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The full conversation from Shift Key, episode three.
This is a transcript of episode three of Shift Key: Is Biden's Climate Law Actually Working?
ROBINSON MEYER: Hi, I'm Rob Meyer. I'm the founding executive editor of Heatmap News and you are listening to Shift Key, a new podcast about climate change and the shift away from fossil fuels from Heatmap. My co-host Jesse Jenkins will join us in a second and we'll get on with the show. But first a word from our sponsor.
[AD BREAK]
MEYER: Hi, I'm Robinson Meyer. I'm the founding executive editor of Heatmap News.
JESSE JENKINS: And I'm Jesse Jenkins, a professor at Princeton University and an expert in energy systems.
MEYER: And you are listening to Shift Key, the new podcast about climate change and the energy transition from Heatmap News. On today's show, we're going to talk about how the IRA, the Inflation Reduction Act, President Joe Biden's big climate law passed in 2022, how it's working, whether it's working. We have new data to shine light on this extremely important question. And we also are going to do as always our upshift and downshift, our thing that gave us hope this week and our thing that maybe has us feeling a little down. So Jesse, ready?
JENKINS: I'm ready. Let's dig in.
MEYER: Let's get into it. In August 2022, President Joe Biden signed the Inflation Reduction Act, the IRA. It's the largest climate law in American history and arguably in global history. And it threw the full financial power of the US federal government behind decarbonization, directing more than $500 billion in grants and tax credits toward replacing old dirty fossil fuel infrastructure with new clean zero carbon technologies. Now, when it passed, modeling, including from the REPEAT Project, which is a collaboration of ZERO Lab at Princeton University, led by my co-host Jesse Jenkins and Evolved Energy Research, a consulting firm, suggested that the law would cut US greenhouse gas emissions 37 to 41% by 2030. And I should say this research when it came out was a big deal. You don't have to take my word for it. The ZERO lab’s work was cited in the Guardian and the New York Times, by the Wall Street Journal, by legislators and by the White House itself.
And it wasn't the only kind of piece of energy modeling that we used to figure out how big a deal the IRA was. There were other reports, one from an organization called the Rhodium Group and another from a nonprofit called Energy Innovation. Now those reports really, I think at the time, helped us understand just how big a deal this law was going to be. We're now just about 18 months after the Inflation Reduction Act has been signed. And that means we're getting to a point where we can see the impact of this legislation. We can start to see whether it's working. And the REPEAT project, in conjunction with the Rhodium Group, MIT and Energy Innovation — all the groups that did this research last time have gone and conducted the first analysis of whether the law is working — our kind of first midstream assessment, 18 months in, of whether the IRA is actually reducing emissions and decarbonizing the economy like we hoped that it would. So that's what we're gonna talk about on the show. The first real analysis of whether Biden's climate law is cutting greenhouse gas emissions, with my co-host Jesse Jenkins, one of the researchers who helped us understand its potential in the first place. So Jesse, I actually want to start by backing up slightly. And before we get into this new data that you have that talks about, you know, whether the law is working, let's start with this: how is the IRA supposed to work?
JENKINS: The IRA is effectively putting clean energy on sale for all Americans. That's how it's supposed to work. It is a set of financial incentives that effectively drop the cost of just about any action you would want to take to help accelerate the clean energy transition by, you know, somewhere in the order of 20 to 50%. So it's a little bit like you know, Black Friday shopping deals or Cyber Monday or whatever your favorite sale is. It’s, you know, using the federal purse to make it easier and a smarter financial decision for households or businesses or utilities or whoever else to just make the greener investment or purchasing decision over the dirtier one.
And it's really quite comprehensive. It involves a set of incentives that cut across really all of the major emitting sectors of the economy. But in particular, all of our modeling from REPEAT Project and our colleagues at Energy innovation and Rhodium Group, indicated that the biggest emissions reductions over the next decade, in particular, would come from the power sector, electricity generation, and the transportation sector, particularly the uptake of electric vehicles.
These are two trends that were already underway before passage of the Inflation Reduction Act. And what we're looking for is evidence that those trends have basically been supercharged by the incentives provided in the act.
MEYER: And luckily my understanding is that those are exactly the two sectors we have new data on today. Is that right?
JENKINS:
That's right. So yeah, this should be a terrifying moment for any modeler — when we get to check our modeling projections against reality. But we did just that. We have data from 2023 now, courtesy of the Clean Investment Monitor Project. If you go to cleaninvestmentmonitor.org, you can check out this data yourself. This is a joint project of the MIT Center for Energy Economic Policy Research and the Rhodium Group. This is led in part by Brian Deese, who is one of the chief economic advisors to President Biden and one of the key architects of the series of laws passed in the last Congress. He was the chair of the National Economic Council and is now an innovation fellow at MIT in helping lead this project.
