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If it turns out to be a bubble, billions of dollars of energy assets will be on the line.
The president of the Clean Economy Project calls for a new approach to advocacy — or as she calls it, a “third front.”
One of the world’s leading climate scientists agrees with Gates in spirit, but thinks we can go much further in practice.
The New York mayoral frontrunner has an opportunity to shift the left’s increasingly nonsensical position on a critical carbon-free energy source.
The country’s underwhelming new climate pledge is more than just bad news for the world — it reveals a serious governing mistake.
Harmonizing data across federal agencies will go a long, long way toward simplifying environmental reviews.
Climate policy strategist Justin Guay has a populist pitch for our warming world.
There’s a famous saying in management circles: Culture eats strategy for breakfast.
In a warming world marked by populist politics, the climate equivalent might be: Culture eats climate policy for breakfast.
As air conditioning becomes the latest front in the culture wars, climate hawks would be wise to avoid the culture war trap being set. Instead we should meet the world where it is with a simple, culturally relevant, and popular approach that keeps people cool on a warming planet — a heat pump populism for the masses.
As the climate warms, increasing numbers of cities, regions, and countries are being faced with an uncomfortable new reality — their built environments weren’t built for this environment. Heat waves like the “once in a millennium” Pacific Northwest heat dome of 2021 or this year’s “warmest summer on record” for the UK — which has kept track of such things since 1884 — are driving the need for air conditioning in places it hasn’t historically been required.
The new air conditioning units installed in response to these heat waves drive up already significant electricity consumption — and greenhouse gas emissions in the process. Air conditioning emissions alone account for 3% of global emissions, and are projected to grow significantly as AC unit sales triple by 2050. In China, which also saw heat records fall this summer, air conditioner sales doubled from June to July.
The climate community has responded with concern about the climate doom loop this represents. The impacts of climate change — most pertinently in this case, increased temperatures — unleash more air conditioning usage, which only exacerbates the underlying problem of climate change, itself.
But there’s another, far more sinister doom loop climate hawks should fear — a doom loop that undermines the political resilience necessary to respond to climate change at all.
This doom loop begins with climate impacts that directly harm average people, generating resentment towards existing institutions — notably the ruling government — that anti-climate populist politicians seize on to aid their rise to power. That in turn leads to anticlimate policymaking that exacerbates the underlying problem, climate change, unleashing yet more impacts. And on and on the cycle goes.
Take for example what happened following the historic flooding in Spain’s Valencia region last fall. Rather than looking to address the underlying causes of the catastrophe, including climate change, populist anti-climate parties seized on the perceived inability of mainstream politics to deal with the situation. They instead sought to sow distrust and climate denial by painting the government as inept and incapable of helping people in their time of need, thereby bolstering their case to overthrow the powers that be.
That appears to be a page from the same playbook populists all over Europe are now using after heat waves gripped a region where air conditioning use is projected to grow by 40% by 2050, compared to the historical average from the last decade. From France to the UK, anti-climate populists are seeking to paint the political left — particularly climate-minded parties — as out of touch radicals bent on denying the sweaty masses their relief. As Nicolas Bouzou, the French liberal economist and essayist, put it recently: “The left is against air conditioners, and the right is in favor.”
In other words, the anti-climate right is actively laying a climate doom loop trap — and it appears that at least some members of the climate community are walking right into it. In the UK, 58% of Green Party voters support discouraging AC installation to cope with heat waves. Meanwhile, in France, the head of the French Green party reportedly “scoffed” at Marine Le Pen’s proposal to deploy air conditioners as part of her policy platform, instead, he offered more energy-efficient buildings as a solution. France’s left-wing daily Liberation called AC “an environmental aberration that must be overcome.”
But what if climate hawks attempted some political jiu jitsu instead? What if we decided to make some lemonade out of these lemons? What if, and hear me out, we decided to scold a little less and push abundance a little more? What if, in a hotter world, we stood for something cool?
May I present: the humble heat pump, otherwise known as a two-way AC, i.e. just the opportunity climate advocates should be looking for. The heat pump is essentially an AC unit that can heat as well as cool. Most AC companies don’t unlock the heating capability because it adds to their manufacturing costs — generally $200 to $500 — to do so. If that modest cost were not an issue, AC manufacturers could not only help deploy desperately needed relief from extreme temperatures and rising costs, they could also deploy cheaper, clean and fossil fuel-free heating at the same time.
