for competitive grants is designed to help quicken the pace of technology transfer from the research phase to on-the-ground projects.
Read an article from CNNMoney about the importance of the energy provisions in the Farm Bill. [1]
The 2014 Farm Bill (they generally only occur every 5-6 years) was especially problematic and delayed because of Congressional bickering. You can learn more about the highlights between the 2014 version and pre-2014 versions [2], but here are a few of them:
Renewable Portfolio Standards (RPS) - mandate that states generate a set percentage of their electricity from renewable sources. In the absence of that state being able to produce renewable sourced electricity at home, they also have the option to buy Renewable Energy Certificates (RECs) from other electricity suppliers. The benefits of a RPS system include improved air quality, reduced greenhouse gas emissions, and, potentially, job creation in the emerging renewable sectors.
Want to know more about the RPS in your state? Click here [4] for a list of RPS policies across the country from DSIRE (the go-to website for energy policies in the U.S.!). See detailed summary maps here [5]. You can see the most recent version here [6]. and a summary map that has solar carveouts and distributed generation requirements here [7].
The 2005 Energy Policy Act provided a whole host of provisions and measures related to the production, distribution, and types of energy we use in the United States. This list is FAR from exhaustive, but is just here to get you thinking about some of the impacts on energy systems we can have with our policy decisions. If you'd like, you can read a summary of all enacted provisions of the bill [8].
The American Recovery and Reinvestment Act directed more than $31 billion into clean energy projects around the country. You can read the Obama White House Retrospective Analysis [9] to learn more. And of course, the recently passed Inflation Reduction Act has a host of provisions that impact energy and climate.
When a bill is passed by Congress and signed into law by the President, what happens next? If you take a look at many of the energy policy examples from earlier in this course (like the big table from Lesson 3), you'll see that the body of the legislation itself contains a timeline and plan for implementation. It calls out who the key players and administrative units will be and a timeline for how they'll actually go about incorporating this new law into their activities. It is essential to consider that Congress is not the body that actually implements the laws. The implementation and enforcement falls to the pertinent agency (see below for specifics).
The subsequent pages of this lesson are devoted to the different types of energy policy and how they are implemented. I've tried to set each of them in real-world examples. As you work through the lesson, be thinking about how you will structure your discussion of policy implementation in your own Research Project. Implementation and monitoring are critical steps. A well-designed policy is no good to anyone if it is poorly implemented or ineffectively managed.
When we look at energy-related regulations, there are a handful of governmental agencies through which these policies are typically implemented.
Taxation is one mechanism relevant to energy policy we explored early in the course. By levying a tax on a good or service, the government can fairly accurately predict the cost of the policy. Let's take a closer look at state and federal taxes on fuel to understand the role taxes play in our energy policies, how they are implemented, and what is done with the revenue they generate.
Gas prices - we've watched them skyrocket as the war in Ukraine drags on and disrupts supplies and makes investors uneasy. But what are we really paying for when we fill up? This graphic illustrates the breakdown of the gasoline prices we pay at the pump.
Notice the top, light blue box devoted to taxes. This is comprised of both federal and state taxes. The federal tax on a gallon of gasoline in the US right now is 18.4 cents (24.4 cents on a gallon of diesel). According to EIA, in addition to that federal tax, states add an average of another 22.01 cents per gallon in excise taxes and 12 states also charge additional state sales or other taxes on gasoline. There are even some locations where county or city taxes can also be included in the price.
Learn more about the factors influencing the price of a gallon of gas [12].
What are the taxes levied on gasoline used for? Excellent question! The American Petroleum Institute [13] updates this interactive map [14] each year to illustrate the relative taxes in gasoline across the country. As you look at these numbers, remember that the federal excise tax on gasoline is 18.4 cents of the number that you see printed on this map. The rest is whatever additional tax that particular state charges.
In the case of the individual taxes levied by each state, there's a lot of variability with how those revenues are utilized. Many states also contribute a portion of their taxes to the Underground Storage Tank Trust, or for state road work, or charge other environmental service fees. On top of the additional fuel taxes that states charge, there are 9 states that currently charge sales tax on gasoline as well.