And what it's doing is, it's basically giving us as close to real time a look at the progress of the clean economy in the United States as I think we can get. It's basically updated every quarter and it's tracking all of the public and private investments in actuality as well as announced projects, that kind of as a leading indicator of what's coming in the future across most of the major sectors that we're talking about here. It's a really helpful data set to gauge our progress. So what we did was we took that data on zero emissions vehicle adoption — so EVs and fuel cell vehicles and plug in hybrids and clean electricity capacity additions — and compared that to what each of our three modeling groups were estimating was likely to happen after passage of the Inflation Reduction Act, and I should add the Bipartisan Infrastructure Law as well, which we were modeling you know back in 2022. So now we have year end 2023 data and the question is, how well are we tracking at least in this first year out from passage of those major laws?
MEYER: I wanna talk in a second about how confident we are that the signal that we're seeing in the data is actually the IRA or the Bipartisan Infrastructure Law, like how confident we are in the Bidenomics signal. But first, let's do the moment of truth. Let's just first get to the data. So in the power sector, what do we see?
JENKINS: What we see in the electricity sector is a new record set for zero carbon electricity generation and storage capacity additions. That's new power plant and battery storage construction. In aggregate, we saw over 32,000 megawatts or 32 gigawatts of new zero carbon generation and storage added to the US grid in 2023. That's about a 32% increase from the rate in 2022. And it edges out a previous record that we saw in 2021 of about 31.6 gigawatts.
So good news is we're setting new record growth rates in total in terms of wind and solar and battery additions. Unfortunately, that does fall on the lower end of what we were projecting in most of the modeling results. We were looking for on average about 46 to 79 gigawatts. So call it, you know, 40 to 80 gigawatts on average of additions in 2023 and 2024. And we fell short of the low end of that range right at 32.3 gigawatts. And so, unless the pace accelerates substantially in 2024, we're probably going to fall a bit behind schedule in terms of capacity additions.
MEYER: And do we have a sense of what's driving that? Because I think that's a very surprising finding, that we're behind schedule in the power sector where I think people feel pretty good generally about the pace of decarbonization or I think where the common wisdom at least is that the pace of decarbonization is like proceeding apace. What's driving this underperformance of the model?
JENKINS: So it's really the difference between solar and wind additions. The solar sector added about 18.4 gigawatts of capacity in 2023. That's up massively from just about 11 gigawatts in 2022. It's about double what we had seen in 2020 which was kind of our reference when we were doing our modeling as we started the REPEAT project in 2021. And so that's looking encouraging and in fact, is running ahead of schedule with the average pace of additions that we saw in REPEAT project results.
Batteries are growing way faster than we expected. And that helps really make the most of those solar capacity additions because solar and batteries are kind of like peanut butter and jelly, they go together quite well. And that's because solar has this nice, regular daily fluctuation, right? From the sun rising and setting. And that pairs really well with batteries, which today in a way lithium ion batteries are best suited for, you know, only a few hours of storage. So they'll charge for three or four hours in the middle of the day when we've got an abundance of sun. And then they'll discharge in the evening to help meet the evening peak of demand when everybody's coming home from work.
The batteries basically helped shift the solar output from the middle of the day to hit that evening peak. And that's, that's really helpful.
Where things are running behind schedule is really in the wind sector, where we only built about half of the peak rate, actually less than half, that we've seen historically in 2023. Additions of wind power in 2023 were only about 6.3 gigawatts, and that's down from nearly 15 gigawatts in each of 2020 and 2021.
So that's a step backwards at a time when we should be smashing new record growth rates across all of these sectors. And that's giving me the biggest concern as we look at in the next couple of years.
MEYER: And that's, I mean, last show we talked about offshore wind and the troubles in offshore wind and how it seems like some big offshore wind projects that we thought might be coming online in the middle of this decade might not be coming online till the end of the decade. But when we talk about wind underperforming in terms of the whole country over the past year, we're really still talking about onshore wind. This is like big turbines in the middle of the Great Plains, not big turbines off the coast of New York, New Jersey, right?
JENKINS: That's right. Yeah, I think I don't think we had any significant offshore wind capacity additions coming in 2024. You know, most of that we were expecting would come in between 2026 and 2030 or 2035. So this is really a story about onshore wind, where if we look at the economics of onshore wind across the country, there's a tremendous number of sites that look very economic given the incentives provided by the Inflation Reduction Act.
