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The Trump tax cuts expire in 2025, which means things are about the get wacky in Washington.

Climate policy has been all over the place lately thanks to pressure from interest groups, pre-election jitters, and the plausibility of a re-elected President Donald Trump laying waste to existing climate policy.
But further in the future, beyond the ups and downs of electoral politics, there’s a policy cataclysm coming that, some hope, could create an opening for that long sought, always denied dream of climate policy: the carbon tax.
Let’s back up. There are two things happening that might free up this policy space, one domestic, and the other overseas. At the end of 2025, much of the Tax Cuts and Jobs Act, otherwise known as the Trump tax cuts, will expire, including several provisions that many in Congress will want to extend, including lower income tax rates, a higher standard deduction and personal exemption, and an expanded child tax credit.
At the same time, much of the revenue that helped pay for those tax cuts — such as limitations on deductions for mortgage interest and state and local taxes — will also expire.
Measures that reduce taxes tend to be popular and those that raise them tend not to be, and that’s as true with the Trump tax cuts as with anything. (Since basically the day the TCJA passed, there’s been intense bipartisan opposition to the limitation on deductions for state and local taxes, for example.) That they’re expiring all at the same time will create a policy free for all.
And just as the Trump tax cuts expire, the European Union’s Carbon Border Adjustment Mechanism will come into full effect in January 2026, complementing its existing cap-and-trade and carbon pricing system. Essentially, CBAM is a tariff on imports from countries that don’t price carbon the same way the EU does, and it’s designed to prevent what’s known as “leakage,” where producers in countries with a carbon price simply offshore emissions-intensive production to countries that don’t. (It also helps make sure those products from other countries aren’t able to undercut domestic producers on price, a facet of the policy some have pooh-poohed as protectionist.)
Starting last year, EU trading partners had to begin reporting the carbon content of some emissions-intensive exports in preparations for payments starting in 2026. One of those trading partners is the United States, which exports some $351 billion worth of goods to the EU, second only to Canada.
Bills that would just address the carbon price gap have been proposed several times in the current Congress, including by climate stalwart and Democrat from Rhode Island, Senator Sheldon Whitehouse, plus some Republicans who think America should get an advantage over China for having a less carbon-intensive manufacturing sector.
This all creates a kind of celestial alignment in favor of a policy that has been rejected so many times (RIP the 2009 cap-and-trade bill and Bill Clinton’s BTU Tax) — or at least that’s what its advocates hope. Based on the history of carbon taxation and related polices, you might be pessimistic. But we haven’t seen a year like 2025.
“If you think about carbon price relative to raising people’s income taxes, when you put it in the whole fiscal conversation that’s going to happen in 2025, it’s going to look more attractive,” Catherine Wolfram, a Massachusetts Institute of Technology economist and former Treasury official in the Biden administration, told me. Wolfram was also one of the authors of a paper released last week by the Brookings Institution’s Hamilton Project mapping out how various climate policies could emerge from the witch’s brew of TCJA expiring and carbon tariffs would actually effect U.S. emissions.
The paper concluded that of the seven 2025 climate policy options they considered — including doing nothing to the IRA and enacting planned new emissions rules, doing nothing to the IRA with no new emissions rules, repealing the IRA, expanding the IRA tax credits for clean electricity, instituting a carbon fee starting at $15 a ton, instituting a clean electricity standard that would mandate a certain portion of electricity be produced from non-carbon-emitting sources with fees for noncompliance, and a carbon fee along with repealing some parts of the IRA — the carbon fee and the clean electricity standard would bring emissions down by the most, just missing the stated 2030 target.
And that’s just U.S. emissions. Wolfram said that if the U.S. were to institute a carbon fee, it would be a major step towards a worldwide carbon price, as countries would want to avoid paying fees to both the U.S. and Europe for pollution-intensive exports. “The more countries that get in this game,” Wolfram said, “the more powerful that policy can be.”
Whitehouse spoke at a Brookings event last week, saying, “We’ll find out a lot when people start getting tariffed through the European Union CBAM,” and that even Republicans were “pricing curious” due to the specter of carbon tariffs. “The forces are converging on making that work,” he added about the idea of finally getting a carbon price of our own.
