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Global Climate Politics Had a Rough 2024
In 2025, it’s time for stern resolve and bold maneuvers.
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In 2025, it’s time for stern resolve and bold maneuvers.
Five years from the emergence of the disease, the world — and the climate — is still grappling with its effects.
It’s going to be worse than 2008.
A cynical optimist’s take on the Inflation Reduction Act.
A counter-proposal for the country’s energy future.
American electricity consumption is growing for the first time in generations. And though low-carbon technologies such as solar and wind have scaled impressively over the past decade, many observers are concerned that all this new demand will provide “a lifeline for more fossil fuel production,” as Senator Martin Heinrich put it.
In response, a few policy entrepreneurs have proposed novel regulations known as “additionality” requirements to handle new sources of electric load. First suggested for electrolytic hydrogen, additionality standards would require that subsidized hydrogen producers source their electricity directly from newly built low-carbon power plants; in a Heatmap piece from September, Brian Deese and Lisa Hansmann proposed similar requirements for new artificial intelligence. And while AI data centers were their focus, the two argued that additionality “is a model that can be extended to address other sectors facing growing energy demand.”
There is some merit to additionality standards, particularly for commercial customers seeking to reduce their emissions profile. But we should be skeptical of writing these requirements into policy. Strict federal additionality regulations will dampen investment in new industries and electrification, reduce the efficiency of the electrical grid through the balkanization of supply and demand, and could become weapons as rotating government officials impose their views on which sources of demand or supply are eligible for the standards. The grid and the nation need a regulatory framework for energy abundance, not burdensome additionality rules.
After decades of end-use efficiency improvements, offshoring of manufacturing, and shifts toward less material-intensive economies, a confluence of emerging factors are pushing electricity demand back up again. For one, the nation is electrifying personal vehicles, home heating, and may do the same for industrial processes like steel production in the not-too-distant future, sparked by a combination of policy and commercial investment. Hydrogen, which has long been a marginal fuel, is attractingsubstantial interest. And technological innovation is leading to whole new sources of electric load — compute-hungry artificial intelligence beingthe most immediate example, but also large-scale critical minerals refining, indoor agriculture like alternative protein cultivation and aquaculture, and so on.
In recent years, clean energy has seemed to be on an unstoppable path toward dominating the power sector. Coal-fired generation has been in terminal decline in the United States as natural gas power plants and solar and wind farms have become more competitive. Flexible gas generation, likewise, is increasingly crowded out by renewables when the wind is blowing and the sun shining. These trends persisted in the context of stable electricity load. But even as deployment accelerates, low-carbon electricity supply may not be able to keep up with the surprisingly robust growth in demand. The most obvious — though not the exclusive — way for utilities and large corporates to meet that demand is often with new or existing natural gas capacity. Even a few coal plants have delayed retirement, reportedly in response to rising demand and reliability concerns.
Given the durable competitiveness of coal and especially natural gas, some form of additionality requirement might make sense for hydrogen production in particular, since hydrogen is not just a nascent form of electric load but a novel fuel in its own right. Simply installing an electrolyzer at an existing coal or natural gas plant could produce hydrogen that, from a lifecycle perspective, would result in higher carbon emissions, even if it displaces fossil fuels like gas or oil in final consumption. Even so, many experts caution that overly strict additionality standards for hydrogen at this stage are overkill, and may smother the industry in its crib.
Likewise, large corporate entities and electricity customers adopting additionality requirements for their own operations can bolster investment in so-called “clean firm” generation like nuclear, geothermal, and fossil fuels with carbon capture. In just the past month, Google announced plans to back the construction of new small nuclear reactors, and Microsoft announced plans to purchase electricity for new data centers from the shuttered Three Mile Island power plant, the plant made famous by the 1979 meltdown but which only closed down in 2019. Three Mile Island’s $100-per-megawatt-hour price tag would have been unthinkable just a few years ago but is newly attractive.