And unfortunately, we're just not building out at the pace that would be economically justified. And that is really an indicator that there are a substantial number of other non-economic frictions or barriers to deployment of wind in particular at the pace that we want to see.
MEYER: Before we go on, I just want to make it clear—
JENKINS: Maybe it's worth pausing and unpacking what those incentives look like. But the main one is what's known as a production tax credit that provides a payment of tax credits for every megawatt hour of clean electricity produced over the first 10 years of operations from a new facility. And that credit is worth about $28 per megawatt hour, which is getting pretty close to the average wholesale revenue that you would get just from selling your electricity. So it's basically doubling roughly, or maybe it's an 80% increase, the revenues that a wind or solar facility gets during its first 10 years of operation. And that is a huge boost in terms of the return on investment that people are seeing. And so that is the incentives that the IRA expanded and extended into the long term, you can increase it even further than that, if you meet domestic content requirements or build in so-called energy communities. And so it could be an even larger incentive worth up to 20% more than that if you meet both of those requirements.
MEYER: I was going to say, the back of the envelope number I usually hear is like a 5% increase in interest rates, is like a doubling of project cost. But if you're doubling project revenue, that actually suggests that yes, we're seeing some big non-economic factors hold up offshore wind.
JENKINS: Yeah, so it's definitely true that the increase in interest rates is sucking up some of what would have been the kind of financial tailwinds provided by the Inflation Reduction Act. And that's why I'm eager to see what our new round of modeling results looks like. But the other, I think data point here is that, you know, batteries and solar are also 100% capital investments just like wind. And so interest rates would affect all of them equally in many ways. So there has to be something unique to the wind industry here that's holding the wind sector back while solar and batteries set new growth records. I have my speculation as to what that is, I think it's, you know, three factors and I have no idea, you know what proportion we can assign to each of them.
One of the first things that's I think unique about the wind sector is that it was facing the full expiration of that production tax credit that I was mentioning. So prior to passage of the Inflation Reduction Act, which extended this credit for the long term out through into the 2030’s. We've had this on again, off again history with the production tax credit of expirations every few years. It's been around since 1994 but it's not a permanent part of the tax code. And so every few years, it's up for renewal.
But unlike the ITC, the investment tax credit that was supporting solar previously, which was also on a ramp down but was still in place when the IRA passed, the production tax credit had entirely phased out for projects that commenced construction after the end of 2021. At that point, it had been reduced to only 60% of its full value. So if you wanted to get the full value, you had to finish or start construction by the end of 2019.
And I think we can see that in the data, what that did was that pulled forward the project pipeline, the development pipeline, and encouraged everyone if they could to start their construction by the end of 2019 in order to lock in the full value of that production tax credit. And that's why I think we saw record build outs in 2020 and 2021 because everybody was finishing projects that they commenced in 2019 in order to get the full value of the credit.
MEYER: You think the first factor here is like maybe a pipeline problem, so to speak, where a ton of projects started in the pipeline in 2019, they were completed in 2020 or 2021, and now we're in this fallow period where the projects that started after the IRA passed aren't complete yet, so we don't see them showing up.
JENKINS: That's exactly right. So that's the first factor. So if that's an issue, then what we would expect to see is that the project pipeline is large now and that we would see more projects coming in 2024 and 2025 that were started as the IRA was passed.
Now the other factor that's, I think, a little bit more unique to wind is also the impacts of the supply chain disruptions that we saw around COVID, and the increase in labor costs, particularly in Western countries. And that's because the solar sector and batteries are dominated by China and other Asian manufacturing bases. Whereas wind is really still a Western-produced technology, most of the wind manufacturing is in Europe or the United States.
That's partly because these are such big components, wind turbines, missiles and towers and blades are massive. And so there's less advantage of shipping them around the world. You want to build them closer to where you need them. And so we maintain more of a manufacturing base. I think something like two thirds of all of the content of wind turbines built in the US were manufactured here, whereas we only build about 5% of the solar PV modules in the US in terms of their domestic content right now. So I think that's important because what we saw was, you know, a very different pandemic response, right, in Europe and the US versus China where China largely kept its manufacturing going for most of the pandemic. Whereas the US had, you know, these disruptions and Europe had these disruptions from lockdowns.