Wolfram is also — cautiously — optimistic. “We haven’t tried since 2009. That’s 15 years ago,” she said. “The climate continues to change, and it’s changed pretty dramatically in the last 15 years. I don’t think we should have too many conclusions about what’s possible.”
Editor’s note: This story has been corrected to reflect that Whitehouse is a Senator from Rhode Island.
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The next governor of the Garden State turned a potential liability into an advantage.
Mikie Sherrill was vulnerable. While New Jersey’s gubernatorial elections tend to favor the party not in control of the White House, no party had won three straight terms in the governor’s mansion at Drumthwacket since the Kennedy administration.
Yet the Democratic congresswoman and former Navy helicopter pilot defeated her Republican rival, former New Jersey State Assemblyman Jack Ciattarelli, on Tuesday night by a comfortable margin of 56% to 43% at press time.
To get there, Sherrill had to overcome not only historical precedent but a potentially devastating kitchen table issue: New Jersey has seen its already high electricity prices rise faster than almost anywhere else in the country, with retail rates going up as much as 20% this summer alone.
It could have proved politically lethal. Heatmap polling has shown that voters blame their state government and electric utility for rising rates more than anyone currently or formerly in power in Washington, D.C. And they are worried about electricity prices — according to CNN exit polling, the top issues among New Jersey voters were taxes and the economy, with about 60% saying that electricity costs were a “major problem where they live.”
Sherrill sought to turn the electricity cost issue from a burden to an advantage by making a clear and simple pledge: that she would declare a state of emergency and freeze utility bills. “On day one, I’m declaring a state of emergency on utility hikes. I’ll freeze those rate hikes to lower your family’s bills… New Jersey, I am not playing. I am not writing a strongly worded letter, I am not starting up a working group, I'm not doing a 10 year study. I am declaring a state of emergency,” Sherrill declared at a pre-election rally.
The results speak for themselves, but they are not entirely unexpected. Sherrill had consistently led in polling against Ciattarelli and even had a 10-point lead on who would handle energy costs better, according to a Fox News poll.
“Mikie Sherrill took the issue of soaring utility bills seriously and centered her campaign around a concise solution to this ongoing crisis,” Skanda Amarnath, the executive director of economics think tank Employ America, told me. “She deserves credit for not shying away from what could have easily been a liability of a campaign issue.”
Sherrill was able to use the electricity prices issue to create some space from her predecessor, incumbent governor Phil Murphy. Murphy was associated with a renewables forward strategy, including offshore wind, and had cast some doubt on the effectiveness and practicality of Sherrill’s pledge. “I’m not sure how you’d actually do that,” Murphy told reporters in August.
“Governor Murphy has taken a lot of blame for increased energy prices. He kind of went all in on clean energy. I think she’s trying to create distance between herself and an incumbent from her party,” Dan Crawford, senior vice president at Echo Communications Advisors, a public relations firm that specializes in climate and clean energy, told me.
Sherrill also embraced nuclear energy on the trail, one of the few non-politically-polarizing energy generation sources left in the United States, saying she would “immediately develop a plan for a new nuclear power site in Salem County.”
Ciattarelli stuck to standard Republican moves on energy, saying he would ban offshore wind and take New Jersey out of the Regional Greenhouse Gas Initiative, the Northeastern cap-and-trade system.
“The price freeze was a very smart move because it was very old in a way. It's very Trumpy,” Crawford said. “I'm going to use an executive order to freeze prices. I'm going to fight for you. I'm going to take the fight to PJM. She’s not really worrying as much about the details, but she’s calling attention to the issue. I think that did kind of make energy prices a bigger issue in the campaign and put Ciattarelli on the defensive a little bit.”
Now Sherrill will have to deal with the politics and practicalities of actually implementing a price freeze, navigating potential legal challenges, and maintaining the necessary investment levels in the state’s grid in order to meet its decarbonization goals.
“For the first time in a long time, utility bills became a top issue in a gubernatorial election. In New Jersey, both candidates leaned heavily on utility affordability messaging, feeling pressure from voters to demonstrate leadership on this issue,” Charles Hua, the executive director of Powerlines, told me. “Now, it is imperative for Governor Sherrill to deliver on her promise to make utilities affordable — voters will be paying attention.”