It is worth noting that many European have significantly higher fuel tax rates than the U.S. [15], which is why gas prices are higher in Europe - sometimes significantly so - than in the U.S.
What role do taxes on gasoline and other liquid fuels really play? Are they a deterrent to use? Not really. Are they meant to be? Not really. The taxes associated with liquid fuels finance projects related to the use of those fuels. People are going to drive, so if the government taxes the fuel they use, that creates a fund from which road maintenance can be completed. Storage tanks for these fuels will inevitably leak - having a fund set aside to handle the environmental problems associated with a fuel leak is another reasonable use of gasoline tax dollars.
Take a good look at the API map, what do you notice about the geographic distribution of gasoline taxes across the country? Which states have the lowest total gasoline taxes? The highest?
But what about taxes for other purposes? We've talked earlier this semester about potentially taxing greenhouse gas emissions in an effort to slow down anthropogenic climate change. A carbon tax would serve a very different purpose than a gasoline tax. A carbon tax would be designed specifically to deter the use of carbon-intensive fuels by bringing their costs more in line with alternative energy sources. The revenue generated from a carbon tax could be used for a variety of programs to aid in a transition to a less carbon-intensive economy. One of the ideas that has gained some bipartisan traction is a revenue-neutral tax, which would divide tax revenue up and provide an equal amount to each citizen of the U.S.
As we learned, though, carbon tax (like any potential solution for pricing carbon) has its drawbacks. It is difficult to know how high the tax will need to be set to ensure desired results. If set too low, firms may just be willing to pay the additional cost and continue on with business as usual - netting no real emission reductions. It also runs the risk of driving emitting firms out of the country, where they can emit freely without the costs of a tax. The implementation of a successful carbon tax would require an appropriately set tax rate and a strict enforcement mechanism to ensure all emissions are included in the accounting. Impossible? No. Challenging? Yes.
One burgeoning policy issue that should only become more important relates to gas taxes and electric vehicles (EVs). Since EVs do not use any gas, what are the potential policy (and economic) implications of state and national goals to increase the use of EVs?
According to the Urban Institute, state and local governments received $53 billion in revenue [16] from gas taxes in 2020 and about 80% [15] of federal government's Highway Trust Fund (used for construction and maintenace of roads, bridges, etc.) comes from gas taxes. The erosion of this revenue is a very important policy consideration and is something worth keeping an eye on as you go out into the policy world. It will be difficult to make up that revenue, though some states have started to have specific utilty rates for EV charging, which could be used to levy a tax on EV charging.
Another way to reduce energy consumption and cut back on utility costs is through the adoption and implementation of an energy conservation policy. Energy conservation policies typically outline reduction targets.
DSIRE [17] - DSIRE is the Database of State Incentives for Renewables and Efficiency and will prove an invaluable resource for you both during your time as a student and once you find yourself working as an energy industry professional.; DSIRE is a comprehensive repository of all state-level incentives across the country for both renewable energy and energy efficiency programs. They also house information about federal incentives and programs that extend beyond energy conservation. Be sure to consult this website to learn more about opportunities that exist in your own state, and opportunities that may be applicable to your Research Project, e.g. by piggybacking on existing incentive programs. (Sometimes the main site does not work, so see an overview of state-level policies here [18].)
ACEEE [19] - the American Council for an Energy-Efficient Economy is also another wealth of information -- specifically relating to energy conservation policies. They have some helpful information on state-level policies here [20]. You may want to view their State Efficiency Scorecard here [21].
Recent energy legislation passed at the federal level mandates conservation policies for federal buildings and purchases. Listed below are some of the highlights of these policies. To learn more about federal energy conservation efforts, read the full report from the Congressional Research Service on the Department of Defense Facilities Energy Conservation Policies and Spending [22] (2009).
You should also take a look at the fully amended National Energy Conservation Policy Act [23]. This act, initially passed in 1978, has been amended several times to meet the changing goals of national energy policy and the evolving technologies we can employ to meet these goals.