Notice the problem Microsoft is trying to solve here: a lack of abundant, reliable electricity generation. Outdated technology licensing, onerous environmental permitting processes, and other regulatory barriers are obstructing the deployment of renewables, advanced nuclear energy, new enhanced geothermal technologies, and low-carbon sources. Additionality fixes none of these issues. Of course, Deese and Hansmann propose “a dedicated fast-track approval process” for verifiably additional low-carbon generation supplying new sources of AI load. Yet this should be the central effort, not the after-the-fact add-on. The back and forth over additionality rules for the clean hydrogen tax credit is a case in point. The rules for the tax credit will (likely) be finalized by January, but lawsuits already loom over them. Expanding this contentious additionality requirement to apply to broad use cases will be even more contentious without solving the actual shortage data center companies care about. Conversations about additionality are a distraction and misplace the energies of policymakers and staff.
Substituting one regulatory thicket for another is a recipe for stasis. Instead of adding more red tape, we should be working to cut through it, fast-tracking the energy transition and fostering abundance.
With such broad requirements, what’s to stop future administrations from expanding them to cover electric vehicle charging, electric arc furnace steelmaking, alternative protein production, or any politically disfavored source of new demand? Could a second Trump Administration use additionality to punish political enemies in the tech industry? Could a Harris Administration do the same? What if a future administration maintained additionality standards for new sources of load, but required that the electricity come from fossil fuels instead of low-carbon sources?
Zero-sum regulatory contracts between sources of electricity supply and demand are not simply at risk of becoming a tool for handing out favors on a partisan basis — they already are one. Two pieces of model legislation proposed at the July meeting of the American Legislative Exchange Council, an organization of conservative state legislators that collaborate to write off-the-shelf legislative measures, would require public utility commissions to prioritize dispatchable generation and formally discourage intermittent renewable sources like solar and wind. One of the proposals suggests leaning on state attorneys general to extend the lifespans of coal plants threatened with retirement.
These proposals did not move forward this year, but it is unlikely that the motivating force behind them is exhausted. And whatever one thinks of the relative merits of intermittent versus firm generation, ALEC’s proposals demonstrate just how easily gamed regulations like additionality could be and the risks of relying on administrative discretion instead of universal, pragmatic rules.
This is not how the electric grid is supposed to work. The grid is, if not an according-to-Hoyle public good, a shared public resource, providing essential services to customers large and small. Homeowners don’t have to sign additionality contracts with suppliers when they buy an electric car or replace their gas furnace with an electric heat pump. Everyone understands that such requirements would slow the pace of electrification and investment in new industries. The same holds for corporate customers and novel sources of load.
The real problem facing the AI, hydrogen, nuclear, geothermal, and renewables industries is an inability to build. There are more than enough clean generators queueing to enter the system — 2.6 terawatts at last count, according to the Lawrence Berkeley National Laboratory. The unfortunate reality, however, is that just one in five of these projects will make it through — and those represent just 14% of the capacity waiting to connect. Still, this totals about 360 gigawatts of new energy generation over the next few years, much more than the predicted demand from AI data centers. Obstacles to technology licensing, permitting, interconnection, and transmission are the key bottlenecks here.
Would foregoing additionality requirements and loosening regulatory strictures on technology licensing and permitting increase the commercial viability of new or existing fossil fuel capacity, as Deese and Hansmann warn? Perhaps, on some margin. But for the foreseeable future, the energy projects and infrastructure most burdened by regulatory requirements will be low-carbon ones. Batteries, solar, and wind projects make up more than 80% of the queue added in 2023. Meanwhile, oil and gas benefit from categorical exclusions under the National Environmental Policy Act, while low-carbon technologies are subject to stricter standards (although three permitting bills recently passed the House, including one that waives these requirements for new geothermal projects).
Consider that 40% of projects supported by the Inflation Reduction Act are caught up in delays. That is $84 billion of economic activity just waiting for the paperwork to be figured out, according to the Financial Times. Additionality requirements are additional boxes to check that almost necessarily imply additional delays. Permitting reform makes them redundant and unnecessary for a cleaner future.
This underscores perhaps the most essential conflict between strict additionality requirements and clean energy abundance. Ensuring that every new policy and every new source of demand allows for absolutely zero additional fossil fuel consumption or emissions will prove counterproductive to global decarbonization in the long run. Natural gas is still reducing emissions on the margin in the United States. Over the past decade, in years with higher natural gas prices, coal generation has ticked up, indicating that the so-called “natural gas bridge” has not yet reached its terminus. Even aggressive decarbonization scenarios now expect a substantial role for natural gas over the coming decades. And in the long term, natural gas plants may prove wholly compatible with abundant, low-carbon electricity systems if next-generation carbon capture technologies prove scalable.