We had more rapid inflation, you know, labor costs were going up. And so all of that I think hit the wind industry harder than it hit batteries and solar PV. We see that in the real costs of these projects. So for the first time, we saw real cost increases for all of the technologies we're talking about: wind, solar and batteries. But already in 2023 costs are back down for modules, solar PV modules and battery packs, but they're still up for wind. So I think that's an important factor too.
MEYER: It's not only that China kept the factories going, it's that even in the post pandemic moment— I feel like this is such an important aspect of how the global economy is working right now that hasn't been fully understood— the US did a ton of demand support macro-economically. Not electricity demand, but I mean, we sent checks to people, we did expanded employment, we made sure the consumers kept spending. China really did so much less of that. And so China's pathway to growing its economy to the level that it hopes to grow it right now is entirely through expanding exports and trade.
JENKINS: And so no wonder they were pumping the supply side up, right?
MEYER: All their support has gone to the supply side. And then furthermore, there's just like this structural support to the supply side because Chinese consumers are in such poor condition, basically, that they have to export things they make is their only possibility of breaking even and growing the economy.
JENKINS: Yeah, for now, at least. I'm sure we'll come back to talk about China's transition soon. So I would say those two factors are hopefully transitory, right? The sort of supply shocks are fading. The inflation is ebbing and we should be rebuilding the pipeline.
The third factor is the one that keeps me up at night. And that's just that I worry that wind is just much more difficult to site and much more transmission-dependent than solar and batteries are.
And that's kind of a function of the physics of wind power, which is interesting. Wind speeds and solar radiation, you know, kind of vary about proportionally. The best wind sites in the country are about twice as good as the worst wind sites. And that's true for solar too, like the best solar sites in Arizona or New Mexico have about twice the resource quality as you know, Maine or, you know, somewhere else in New England. And that makes sense because the physics of the wind is driven largely by the impacts of the sun heating different parts of the planet differentially and that moves pressure and temperature around and that drives the wind.
The big difference is that solar panels convert sunlight or insulation into electricity kind of proportionally to the resource quality. So a linearly one for one kind of relationship, whereas wind turbines convert wind speeds to wind power at the wind speed cubed. So if you double the wind speed, you get about an 8x increase in the wind power generation. And what that does is it makes wind much more site-dependent than solar, right? If you have a good wind speed site, you're not just a little bit better than a bad wind speed site, you're way better. And so the best, most economic, you know, attractive projects, they have to be where it's really windy.
And that means they don't have as much flexibility about where to build and those windy locations, you know, right up and down the middle of the Great Plains, for example, tend to be a lot further from where most people live. And so they're also much more dependent on transmission to site those projects than solar projects, where you can kind of move around pretty freely across a broad area without really sacrificing much in terms of resource quality. And therefore you can pick a site that's easier to build, that has less local opposition, that happens to be closer to a transmission line. Maybe you lose 3-5% of your, you know, power output by picking that easy-to-develop-site over maybe the best one around. But it's just not that big a difference whereas for wind, it really could make or break a project.
MEYER: Last question, then I want to move on to EVs, because that's so interesting. But how much does solar and batteries need to overperform to make up for this issue we're seeing with wind?
JENKINS: So if wind can't really get back on the same track as it was in 2020 and 2021 where we're building at least 15 gigawatts a year and kind of growing steadily from there, then it's true that solar and batteries are going to have to step up and kind of fill the gap.
And I think there's a chance that could happen if we look at the results kind of extrapolating out a bit further beyond 2023. We in the REPEAT project are estimating about 26 gigawatts a year of solar additions between now and 2026. So 2023 through 2026, and about 15 gigawatts a year of wind. And so if wind can only do eight or seven, you would have to see solar growing at maybe 35 or 40 gigawatts a year.
And that's actually exactly what the US Energy Information Administration is projecting for the solar sector over the next couple of years. They're projecting that in 2024, we'll build about 44 gigawatts of utility scale solar, of both utility and distributed solar, I should say, and about a similar amount in 2025. And so there's a chance that we actually could see solar kind of over-performing and making up for wind being a laggard and that kind of gets us through the next couple of years. But the growth rate just has to keep smashing new records every year from here on out. And I don't think we can really do that if we're dependent only on solar and batteries, we need both wind and solar pulling their weight. And if the wind industry can't pick things back up, I think we're probably gonna fall short of the targets that we were seeing in our modeling.
[AD BREAK]
MEYER: I want to move now to the other sector that your new research looked at, which is EVs, transportation, vehicles. What is happening in the US vehicle sector?