Some policies that may affect energy efficiency and conservation include:
Energy conservation policy is a great example of a form of energy policy that can be implemented with much success at the local level. Energy conservation translates to avoided energy costs, and local municipalities and other governments are highly motivated to reduce operating costs. Programs with a local scale are more easily relatable to people, and therefore often enjoy greater success.
This graph illustrates the types of energy conservation policies employed by 2,176 local governments that responded to the 2010 Sustainability Survey administered by the International City/County Management Association. You can download the full survey results [25].
One way the government can set prescriptive boundaries on energy consumption and signal development of more efficient technologies and products is through the adoption of efficiency standards and labeling. By establishing minimum requirements for a variety of energy usages (from utility companies to the DVD player you choose), they are driving the market to produce more efficient products. Labeling products empowers consumers to make more informed decisions about how the products they buy will impact their own electricity bills (and our climate!). Let's take a look at some of the efforts across the country to establish standards and provide labeling guidelines. Note that this list is far from exhaustive, and in addition to finding more examples domestically, a simple Google search will reveal countless international efforts underway to achieve similar results. The Collaborative Labeling and Appliance Standards Program [27] (CLASP) does research on energy standards and labeling programs in the United States and elsewhere, and is worth checking out in this regard.
An EERS is similar to a Renewable Portfolio Standard in that it dictates a certain percentage by which a utility must reduce its energy use over time. These standards can be implemented in different ways, including through market-based systems of trading or the option to buy out and just purchase credits. Generally, the initial targets in the program are low and increase over time, allowing maximum flexibility for meeting goals. An EERS is an attractive approach to achieving real energy savings, because, instead of emphasizing the costs of the program, it focuses on the energy savings (and therefore avoided expenses). Many states have already implemented EERS programs, and several others have standards in development.
While there is no federal EERS in place yet (several bills have been drafted, though), the patchwork efforts of states across the country represent a substantial portion of national energy use. If a federal EERS were to be enacted, states could continue to operate their state-level EERS programs in conjunction with the federal standard, and if state targets were higher, they could continue to work toward those goals.
Check out the American Council for an Energy-Efficient Economy site [28] to learn more about initiatives in every state (also mentioned on previous page in regard to state conservation policies). The website also provides functionality for comparing state efforts against each other.
Labeling products so that consumers can make informed choices about how the purchases they make will impact their utility bills and the environment is just one way to implement smart energy policies. Probably the most widely recognized labeling effort is that of ENERGY STAR [29].
There are two types of labeling utilized by the ENERGY STAR program with which you should be familiar.
The first is an endorsement label, and that's just this ENERGY STAR logo (at right) you have likely seen on a wide range of products. The label indicates to the consumer that this product is certified by the ENERGY STAR program. In order to earn the label, products must meet standards established by the EPA. In addition to providing energy savings, ENERGY STAR-qualified products must also provide comparable performance and features consumers expect out of that category of product.
Visit the ENERGY STAR website to learn more about how a product (or building, plant, or new home) can earn this label [30].
The second type of label you should know about is a comparative label. As the name suggests, this type of labeling allows consumers to evaluate the energy efficiency of multiple products before selecting one. This familiar yellow labeling scheme contains information on kWh/year used for this model of product vs other similar models, and also offers consumers an estimate of yearly operating costs for the product. This label is associated primarily with home appliances. The information printed on these yellow labels is based on standardized testing procedures developed and prescribed by the DOE. All ENERGY STAR qualified appliances are required to also carry this label.
Want to dig into policy implementation weeds in your spare time? Well, you are in luck! Here [33]is a "proposed rule" by the Federal Trade Commission to update energy labeling regulations. The FTC is considering updating their "rule" (basically, their interpretation of how to implement the law) for CFR part 305 [34], which is a law passed in 1987 that requires energy and water efficiency labeling. They are the agency that is responsible for the implementation of this law, which is why it is their concern. Per federal policy, they must provide a comment period during which anyone can submit a comment in support or otherwise to the proposed changes to the rule. The FTC is required by law to consider all substantive comments before they make their final ruling. It actually makes for some pretty interesting reading because they are proposing new appliances that must be labeled and changing labeling requirements. It is interesting (well, to some of us, I suppose) who decides what goes on those labels and how. This is the sausage being made, folks, and how policy is implemented!