The United States is the world’s energy technology R&D and demonstration laboratory. If policies to prune marginal fossil fuel consumption here stall domestic investment and scaling of low-carbon technologies — as current permitting regulations already do, and proposed additionality requirements would do — then we will not only slow U.S. decarbonization, but also inhibit our ability to export affordable and scalable low-carbon technologies abroad.
Environmental progress’s surest path is in speeding up. For that to happen, we need processes that allow for rapid deployment of clean energy solutions. Expediting technology licensing, fast-tracking federal infrastructure permitting, and finding opportunities for quicker and more rational interconnections should be first and foremost.
The real solution lies in building a regulatory environment where energy abundance can flourish. Clearing the path for clean energy development, we can achieve a future where energy is affordable, reliable, and abundant—a future where the United States leads in both decarbonization and economic growth. It’s time to stop adding barriers and start speeding up progress.
Additionality isn’t just for hydrogen.
The rapid increase in demand for artificial intelligence is creating a seemingly vexing national dilemma: How can we meet the vast energy demands of a breakthrough industry without compromising our energy goals?
If that challenge sounds familiar, that’s because it is. The U.S. has a long history of rising to the electricity demands of innovative new industries. Our energy needs grew far more quickly in the four decades following World War II than what we are facing today. More recently, we have squared off against the energy requirements of new clean technologies that require significant energy to produce — most notably hydrogen.
Courtesy of Rhodium Group
The lesson we have learned time and again is that it is possible to scale technological innovation in a way that also scales energy innovation. Rather than accepting a zero-sum trade-off between innovation and our clean energy goals, we should focus on policies that leverage the growth of AI to scale the growth of clean energy.
At the core of this approach is the concept of additionality: Companies operating massive data centers — often referred to as “hyperscalers” — as well as utilities should have incentives to bring online new, additional clean energy to power new computing needs. That way, we leverage demand in one sector to scale up another. We drive innovation in key sectors that are critical to our nation’s competitiveness, we reward market leaders who are already moving in this direction with a stable, long-term regulatory framework for growth, and we stay on track to meet our nation’s climate commitments.
All of this is possible, but only if we take bold action now.
AI technologies have the potential to significantly boost America’s economic productivity and enhance our national security. AI also has the potential to accelerate the energy transition itself, from optimizing the electricity grid, to improving weather forecasting, to accelerating the discovery of chemicals and material breakthroughs that reduce reliance on fossil fuels. Powering AI, however, is itself incredibly energy intensive. Projections suggest that data centers could consume 9% of U.S. electricity generation by 2030, up from 4% today. Without a national policy response, this surge in energy demand risks increasing our long-term reliance on fossil fuels. By some estimates, around 20 gigawatts of additional natural gas generating capacity will come online by 2030, and coal plant retirements are already being delayed.
Avoiding this outcome will require creative focus on additionality. Hydrogen represents a particularly relevant case study here. It, too, is energy-intensive to produce — a single kilogram of hydrogen requires double the average household’s electricity consumption. And while hydrogen holds great promise to decarbonize parts of our economy, hydrogen is not per se good for our clean energy goals. Indeed, today’s fossil fuel-driven methods of hydrogen production generate more emissions than the entire aviation sector. While we can make zero-emissions hydrogen by using clean electricity to split hydrogen from water, the source of that electricity matters a lot. Similar to data centers, if the power for hydrogen production comes from the existing electricity grid, then ramping up electrolytic production of hydrogen could significantly increase emissions by growing overall energy demand without cleaning the energy mix.
This challenge led to the development of an “additionality” framework for hydrogen. The Inflation Reduction Act offers generous subsidies to hydrogen producers, but to qualify, they must match their electricity consumption with additional (read: newly built) clean energy generation close enough to them that they can actually use it.
This approach, which is being refined in proposed guidance from the U.S. Treasury Department, is designed to make sure that hydrogen’s energy demand becomes a catalyst for investment in new clean electricity generation and decarbonization technologies. Industry leaders are already responding, stating their readiness to build over 50 gigawatts of clean electrolyzer projects because of the long term certainty this framework provides.