That’s the argument Nate Adams and the team at the Collaborative Labeling and Appliance Standards Program — otherwise known as Clasp, a nonprofit organization focused on improving the efficiency of everyday appliances and equipment — made when they called for a supply-side intervention to make heat pumps affordable and universally available. Rather than subsidizing heat pump purchases and hoping homeowners take advantage, we should incentivize AC manufacturers and distributors to exclusively sell two-way air conditioners moving forward — no more one-way AC.
Under such a policy, participating manufacturers or distributors would receive a few-hundred-dollar incentive for every two-way AC (i.e. heat pump) sold. That subsidy would decline over time as manufacturers convert production lines and costs come down. Crucially, any participating company would have to commit to stop producing one-way ACs. In addition, governments and participating manufacturers would be wise to invest in training and education programs for HVAC contractors to speed deployment and support consumer education.
The Clasp team calculates that a program like this would cost somewhere between $3 billion to $12 billion in the United States and result in 45 million new two-way ACs deployed, which would save citizens $27 billion in direct energy costs and $80 billion in indirect societal benefits — such as, yes, mitigating climate change.
As I’ve argued previously alongside Nate, the shift in policy focus from consumers to manufacturers and suppliers is really, really important. Most AC replacement purchases are driven by existing equipment breaking down — and now by historic heat waves setting in — which causes panic-buying. That almost always leads people to buy the first replacement they can find, and that’s almost never a heat pump.
If we instead incentivize manufacturers to ensure that heat pumps and only heat pumps are on hardware and home goods store shelves and make it easy for average people to buy and install them by educating HVAC installers around their benefits then we solve this problem. Heat pumps become the default.
Now map that policy onto the political landscape. Imagine that instead of climate-oriented politicians being perceived as out of touch radicals who want to ban air conditioning, we have political leaders using the next inevitable heat wave to announce a new policy of abundant air conditioning for all. That alone won’t win the culture war — it will still require savvy salesmanship to make the pitch land with voters, not to mention digital acumen of a sort the left seems woefully behind in developing. But the ingredients are there, if only our leaders are willing and able to seize on them.
Ironically, as wildfires now ravage Spain, the country’s center-left prime minister is now calling for a national climate pact. His call is a beacon of hope that the climate doom loop can indeed be broken by forward-looking politicians who realize that we must address the underlying cause of these impacts before it’s too late.
It’s time others follow his lead and use these moments of visceral climate impact to drive climate policy forward with an unabashedly populist policy agenda. That’s how we take the bite out of the air conditioning culture war before it even begins. And maybe, just maybe, it’s how we begin to reclaim our politics.
On the third anniversary of the signing of the Inflation Reduction Act, Heatmap contributor Advait Arun mourns what’s been lost — but more importantly, charts a path toward what comes next.
Today, the Inflation Reduction Act would have turned three years old — if it hadn’t been buried alive in a big, beautiful grave. While the IRA was a hodgepodge of programs salvaged from President Biden’s far more ambitious Build Back Better agenda, it still represented the biggest climate investment in U.S. history. It catalyzed over $360 billion in energy and manufacturing investments and was expected to drive the installation of over 155 gigawatts of new solar and wind energy by 2030. And now Republicans have taken a sledgehammer to its achievements.
The timing could not be worse — not just for the climate, but also for the energy systems that we rely on. At a moment when the energy sector requires $1.4 trillion worth of upgrades by 2030 just to keep up with rising energy demand and increasingly erratic weather, Republicans have instead delivered a one-two punch of tariffs and tax hikes, sabotaging the industrial base required to deliver those investments and raising the retirement age of our power generation fleet.
All over the country (Texas and California maybe exempted), our aging electricity system is putting in its two-weeks notice. Staring down the barrel of precipitous demand growth, the country’s regulated utilities have requested over $29 billion in rate increases, concentrated across the West and South. The Department of Energy ordered the delayed retirement of coal plants and oil generators to manage this summer’s demand peaks. Meanwhile, capacity market prices on two of the country’s largest grids, PJM and MISO, have reached record highs ― a cry for new supply that is now increasingly unlikely to materialize quickly or cheaply. Two months ago, an unplanned nuclear reactor outage on a congested part of Louisiana’s energy grid led to a blackout for 100,000 people in and around New Orleans. That meant no working AC or refrigerators across large swaths of the city during a sweltering Memorial Day weekend.