Primacy is the act of coming first or foremost. So when we look at patchwork networks of energy policies spanning all geographic scales from the local level through the international community, it's important to understand how primacy is determined and how this influences the implementation of a policy.
The most common level of interplay between different geographic scales as it relates to primacy is that between the state and federal governments. As you've learned in earlier lessons of the course, many issues relating to climate and energy policy have yet to be fully addressed at the federal level, leaving states to lead the way with innovative policy. As the federal government 'catches up' to the states, what does that mean for the policies already enacted and implemented at individual state levels?
Let's look at tailpipe emission standards in California as an example of the battle for primacy:
California is the only state in the country with its own regulatory agency related to air quality, the California Air Resources Board [35]. It was established in 1967 in the Mulford-Carrell Act and is a cabinet-level agency within the US EPA. Why don't any other states have a comparable entity? CARB was established before the Clean Air Act was passed at the federal level (in 1970). Other states are free to follow the CARB standards, but they do not have regulatory authority to establish any themselves - the federal act enjoys primacy over states in this matter.
While the federal government did recently update CAFE standards [36] (which regulate passenger vehicle fuel economy), during the process, California decided they wanted to enact their own, more stringent Clean Car Standards [37], and 13 other states wanted to adopt them. As you might imagine, some vehicle manufacturers opposed this move (and challenged the ruling in court [38]), recognizing that in order to stay competitive in these markets, their vehicles would need to progress to more stringent fuel economy standards more quickly than they initially considered under the federal standards because California and the other states constitute such a signifcant portion of the market.
The new standards began phasing in starting with model year 2009. To learn more about the proposed regulations, read this Final Statement of Reasons for Rulemaking [39] from the Air Resource Board (updated February 2010).
The California tailpipe emissions example is one in which state primacy remained intact even with federal regulation. When discussions around emission trading on a national scale were circulating through the House and Senate, one of the primary concerns was whether state and regional programs would maintain primacy under a federal system, or if they would simply be absorbed. That case is a little different, though, because those regional emission trading programs were established with the consideration that, someday, a federal system would come along and take over. The smaller-scale programs were merely pilots or test cases to illustrate that greenhouse gas emissions could be reduced with a market-based approach driving technological innovation and private investment. The likely outcome would not be for state primacy to be maintained in a federal cap and trade emission trading program, but rather to have those programs be folded into the larger federal system.
The function of primacy as it relates to public policy can be sensitive. States strive to maintain autonomy, and in the case of environmental and energy legislation, often act in areas very important to their own interests if the federal government fails to do so. They spend considerable time and resources developing and implementing programs and, consequently, can be defensive then of federal regulation preempting their efforts.
We could probably devote an entire lesson to all the energy-related grants and incentives available to citizens and companies. Instead, let's pick just a few examples and work through how this type of energy policy is implemented.
While the American Recovery and Reinvestment Act [40] is by no means a 'typical' piece of legislation, let's take a look at it, specifically, because it called out several types of energy-related grant and incentive opportunities.
When ARRA passed, so too did all of the provisions built into it to drive clean energy development and stimulate new job growth in the energy sector. As a taxpayer and informed citizen, it's important for you to understand where your tax dollars are going and what sorts of activities they fund. With ARRA, energy funding reaches across the spectrum from installation and adoption of smart grid technologies to improved efficiency to innovative research into carbon capture. I encourage you to check out DOE's ARRA website [41] to learn more about how the stimulus package benefited clean energy. Briefly, here's a general list of the types of activities funded through grants and incentives in this important piece of energy policy.
ARRA was a rather high-visibility piece of legislation, given the tremendous investment of taxpayer dollars. And of course, we can't talk about ARRA funding for energy projects without talking about Solyndra, the failed solar energy company that received a federal loan guarantee, which was a talking point for years after it occurred. Learn more about the Solyndra story [42].