Environmental groups hailed Sherrill’s win as a victory for renewables against the regulatory assault launched on them by President Trump and as a sign that advocates for renewables could effectively leverage the electricity price issue to their advantage.
“Make no mistake, out of control energy costs were a top tier issue in this year’s election, and in Sherrill, New Jerseyans have elected a governor who knows that renewable energy is cheaper, cleaner, and faster to deploy than dirty, old alternatives, and who has a strong mandate to lead the Garden State forward,” EDF Action president David Klieve said in a statement.
And the electricity price issue will likely flare up in statewide and national races in 2026.
“Electricity price spikes are going on all over the country,” Justin Balik, a vice president at Evergreen Action, told me. “Folks should be taking a close look at how Mikie messaged around these issues.”
A “seismic change” comes for the state’s Public Service Commission.
Voters in Georgia ousted two Republican energy regulators in a statewide election on Tuesday, shaking up the party’s nearly two decade-long run holding all five seats on the state’s Public Service Commission.
Democrats Alicia Johnson and Peter Hubbard, who campaigned on the promise to protect ratepayers from skyrocketing energy bills by pushing for more renewable energy, won in a landslide against incumbents Tim Echols and Fitz Johnson.
“The election of two new Public Service Commissioners represents a seismic change in Georgia’s energy landscape and reflects a new politics of electricity in America,” Charles Hua, the executive director of PowerLines, a nonprofit focused on reforming utility regulation, said in a statement. “Consumers have sent a clear message: they are paying attention and will hold public officials accountable for decisions that impact their utility bills.”
Public Service Commissioners are key gatekeepers in the energy transition. When utilities want to build new power plants, transmission lines, pipelines, or other energy infrastructure, they first have to get approval from the local PSC. Not only do commissioners preside over what gets built, but also how much of the cost can be put on ratepayers. They are smack dab in the middle of today’s holy trinity of energy politics — climate change, data centers and demand growth, and affordability.
Every state has a Public Service Commission, but only 10 let voters choose who sits on it — elsewhere commissioners are appointed by the governor or legislature. Utility regulation is so esoteric, however, that these races rarely draw much attention. In Georgia, there was an even bigger uphill battle than usual to engage voters, since in many places, the PSC contest was the only race on the ballot. Yet mounting frustration over electricity costs propelled the race into the spotlight.
“I've never seen a Public Service Commission race catch the cultural zeitgeist and break through to the general public like this one has,” Daniel Tait, the research and communications director for the Energy and Policy Institute, a utility watchdog group, told me.
There’s also been a long buildup to the race after it was held up for the past two election cycles due to a lawsuit. During that time, the commission approved six rate hikes for customers of Georgia Power, the largest utility in the state, in part to pay for major cost overruns on new nuclear reactors at Plant Vogtle. Rates increased by 33% in the past 2 years, translating to an additional $500 per year for the average household, according to PowerLines. Meanwhile, Georgia Power reported $4 billion in profits last year.
“If Georgia Power comes to the commission and wants a rate increase, they get it,” said Tait. “If they want to build a bunch of gas plants, they get it. If they want to raise their profit margin, they get it.”
Now Georgia Power is proposing a major expansion of natural gas power — more than 5 nuclear reactors’ worth — mostly to meet data center demand. The new commission will be assessing those plans and have power to approve or reject the utility’s proposed generation projects.
Johnson and Hubbard, the two Democrats, have promised to bring greater scrutiny to utility spending. With just two out of five seats, though, they may be limited in what they can do. Tait expects they might be able to find a third vote on some issues, such as strengthening data center rules and taking another look at utility profit margins — especially if sitting Republicans get skittish about their own seats after this election. The PSC in Louisiana previously had a similar three to two makeup, Tait said, and there were a number of votes that did not split on party lines.
Hubbard, however, will have to build his reputation in record time — while a typical term on the commission is six years, the lawsuits screwed up the schedule for Hubbard’s seat, and he’ll be forced to run for re-election next year.
Emerald AI’s Arushi Sharma Frank wants to apply “connect and manage” to AI development.