JENKINS: Yeah, this is one where it's funny, you know, you mentioned that I think most people have pretty good vibes about the power sector but maybe there's some warning signs that wind is lagging. I think we've seen a lot of bad vibes on the EV sector as I wrote for Heatmap a while back.
MEYER: It’s nothing but bad vibes right now!
JENKINS: Yeah, it's just all bad vibes. And yet this is the sector that is unequivocally on track, at least compared to our modeling— maybe not compared to Ford or GM’s sales growth projections— but as a sector, compared to our modeling from REPEAT project, as well as Rhodium and Energy Innovation, the EV transition is actually moving at about the pace that we expected. And that's probably likely to be true for the next several years also, not just for 2023.
MEYER: I just wanted to pause and put a pin in this point because it shocked me when I saw the initial report and I think it is so important. In the power sector, I feel like it's mostly good vibes right now. Like people have a sense that the power sector is decarbonizing at roughly the pace we need. That seemingly is not true! In the electric car sector, in EVs, there's a sense that like EVs are in trouble, the transition is in danger, things aren't going well, it's not going as well as the Biden administration wants or thought it would. And in fact, it's going basically at the pace we thought it would happen.
I just think this is such an important, interesting thing because it is completely the opposite of, if you're just reading the paper, it's completely the opposite of what you would think.
JENKINS: Yeah. And maybe this reflects just that our modeling groups were a little bit more conservative than individual car companies were in their sales growth projections. But we look at new technology adoption and we typically apply an S-curve to that adoption where they're growing at double-digit compound annual growth rates at the beginning. But then they hit, usually, a linear phase where they're growing at a pretty steep rate but it's a straight line rather than continuing to bend upwards like an exponential curve. And what that means is that you would expect the annual growth rates, the percentage growth, to be declining even as the absolute sales growth is increasing because you're building on a much bigger base, right? You know, adding 20% to a million vehicles is easier than adding 20% to 5 million vehicles, right?
MEYER: I mean, this is like a version of the Facebook problem, right? Where eventually just enough humans are Facebook users that Facebook has to find other ways to make money. It can't just keep adding new humans every quarter.
JENKINS: Exactly. So we all modeled these uptake rates pretty similarly as this kind of S-curve where we expected growth to be strong. We expected, I think, supply chain constraints on the production side to persist a bit longer than they did in reality. So that's an interesting divergence from at least our kind of underlying thinking at REPEAT. We thought that it would be harder to ramp up manufacturing capacity as quickly as the auto industry has.
MEYER: Huh!
JENKINS: But in general, you know, we are expecting to see what we saw. Actually it’s interesting, in 2023, we actually saw the annual growth rate go up. In 2022, the growth rate for zero-emissions vehicles, and that includes EVs and plug-in hybrids as well as fuel cells (although they’re a rounding error) went up by about 43%, 44% in 2022. And that growth rate accelerated in 2023 to 52%. So despite all the vibes about slowing growth, there's actually no evidence of that, at least on an annual basis. 2023 grew faster in compound annual growth terms, percentage growth terms, than 2022. But we would expect that growth rate to decline. None of our modeling is expecting a 50% annual growth rate from every year. We would hit 100% sales in just a matter of a few years if that were the case.
Instead, we're expecting the growth rate in 2024 to 2026 to be somewhere between 30 and 44% and to fall even further to somewhere between about 15 and 27% from 2027 to 2030. You know, exactly following that S-curve where the annual growth rate is declining as we hit that linear phase.
MEYER: I just want to be clear, this is in the absence of any technology-forcing policy, like new EPA rules that say you have to sell a certain number of EVs per year.
JENKINS: We do include the states that have been following California in adopting the Advanced Clean Cars to standard, which is their requirement that by 2035, 100% of vehicles need to be zero-emissions vehicles, vehicles sold, I should say in 2035 need to be zero-emissions vehicles. And so we had included at the state level, some states like that, there's about a dozen that are following in that direction. That's maybe 30% or so of the overall vehicle market in the US. So it's not inconsequential, but it's not the only thing going on. I think we all expect that 2024 will see a slowdown from 2023. But again, that's in line with what we expected in our modeling.
What's actually really interesting, at least from the REPEAT side, is that hybrids, both plug-in hybrids and just regular hybrid electrics, are far outselling our projections from our modeling.
MEYER: The IRA has incentives for some plug-in hybrid vehicles, but it has no incentives for regular hybrid vehicles. Is that right?