All of this amounts to an opening for Democrats to shift public opinion decisively in favor of renewed climate action. Moving forward, lawmakers cannot ignore our infirm fossil-fired energy system, which stands to thwart their ability to deliver affordability, employment, health, and resilience to their constituents. Despite our recent losses, we still need an energy policy ― a climate policy.
What should the Democrats’ second attempt at a clean investment program look like? Having delivered the Bipartisan Infrastructure Law and the Inflation Reduction Act, laws that committed the state to the realization of a particular energy future, Democrats are well-positioned to build on their successes, and even to engage Republicans who remain interested in supporting innovative technologies, decarbonizing industry, and protecting public lands.
Where they cannot meet Republicans halfway, Democrats should double their ambitions. They must continue to embrace the power of federal investment to shape markets and achieve policy goals. But they must also learn from the shortcomings of their previous legislative outings and substantively change how the federal government invests in the first place. The way forward for Democrats starts with mapping out exactly how far they didn’t go, and ends with going there.
IRA and BIL were paradigm-shifting attempts at market-shaping. They laid the groundwork for the deployment of promising clean firm energy technologies such as next-generation geothermal and nuclear energy, as well as for necessary grid and supply chain upgrades, such as long-distance transmission corridors and critical minerals processing.
IRA and BIL were not, however, a comprehensive climate policy. They created cost-share programs for infrastructure resilience but neglected to buttress municipal bond markets, which states and local governments can use to make longer-term investments in climate resilience and adaptation. They penalized methane emissions but organized no comprehensive or compulsory managed phaseout of fossil fuel infrastructure. They failed to advance or adequately finance a coordinated deployment strategy for any key energy sector. And they shed the transformative vision of Biden’s Build Back Better agenda, which sought to stabilize the cost of living for Americans in the meantime — a tactical retreat that, in retrospect, looks ill-advised given voters’ current worries about affordability.
I am aware that criticizing BIL and IRA on these grounds amounts to judging them for goals they didn’t attempt to achieve. Judging them by the goals they did attempt to achieve, however, reveals that they only ever worked incompletely. Taken together, BIL and IRA expanded the energy tax credit system, created powerful programs for piloting and deploying innovative energy technologies, and seeded an ecosystem of regional financing institutions devoted to more equitably distributing the benefits of decarbonization. But the energy tax credits were never expansive enough; the programs intended to motivate investments into deeper decarbonization were not flexible enough to drive the mass uptake of emerging technologies; and efforts to decarbonize disadvantaged communities lacked a coherent strategy and ran headlong into local capacity constraints.
Speeding up the energy transition and building new infrastructure at scale requires endowing federal and state agencies with adequate appropriations, access to liquidity, and crystal-clear, wide-ranging mandates, as well as empowering them in statute with considerable flexibility as to the financial products and strategies they deploy to achieve those mandates.
Although imperfect, the IRA’s tax credits scored some significant wins that should undoubtedly inform future policy. The law took an existing system of technology-specific subsidies that had been on the books in some form since 1978 and made them technology-neutral, allowing developers of nearly any zero-emissions energy technology to access tax relief. It expanded the credits to domestic manufacturers of certain low- and zero-carbon technologies. It created a tax credit transfer market, allowing developers with limited tax liability to sell their credits for cash on an open market to any tax-liable buyer, rather than engage in expensive and complex “tax equity” transactions with a few large banks. It made certain credits directly accessible to tax-exempt entities, significantly broadening the pool of potential users. And most of these credits remained entirely uncapped ― a “bottomless mimosa” for developers that spurred over $321 billion in clean energy and manufacturing investments and supported more than 2,000 new facilities across the country.
To be sure, the IRA did not level the playing field perfectly across developers or across technologies. Developers of energy transmission, grid transformers, and electric rail were shut out of the credits. Tax-exempt public and nonprofit developers ― entities as large as the New York Power Authority and as small as local churches ― could not monetize depreciation or participate in the transfer market. And some credits remained capped, forcing developers to apply and cross their fingers. But as early as 2023, Goldman Sachs argued that even with these inadequacies ― which have easy legislative and statutory fixes ― the IRA would still have spurred over $3 trillion in investment by 2033.