Everyone knows now how great Texas is for renewables. Its particular combination of sun, wind, and permissive market structure has led the state to overtake even California in clean energy generation. At the same time, however, the state is nervous about data centers and their effects on the grid, even passing a law this past legislative session to more closely examine the data center industry and to establish protocols for curtailing data center operations when electricity is tight.
But what if you could do for data centers what Texas has done for renewables? That’s roughly the idea Arushi Sharma Frank, who helped bring Tesla’s energy business to Texas and is now an advisor to Nvidia-backed Emerald AI, has come up with.
On Friday, Frank filed a proposal with ERCOT, the electricity market that sits outside federal regulation and covers about 90% of the state, that would reform its rules to allow data centers to connect to the grid much faster. The rough idea is that by applying ERCOT’s existing “connect and manage” system for getting new electricity generators on the grid to new large demand sources like data centers, the data centers can get power more quickly — if they can handle not getting access to the grid sometimes.
The proposal “creates the basis of connect-and-manage of load using the existence system that ERCOT already has for generators and batteries,” Frank told me.
Her idea would reward data centers for being able to modulate how much electricity they need in the interconnection process. This could mean that data centers get credit for curtailment and for having their own generation on site. And crucially, unlike a widely-panned proposal by PJM Interconnection to essentially mandate that some customers be forced to curtail their energy use, the ability to curtail or self-power a data center would result in faster interconnection, not simply the cost of doing business.
Frank pointed to chip designer Nvidia’s recent announcement that it would back a Virginia data center using Emerald AI software to smooth out power usage, saying she wants to be “able to actually do that at scale” for “any developer in Texas.”
Getting power for data centers is one of the biggest barriers to getting them built, and so anything that can deliver faster interconnection without foisting enormous new costs on the system as a whole counts as a win-win. With this system in place, Frank told me, data centers and other large loads could “invest in firming their own power needs before major transmission upgrades get built, enabling them to voluntarily choose to be flexible participants on the grid in exchange for earlier interconnection.”
Texas has been able to deploy wind, solar, and batteries so quickly, many energy policy experts and developers say, precisely because of connect and manage, whereby new generators can get on the grid after just a local grid study, without having to examine their effect on the whole system, which most of the country’s grids require. After these system-wide studies often come expensive transmission upgrades, the costs of which are passed on to all electricity customers in the form of higher bills. This process, Duke University’s Tyler Norris has written, “can often make generators financially unviable, introduce uncertainty for project economics, and delay interconnection by years.”
That level of extensive review is partially responsible for the interconnection delays seen in the rest of the country, which can stretch to as long as several years. Projects in Texas take on average two years to complete the interconnection process, according to the trade group Advanced Energy United.
The trade-off for allowing new resources onto the grid without those upgrades means that they’re more likely to be curtailed if the amount of electricity they generate overwhelms the grid — the “manage” part of “connect and manage.” Frank made an analogy to me between a data center and an 18-wheeler, which might be allowed to start its journey sooner if it agreed in advance to get off the road in the case of heavy traffic.
Frank delivered her proposal along with support from a group of big-name and deep-pocketed stakeholders, including former Loans Program Office chief Jigar Shah, renewables developers like Cypress Creek Renewables, and a number of datacenter developers and technology providers.
In comments on the proposal, Agentic Infrastructure, which works on powering data centers, said that Frank’s plan will allow for “private capital investment to energize with dispatchable service ahead of the timeline required for expansion of firm network service,” which would ensure that “the risks of serving rapid load growth are managed privately while the economics benefits of load growth are socialized to the public rate base.”
In other words, more users of electricity would come online faster, allowing them to make payments to utilities and split up fixed costs among all customers, while the developers would take on the risk of not always being able to power their data centers.
In a best-case scenario, the proposal could be approved at an ERCOT board meeting early next year, Frank said.
Allowing flexible large loads to connect faster is “the most viable way for loads to actually invest with their complex webs of financing and technology partners in creating dispatchability,” she added.
“Everyone is talking about” how important dispatchability is, Frank told me, but “no one is doing anything about it, except for the proposal at PJM and random one-off deals that folks like Google are doing.”
“What makes ERCOT different,” Frank said, “is that it is a place that gets national attention, and it can get national attention because things generally just happen faster there.”