JENKINS: That's right. Yeah, that's right. And that's kind of what we expected was that basically hybrids would kind of give way to EVs, and that seems to be not what we're seeing. We're seeing that actually, they're kind of additive, particularly hybrids. Where last year, I think we mentioned this on an earlier show, we sold about as many hybrid electric vehicles as we did battery electric vehicles about 1.1 or 1.2 million of each of them, and that is way higher than what we expected. I think we only expected about a 1 or 2% sale share, which is about where we were in 2019.
And instead hybrid electric vehicles have just grown right alongside EV growth, and that's encouraging from an emissions perspective because those hybrids are emitting about 40% less per mile traveled, probably, than an equivalent sized internal combustion car.
MEYER: They're also going to then go have a long life as a used car, continuing to reduce emissions.
JENKINS: So from a climate perspective, every internal combustion engine vehicle that's sold that's a hybrid instead of a regular one, that's a win.
MEYER: It is funny because I feel like on the one hand, this is surprising. And on the other hand, I can think of multiple new car consumers, like in my life, friends I know, who were buying a new car in the past two years and were EV-curious, they looked at EVs. They kind of quickly decided there were none in their price range or there were none that needed exactly what they needed them to do. And so then they bought a hybrid.
Why did they buy a hybrid? Well, because they wanted to buy an EV, and they couldn't find one they liked. So they bought a hybrid because they felt like that was on the path of the transition, which is not really a rational consumer behavior as I think you would expect from a model. But on the other hand, kind of makes sense from a certain flavor of like, “Oh, well, I wanna help with this, but I can't buy an EV yet, so I'm gonna buy a hybrid.”
JENKINS: Yeah, I mean that was my mental model too because I think that's how you think about it. If you're segmenting the market, there's a certain amount of consumer who cares about the environment, they care about the cost of fueling their vehicle or both. And so they're looking at a hybrid versus a plug-in hybrid versus an EV, and they're going to fall in that range. And our expectation was that the large incentives provided for EVs would basically shift the consumer from a hybrid to the EV. But it looks like either that's not what's happening or there's a larger market out there for EVs than even we anticipated, and it's just that right now that market is still being split between hybrids and EVs.
But there's basically twice as many consumers interested in one of those than we thought, right? Because we sold about 2.2 million hybrids and battery electric vehicles, you know, whereas we were only expecting, you know, a few 100,000 hybrids and then around that many EVs. So, you know, there's a million extra consumers out there that we didn't think would be there in the market in 2023. And again, my thinking was, look, a plug-in hybrid vehicle is always going to be more expensive than a battery electric or an internal combustion car because it's just, both drivetrains crammed into the same vehicle.
MEYER: Right.
JENKINS: It's got a pretty big battery, not as big as an EV, but it's a pretty good size one. It has to keep the internal combustion drivetrain and add the electric motors, you know, and so it's gonna be relative. It's always gonna be a cost premium over an internal combustion car. Whereas a battery electric vehicle, they're getting cheaper and cheaper every year and there's gonna be a point before too long where even the upfront cost is lower. I think the cost of ownership is already at parity, but you're gonna go to the dealership and it's just gonna be cheaper to get in a battery electric car than a internal combustion car because they're simpler to build and they have less parts and batteries are the biggest chunk of the cost and batteries keep getting cheaper year after year.
MEYER: Yeah, there's this argument you hear from Toyota executives, which I've always taken as like 70% cope. Where they say, “Oh, well, actually, you know, plug-in hybrids and regular hybrids make more sense because as long as lithium and these minerals we need for the batteries are scarce, you get more emissions reductions per ton of lithium or per ounce of lithium or per ounce of cobalt, whatever, than you do with, with a plug-in hybrid or a regular hybrid than you would with a pure battery electric vehicle. Do you think that a plug-in hybrid is this range anxiety security blanket where you're able to do a lot of your trips plug-in but, whenever you need—
JENKINS: It depends on the size of the battery. Yeah, in some ways, the plug-in hybrid is the ideal vehicle, right? If you had, you know, a 40 or 30 mile range, that covers most people's daily commute, the all year around town, driving to pick up the kids at soccer, school or whatever. And then when you need to go on a road trip, you've got your gasoline engine and you can go for as long as you want. So in some ways, it's kind of the ideal American car if you didn't think about charging infrastructure.
But of course, as we build out the charging infrastructure and as batteries get cheaper, you know, BEVS get cheaper. I think it will make sense for more and more people to just get rid of the gas part and you don't need the range extender. You know, we are a single car household. We have one EV only and our second car is an e-bike, for riding around town. You know, we put 20,000 miles on our car since we bought it in November of 2022. And we've been on many road trips and we had maybe one or two charging experiences that were suboptimal.