The GOP has gutted much of this system, shortcomings and all, and replaced it with a tangle of red tape. The energy tax credits are once again technology-specific ― solar and wind developers have a few months left to start a project and claim the credits as written, though what it means to start a project got more complex just yesterday. But even the “clean firm” energy technologies that can still claim credits until 2032, such as nuclear and geothermal, may not be safe under new “foreign entity of concern” rules, which condition credits on developers’ ability to limit their reliance on Chinese suppliers and investment, requiring them to map out their supply chains at an unprecedented level of detail.
Democrats seeking to restore and build upon this plank of the IRA have their work cut out for them. The developers and manufacturers of any technology that contributes to zero-emissions energy production should be able to access and monetize federal support regardless of their tax status and free from the rigmarole and uncertainties imposed by competitive application procedures. Goldman Sachs’ $3 trillion estimate is now the lower bound of what’s possible — for instance, a tax credit for transmission investments suggested as part of Build Back Better but excluded from the IRA could have catalyzed over $15 billion in investment and supported the economics of all other energy projects. To the degree that the tax credits can help build industrial capacity and institutional support for decarbonization, future policymaking should maximize their remit and their distribution.
Tax credits alone, however, are hardly a skeleton key to decarbonization. Being disbursed only once a project is complete, tax credits do not substitute for the kinds of upfront financial support that project developers — especially developers of emerging technologies — require to complete their projects in the first place. Private investors have been comfortable with solar, batteries, and onshore wind because these projects can be completed, claim their tax credits, and earn revenues on the grid on a mostly predictable timetable. But new nuclear reactors, geothermal, hydrogen, green steel, and carbon capture are unfamiliar investments, have uncertain development pathways and return profiles, and thus remain un-bankable to investors.
This is why BIL and IRA created powerful programs worth tens of billions of dollars to finance the deployment of emerging clean technologies and break this vicious cycle of uncertainty. The Office of Clean Energy Demonstrations, or OCED, and the Loan Programs Office, or LPO, in particular, were empowered to support, at scale, the testing and commercialization of these emerging technologies as well as conversions of whole electricity grids.
OCED, with over $27 billion in appropriations, set up hubs for hydrogen and carbon capture projects across the country, and funded a suite of advanced steel and iron decarbonization projects. Endowed by BIL and IRA with over $15 billion in total credit subsidy and well over $300 billion in total loan authority, LPO made ambitious investments across a host of innovative technology categories, including ― but certainly not limited to ― energy storage, sustainable aviation fuels, virtual power plants, EV charging, and bioenergy. At the end of 2024, the LPO had over 200 loan applicants in its queue.
By rescinding OCED’s unobligated funding, ambiguously rewriting LPO’s lending authorities (while rescinding most of its unobligated credit subsidy), and pulling the plug on billions of dollars worth of conditional commitments, the GOP has stopped years of progress in its tracks. In the meantime, LPO has shed considerable staff while the administration has prevented it from making any new commitments. The combination of the “foreign entity of concern” rules constraining tax credit eligibility and this shuttering of federal financing opportunities could seriously throttle the development and commercialization of nuclear energy in particular, the darling du jour of Republicans’ energy strategy.
If these offices were once the engines of decarbonization, they needed a stronger spark plug. The LPO, in particular, has a special authority to finance state government-backed, non-innovative clean energy projects, such as regional battery manufacturing clusters or a state power developer’s renewables portfolio, but has never used it. And while OCED and LPO can provide developers with some degree of upfront support, LPO cannot easily provide construction loans, cannot derisk project cash flows to provide security to investors, and cannot mandate offtake. These deficiencies prevent ambitious borrowers with unproven technologies from scaling up: they scare off private lenders in the infrastructure sector, many of which are skittish about construction risk, require project developers to demonstrate three to five years of stable cash flows, have a low tolerance for market price uncertainty, and have shareholders who demand a certain level of returns.
The DOE can bridge this “valley of death” by using its broader market-shaping authorities to take a more aggressive “dealership” role in these sectors, providing stable offtake for developers through upfront purchasing while becoming a reliable source of supply to downstream customers (like an actual car dealership or a grocery store). The DOE has in fact already used this approach to provide demand-side support to its now-endangered hydrogen hubs through OCED.