In addition to ARRA, there are many, many other opportunities available to citizens and organizations, and DSIRE [17] is a very comprehensive repository of these programs. While the site is devoted primarily to state-level incentives, it also offers links to federal programs as well.
And as I'm sure you know, the Inflation Reduction Act provides a bevy of incentives and some loan guarantees. (But I'll let you do the research to find out more.)
We looked at several different types of policy earlier in this lesson. Enacting policy is only part of the puzzle to achieving a desired outcome. Enforcement mechanisms ensure that the policy is implemented and provide consequences for non-compliance. Let's take a look at the different types of enforcement mechanisms out there. The type of policy employed dictates the type of enforcement mechanism(s) necessary to keep the policy goals on track.
Generally, for the policy options we explored that are voluntary in nature (such as tax incentives, grant opportunities, and guidelines), there is no real need for any sort of enforcement mechanisms. But, for those policy options that have some sort of mandatory component (taxes, market based approaches, and standards), there needs to be a system in place to ensure that the policy is actually enforced.
Generally, the energy policy document itself will detail who is in charge of ensuring compliance with the policy. The policy may even create a new office or establishment for managing the oversight of the policy (for example - 1974's Energy Reorganization Act established the Nuclear Regulatory Commission).
Keep enforcement mechanisms in mind as you research your Research Project policy. Which group or groups work together (or against one another) to achieve its stated goals? Ensure successful monitoring and implementation?
Intended Consequences: These are the outcomes that are not only desirable but sought after in developing an energy policy. If we're looking at a policy to implement higher fuel economy standards on passenger vehicles to reduce gasoline consumption and greenhouse gas emissions, and the policy effectively forces automakers to comply with these new standards, that's an intended policy consequence.
Unintended Consequences: When policy makers (energy policy or otherwise) are crafting policy design to handle specific issues, they need to pay careful attention not just to the consequences they're intending to achieve with the policy, but also the ones that might come along as byproducts of the policy design. When we talk about unintended consequences, we're usually referring to a negative, unforeseen consequence of a seemingly well-intentioned policy design. For example, one of the most prominent cases of unintended consequences in a policy related to energy is the case of ethanol. Policies enacted to stimulate corn ethanol production in the United States in an effort to reduce greenhouse gas emissions and dependency on foreign oil have come under harsh criticisms for a host of potential unintended consequences such as food scarcity, increased greenhouse gas emissions, increased food prices, water and air pollution, and ecosystem disruption. And more ironically, some research [43] has shown that using ethanol creates as many lifecycle emissions as gas.
There are however, some times when the unintended consequences of energy policy are beneficial. One example of this can be found in the case of policies instituted to reduce carbon monoxide emissions from car exhaust. Reductions in carbon monoxide emissions in car exhaust appear to have led to a decrease in carbon monoxide poisoning suicides. (Curious? Read Unsuccessful Suicide by Carbon Monoxide: A Secondary Benefit of Emissions Control [44] and Suicidal Asphyxiation by Inhalation of Automobile Emission without Carbon Monoxide Poisoning [45] to learn more.
In this lesson, we have looked at the various types of energy policies and have gone through examples of real-world implementation of these policies. As you can see, there's a complex web of mandatory and voluntary programs that comprise our national energy policy - having influence over everything from the gas you put in your car to the computer monitor you choose to purchase. The take-home message for this lesson is simple: Implementation of a successful energy policy (of any kind) requires significant forethought into the possible roadblocks to achieving stated goals and a clear delineation of who is responsible for what. It is important to anticipate criticisms and create policies that bridge gaps, not ones that are further divisive.
In the next lesson, we're going to step away from public policy and into the private sector to find out what companies are doing with regard to energy and climate policy and how their choices influence and are influenced by what is happening in the public sector.
You have reached the end of the Lesson! Double-check the Lesson Requirements in Canvas to make sure you have completed all of the tasks listed there.