MEYER: [laughs]
JENKINS: But like that is such a small part of my overall driving experience on those 20,000 miles. Most of them, I just wake up in the morning and my car is full with 280 miles, 290 miles of range. That's like enough for a week. And I never have to go to the gas station! The convenience of that so outweighs the one or two frustrating experiences in a long distance trip every year, that I think most people, once they're in a battery electric vehicle, they don't miss the gas at all. We've seen actually in recent consumer reports, trends that consumers who have bought EVs are far more likely to buy a second EV than to go back to internal combustion cars.
Toyota's argument about lithium, I think is intellectually correct, I should say, if you think that lithium is in finite supply. But go look at lithium prices on the market right now. They're in freefall. We are not lithium constrained, right? So, I don't know, it's a good, nice ex post justification for Toyota’s strategy. But basically what Toyota did was they bet big on fuel cell vehicles and they've lost massively. So they're trying to recoup their position by doubling down on the one area where they do have advantage, and that's in hybrids and plug-in hybrids.
MEYER: How would you look at this big— is Paris any good or not? Yes or no, is the IRA working?
JENKINS: I would say yes, I think that we're still within the cone of growth for these sectors that we projected. So I don't think there's any evidence that we're off, you know, way off base yet. Emissions did fall in 2023 as the economy expanded for the first time since the pandemic hit, it’s lower than what we projected in our modeling. So, you know, again, it's early. We should have mentioned this much earlier on, but it's hard to know— I think you alluded this actually in your setup— how much signal there is here from the IRA.
MEYER: Yeah.
JENKINS: Because we spent most of the last 18 months writing tax credit guidance and setting up new grant programs and issuing RFPs and reviewing those and most of the money hasn't actually gotten out the door yet. And so, whatever we're seeing now is just sort of like the early stages of influence from these policies and where the real signal is going to show up is in particularly 2025 and 2026 and 2027. When you have time to build a new factory, to install a new wind farm, to expand our charging infrastructure, and really take advantage of the credits and grant programs and others that were enacted by these laws, which are really just starting to get out the door.
MEYER: One more observation, which is, it is crazy that hybrids especially— I don't want to keep going back to this and I feel like again, we're just seeding topics for a future conversation— but it is crazy that hybrids are popping off during a year when gas prices did not go up.
JENKINS: Yeah!
MEYER: Because I feel like in the past, what we've seen is the only years where Americans don't buy more SUVs, let's say, than they did the previous year, is in years like 2007 or 2022, when gas prices spike to really high, you know, previously unprecedented levels. 2023, gas prices went down.
JENKINS: Maybe the memory is still in people's minds, maybe it's the inflation and the cost of living overall is still very salient for people. And so the ability to save some money on your gas bill is still helpful even if gas is not at its peak inflation levels.
I think the other factor is just that the upfront cost of buying a hybrid has fallen so much that for many models, it's just like a total no brainer. I spend a few $100 more and I get a better car that has more power and less fuel consumption. You know, it just makes a ton of sense from an economic perspective.
MEYER: And I was thinking earlier that in some ways, the presence of battery electric vehicles really defangs conventional hybrids because it is no longer the “lib car.” I mean, I don't think that cultural politics are the entire driver here, but the presence of battery electric vehicles as kind of the new “Democrat car” for lack of a more elegant way of phrasing that particular cultural idea. Okay, what I've learned from this is we need to do like 15 more episodes on cars and we need to do another 15 more episodes on China's macroeconomy and green transition.
JENKINS: Alright, we got the next season lined out.
MEYER: Yeah, let's do Upshift and Downshift. But first, let's take a break.
[AD BREAK]
MEYER: Okay, let's do Upshift/Downshift. Jesse, what is your downshift for the week?
JENKINS: So my downshift is one of the things that I think flew under the radar for a lot of people, is that on February 15th, the US Federal Energy Regulatory Commission approved a new pipeline from Texas to Mexico that will export about 2.8 billion cubic feet of natural gas for the purposes of supplying a new liquefied natural gas plant on the Pacific coast of Mexico. You know, we talked in our first episode about the pause that the Biden administration has put on the review of new LNG export terminals in the US.
This is an export pipeline which I think falls under the same criteria of, you know, having to decide whether it's in the public interest or not. And we just approved another 2.8 billion cubic feet of exports. That's like a quarter of all of our LNG exports today! And this is going to go out as a pipeline, not as LNG, right. It'll leave the US in a pipeline but it will then go to the Pacific coast of Mexico where it will supply a new $15 billion LNG terminal that is meant to supply Asian markets, right? So the ability to get the gas to the Pacific Ocean and then go from there to Asia is, you know, quite advantageous relative to the Gulf coast terminals that we're mostly talking about in the US.