These kinds of public dealership arrangements are not unique or path-breaking: The Federal Reserve’s backstop of the municipal bond market in 2020, nonprofit investor Climate United’s planned EV trucking purchase-and-lease program in California, and even the Department of Defense’s recent MP Materials deal are all examples of public entities addressing a mismatch in the supply of and demand for a critical good and, in doing so, shaping markets toward public ends.
For all that BIL and IRA built avenues for developing and deploying energy technologies, they were also full of programs aimed at distributing the fruits of decarbonization equitably. Both the energy community bonus credits, a provision in the IRA that increased the value of the energy tax credits for projects in poorer, higher-unemployment, and energy facility-adjacent communities, and President Biden’s Justice40 initiative, which directed 40% of federal spending toward poorer and more rural communities, exemplified the administration’s “place-based” approach to industrial policy and economic development. The Biden administration heavily encouraged disadvantaged communities, local governments, schools, nonprofits, and tribal nations to develop their own clean energy projects — aided by the IRA’s direct pay mechanism, which allowed tax-exempt entities to access subsidies — by drawing on the various local decarbonization programs in BIL and IRA.
The Greenhouse Gas Reduction Fund, perhaps the most important of these programs, exemplifies the promises and pitfalls of the administration’s approach to “place-based” industrial policy. Managed by the Environmental Protection Agency, GGRF provided $27 billion to disadvantaged communities for the financing of rooftop solar, zero-emissions transport, and net-zero housing. That pot was split into three thematic buckets ― $7 billion to the Solar for All program, specifically for rooftop solar development; $14 billion to the National Clean Investment Fund, for supporting clean energy project finance more broadly in disadvantaged communities; and $6 billion more to local and regional technical assistance providers. Each program then subdivided its appropriations further. Solar for All went to 60 recipients across the country via a competitive application. The National Clean Investment Fund’s $14 billion was split among three awardees, each a coalition of various financial institutions designed to lend to energy projects, such as green banks, impact investors, and nonprofits ― and each of those recipient coalitions planned to subdivide much of its funds still further, first among coalition partners and then to subordinate local and state partners.
That dizzying program structure was meant to endow local communities with the ability to finance their own projects. And by including so many nonprofit institutions, GGRF could make significant inroads into Republican states, whose officials might otherwise reject federal funding.
But there was not much coordination between partners and subawardees around how best to deploy those funds. And what seemed like a firehose of financing often reached local recipients as a trickle of pre-development and technical assistance grants. Demanding that local organizations build their own capacity to plan, finance, and develop projects (or hire expensive external consultants to do so) ― with limited and one-time funds, no less ― is duplicative and inefficient, and it defeats GGRF’s own stated goal of mobilizing private capital through building standardized markets for decarbonization, thereby slowing down the pace of emissions reductions. The program’s complexity also left it vulnerable to EPA Administrator Lee Zeldin’s efforts to hound the program in court and freeze its funding.
Pandemic-era proposals for a National Investment Authority, as well as legislative proposals for a national green bank ― predecessors to the GGRF ― differ sharply from this status quo, instead highlighting how public finance can benefit from economies of scale. Larger financial institutions tasked with deploying clean energy projects can more easily prepare portfolios of projects for co-investors, engage with utilities, raise debt on municipal bond markets, and build a bench of trustworthy private developers to contract for projects. If they are publicly administered, these institutions can also take more risk, undercut private lenders, support more developers, engage with local communities to meet their needs, and use revenues from higher-return projects to derisk lower-return projects that might be necessary to build to achieve their resilience and affordability goals.
Should policymakers get a second shot at building a national green bank system, they should not try to recreate GGRF’s fractal approach to energy finance. Rather, policymakers must ensure that financing sits in the hands of public agencies that already have the authorities and expert staff to be ambitious market-shapers: bond banks, state-led energy finance authorities, and public developers. The good news is that state-level green banks empowered with state funding and a political mandate are already exercising their capacities to shape markets and support disadvantaged communities directly: the New York Power Authority, the Minnesota Climate Innovation Finance Authority, the Connecticut Green Bank, and the Greater Arizona Development Authority, to name a few, are all taking it upon themselves to raise debt and contract with developers to undertake ambitious energy and infrastructure investment programs.