Links
[1] http://money.cnn.com/2007/07/24/news/economy/farmbill_ethanol/?postversion=2007072413
[2] https://www.usda.gov/sites/default/files/documents/usda-2014-farm-bill-highlights.pdf
[3] https://www.rd.usda.gov/programs-services/rural-energy-america-program-renewable-energy-systems-energy-efficiency
[4] https://programs.dsireusa.org/system/program?type=38&
[5] https://www.dsireusa.org/resources/detailed-summary-maps/
[6] https://www.e-education.psu.edu/geog432/sites/www.e-education.psu.edu.geog432/files/RPS%20map%202020%20-%20U.S..jpg
[7] https://ncsolarcen-prod.s3.amazonaws.com/wp-content/uploads/2019/07/RPS_carveout_4.pdf
[8] https://cms.ferc.gov/sites/default/files/2020-04/epact-fact-sheet.pdf
[9] https://obamawhitehouse.archives.gov/blog/2016/02/23/american-recovery-and-reinvestment-act-paying
[10] https://www.uso.org/stories/2375-15-things-you-should-know-about-the-army-corps-of-engineers-for-it-s-birthday
[11] https://www.eia.gov/petroleum/gasdiesel/
[12] https://www.eia.gov/energyexplained/gasoline/factors-affecting-gasoline-prices.php#:~:text=The%20cost%20of%20crude%20oil,Taxes
[13] http://www.api.org/
[14] https://www.api.org/oil-and-natural-gas/consumer-information/motor-fuel-taxes/gasoline-tax
[15] https://www.pgpf.org/blog/2021/03/its-been-28-years-since-we-last-raised-the-gas-tax-and-its-purchasing-power-has-eroded
[16] https://www.urban.org/policy-centers/cross-center-initiatives/state-and-local-finance-initiative/state-and-local-backgrounders/motor-fuel-taxes
[17] http://www.dsireusa.org/
[18] https://programs.dsireusa.org/system/program
[19] http://www.aceee.org/
[20] https://www.aceee.org/program/state-policy
[21] https://www.aceee.org/state-policy/scorecard
[22] https://www.fas.org/sgp/crs/natsec/R40111.pdf
[23] https://www1.eere.energy.gov/femp/pdfs/necpa_amended.pdf
[24] https://bipartisanpolicy.org/download/?file=/wp-content/uploads/2022/08/Energy-IRA-Brief_R04-9.26.22.pdf
[25] https://icma.org/documents/icma-survey-research-2010-sustainability-survey-results
[26] http://uepinst.wikispaces.com/
[27] http://clasp.ngo/
[28] https://www.aceee.org/about-us
[29] http://www.energystar.gov/index.cfm?c=home.index
[30] http://www.energystar.gov/index.cfm?c=products.pr_how_earn
[31] https://en.wikipedia.org/wiki/User:Cjfrysinger/sandbox#/media/File:Energyguide.jpg
[32] https://en.wikipedia.org/wiki/User:Cjfrysinger
[33] https://www.federalregister.gov/documents/2022/10/25/2022-23063/energy-labeling-rule
[34] https://www.ecfr.gov/current/title-16/chapter-I/subchapter-C/part-305
[35] http://www.arb.ca.gov/homepage.htm
[36] http://www.nhtsa.gov/fuel-economy
[37] http://www.calcleancars.org/
[38] https://www.nytimes.com/2020/05/27/climate/lawsuit-fuel-economy-climate.html
[39] http://www.arb.ca.gov/regact/2010/ghgpv10/ghgfsor.pdf
[40] http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=111_cong_bills&docid=f:h1enr.pdf
[41] http://www.energy.gov/recovery/
[42] https://www.realclearenergy.org/articles/2023/01/29/the_inconvenient_truth_about_solyndra_877840.html
[43] https://www.thecgo.org/research/environmental-effects-of-renewable-fuel-standards/
[44] https://courseware.e-education.psu.edu/downloads/geog432/Landers%201981.pdf
[45] https://courseware.e-education.psu.edu/downloads/geog432/deRoux%202006.pdf