While the scale and technology requirements are different, meeting AI’s energy needs presents a similar challenge. Powering data centers from the existing electricity grid mix means that more demand will create more emissions; even when data centers are drawing on clean electricity, if that energy is being diverted from existing sources rather than coming from new, additional clean electricity supply, the result is the same. Amazon’s recent $650 million investment in a data center campus next to an existing nuclear power plant in Pennsylvania illustrates the challenge: While diverting those clean electrons from Pennsylvania homes and businesses to the data center reduces Amazon’s reported emissions, by increasing demand on the grid without building additional clean capacity, it creates a need for new capacity in the region that will likely be met by fossil fuels (while also shifting up to $140 million of additional costs per year onto local customers).
Neither hyperscalers nor utilities should be expected to resolve this complex tension on their own. As with hydrogen, it is in our national interest to find a path forward.
What we need, then, is a national solution to make sure that as we expand our AI capabilities, we bring online new clean energy, as well, strengthening our competitive position in both industries and forestalling the economic and ecological consequences of higher electricity prices and higher carbon emissions.
In short, we should adopt a National AI Additionality Framework.
Under this framework, for any significant data center project, companies would need to show how they are securing new, additional clean power from a zero-emissions generation source. They could do this either by building new “behind-the-meter” clean energy to power their operations directly, or by partnering with a utility to pay a specified rate to secure new grid-connected clean energy coming online.
If companies are unwilling or unable to secure dedicated additional clean energy capacity, they would pay a fee into a clean deployment fund at the Department of Energy that would go toward high-value investments to expand clean electricity capacity. These could range from research and deployment incentives for so-called “clean firm” electricity generation technologies like nuclear and geothermal, to investments in transmission capacity in highly congested areas, to expanding manufacturing capacity for supply-constrained electrical grid equipment like transformers, to cleaning up rural electric cooperatives that serve areas attractive to data centers. Given the variance in grid and transmission issues, the fund would explicitly approach its investment with a regional lens.
Several states operate similar systems: Under Massachusetts’ Renewable Portfolio Standard, utilities are required to provide a certain percentage of electricity they serve from clean energy facilities or pay an “alternative compliance payment” for every megawatt-hour they are short of their obligation. Dollars collected from these payments go toward the development and expansion of clean energy projects and infrastructure in the state. Facing increasing capacity constraints on the PJM grid, Pennsylvania legislators are now exploring a state Baseload Energy Development Fund to provide low-interest grants and loans for new electricity generation facilities.
A national additionality framework should not only challenge the industry to scale innovation in a way that scales clean technology, it must also clear pathways to build clean energy at scale. We should establish a dedicated fast-track approval process to move these clean energy projects through federal, state, and local permitting and siting on an accelerated basis. This will help companies already investing in additional clean energy to move faster and more effectively – and make it more difficult for anyone to hide behind the excuse that building new clean energy capacity is too hard or too slow. Likewise, under this framework, utilities that stand in the way of progress should be held accountable and incentivized to adopt innovative new technologies and business models that enable them to move at historic speed.
For hyperscalers committed to net-zero goals, this national approach provides both an opportunity and a level playing field — an opportunity to deliver on those commitments in a genuine way, and a reliable long-term framework that will reward their investments to make that happen. This approach would also build public trust in corporate climate accountability and diminish the risk that those building data centers in the U.S. stand accused of greenwashing or shifting the cost of development onto ratepayers and communities. The policy clarity of an additionality requirement can also encourage cutting edge artificial intelligence technology to be built here in the United States. Moreover, it is a model that can be extended to address other sectors facing growing energy demand.
The good news is that many industry players are already moving in this direction. A new agreement between Google and a Nevada utility, for example, would allow Google to pay a higher rate for 24/7 clean electricity from a new geothermal project. In the Carolinas, Duke Energy announced its intent to explore a new clean tariff to support carbon-free energy generation for large customers like Google and Microsoft.
A national framework that builds on this progress is critical, though it will not be easy; it will require quick Congressional action, executive leadership, and new models of state and local partnership. But we have a unique opportunity to build a strange bedfellow coalition to get it done – across big tech, climate tech, environmentalists, permitting reform advocates, and those invested in America’s national security and technology leadership. Together, this framework can turn a vexing trade-off into an opportunity. We can ensure that the hundreds of billions of dollars invested in building an industry of the future actually accelerates the energy transition, all while strengthening the U.S.’s position in innovating cutting- edge AI and clean energy technology.