But Democrats should be clear-eyed about the consequences of this reorientation: It means rejecting the prevailing wisdom that local nonprofits should necessarily coordinate local project development. Local groups can be extremely effective advocates for communities’ needs ― but in contrast to public investment agencies, their capacity to finance and implement solutions is simply not great enough.
This analysis of IRA and BIL leaves out more parts of the laws than it includes ― to take just one example, the BIL’s $5 billion National Electric Vehicle Infrastructure charging station program. But the story is similar: Ambitious as it seemed, NEVI money could only flow when state governments set up implementation offices and had their spending plans approved by federal officials. Most states, which had not prepared for any of this, took years to build the requisite capacity ― just in time for the Trump administration to try and snatch away the funding (though it recently admitted defeat in that project). In fairness to state governments, the EV charging sector is incredibly new. But even this program highlights how IRA and BIL lacked the capacity to be implemented as quickly and efficiently as their supporters hoped.
Going above and beyond BIL and IRA to deliver an energy policy that stabilizes Americans’ cost of living while driving an energy transition away from fossil fuels and toward the technologies of the future ― Democrats should embrace this challenge. But they should also be aware that climate ambition runs headlong into the same institutional problems facing American democracy at large. The Senate filibuster prevents either party from comprehensively redesigning the federal government, its institutions, and its regulations to serve Americans more quickly and more efficiently. That leaves both parties reliant on budget reconciliation ― to our detriment. The head-spinning design of GGRF was itself an artifact of the reconciliation process, which prevented Congress from creating a single green bank institution or giving it a specific mandate; its awardee organizations and coalitions certainly did not ask for the program structure they got.
There’s a lot more that budget reconciliation will never solve: the century-old American utility system, the regulatory thicket of U.S. electricity markets, or the land use and permitting rules that constrain project development and grid interconnection. And things could get worse: Trump-appointed judges and Supreme Court justices who reject federal agencies’ and state governments’ attempts to regulate fossil fuel infrastructure have placed the legal system itself at odds with responsible energy system management. The courts may no longer be able to block clawbacks and recissions of legally obligated federal spending. Democrats, like clean energy developers, do not fight on a level playing field.
While Democrats are out of federal power, they should practice ambitious climate policymaking at the state level. States already have considerable ability to raise finance and build capacity for ambitious infrastructure projects ― and they might have to quickly, considering the drain of federal capacity that might support them. By developing their own public programs for transmission finance, utility-scale battery procurement, virtual power plants, and clean firm energy pilots, Democratic state governments can ensure that the ecosystem of clean energy developers created by BIL and IRA does not disappear for lack of demand — and in doing so, these states would help stabilize the cost of clean energy project development.
Finally, Democrats should not forget that climate remains a cost of living issue. In a city like New Orleans, rocked by the recent nuclear outage, residents spend, on average, over 19% of their incomes on their energy bills, over three times the DOE’s threshold to be considered an energy-burdened community. Their bills already include adders for climate adaptation and disaster preparedness ― yet, for all they spend, they still face blackouts, and their costs will only increase as their grid continues to deteriorate. Here, climate policy is not about combating Chinese supply chain dominance, or even about delivering an American industrial renaissance. It’s about keeping the lights on, keeping bills low, keeping the air clean, and keeping residents safe from disaster.
It turns out that voters all over the country still care about these goals. A majority of likely voters in the next election think climate change will have a direct impact on their or their family’s finances. This constituency is still in play — and given sharply deteriorating macroeconomic conditions, soon-to-spike electricity prices, and the ever-increasing threat of climate disaster, these cost-of-living-focused voters could be far more vocal, relevant, and hungry for change than a coalition built on vague sabre-rattling against China.
In 2022, Democrats made a valiant first attempt to transform the state itself. Perhaps it was inadequate, perhaps it was impossible to do more at the time, but that’s no reason not to think seriously about the kind of policymaking, institutional, and financial interventions that would be called for should they get a second shot at realizing that goal. The rollback of the IRA only reveals how much Democrats left on the table three years ago ― and how much farther a real climate policy could go.
Editor’s note: This story has been updated to clarify the relationship between the unplanned nuclear shutdown and the power outage in New Orleans.