So I just thought this was really interesting, I mean, we've had this big debate in our first episode and across the energy sphere about the role of exports in the US economy of natural gas exports, and here's this really massive pipeline that just kind of snuck in under most people's radar. I almost didn't catch it. But you know, big approval last week of a 2.8 billion cubic feet per day gas export pipeline to Mexico. What’s let you down this week?
MEYER: I feel like I'm about to use a downshift that I will have to use sparingly over the next few months. The presidential election, Jesse! I'm not sure you've heard about it, but there's a presidential election in the United States of America in 2024. And it has me down. Ezra Klein published a really interesting audio essay this past week about calling for Biden to step aside and for a Democratic Convention, an open Democratic Convention later this summer to select a candidate. I think he counseled something in that, which I thought was quite wise, which was that it's February and a lot of Democrats are acting very fatalistically about their candidate, and that's kind of absurd.
It's February, it's too late to get on the primary ballot in a lot of states. But there's still many months to go before the presidential election and nothing is written. There’s still a lot of different possibilities that could happen. It’s just that the outcome of the presidential election is not yet secure. However, at this point, I think it is important to say Biden is losing, which from a strictly climate policy lens would be a really bad thing for climate policy.
And I think what has me most worried about this presidential election and, and which I think, I hope that folks listening to this and folks who were very angry at me when I posted the Ezra Klein essay— I don't know whether I agree with it, I'm not gonna take an advice standpoint here— I will say that what has been so noticeable about the campaign so far is the reluctance to use Biden and the reluctance to put Biden out in public. And that the way to dispel public concerns, which seem to be extremely widespread, understandably, about the president's age, are to have the president out there a lot, talking! Showing that he can campaign, showing that he's up to the task, and the fact that that has not happened as much over the past two weeks and the fact that the president is so unavailable— he's done fewer press conferences than both of his predecessors— I think should give a lot of folks who are interested in US politics, even solely because of climate policy, a lot of pause.
Well, let's turn this around, and what's your upshift?
JENKINS: My upshift is from Jeff Stein at the Washington Post who is an economics reporter there and has been doing some really interesting on-the-ground reporting as to the impacts of the Inflation Reduction Act and other incentives in these climate bills on, you know, local economies around the country. And so he spent some time last week in Michigan with the United Association Union of Plumbers and pipefitters in central Michigan. So this is, you know, a union that does plumbing and HVAC technicians and welding and pipe fitting. And what he found is that the demand for union jobs there is just booming, driven largely by two massive new EV battery plants that are under construction in Michigan, driven by the Inflation Reduction Act and the incentives for domestic battery manufacturing that the law provides, that includes both direct subsidies for manufacturing EVs in the US, as well as tying some of the EV tax credits to the sourcing of domestic or North American assembled batteries.
So it’s a straight line from the passage of the Inflation Reduction Act to the employment boom that they're talking about. He noted that typically this union in central Michigan has fewer than 1000 members and that these two plants alone could hire about 500 full time jobs each from their union. So the entire union would be employed building these two battery plants. And clearly that's gonna create new jobs and new opportunities for union work and well-paid family-supporting jobs in Michigan. I think that that story is playing out across the country. That’s hopefully encouraging in the long term for the politics of the clean energy transition because when people see the clean energy transition as something that's fueling their economic future and not just as about avoiding scary future climate outcomes, I think that has a strong amount of durability and a lot of political salience.
MEYER: I am so curious though to see whether these— I mean, unions are now, the federal government has passed a ton of policy that increases demand for union workers, and like a lot of these unions have to grow in a way they have not been asked to grow in a long time. And I'm so curious to see how that happens.
JENKINS: So, what about you, Rob? Do you have something to close us out on and keep us a little bit more positive than that electoral news?
MEYER: There's a really interesting study that came out earlier this month in the Journal Earth's Future by Mallory L. Barnes et al, she's a scholar at Indiana University in Bloomington, that looked at this question that I think has kind of hung over some climate data for a long time, which is when you look at these global maps of temperature rise and how much different parts of the planet have experienced global warming, often the least amount of warming has happened in the Eastern United States. And you'll sometimes even hear this called “a warming hole” that while the rest of the planet seems to be experiencing, you know, varying levels of global warming and especially at the poles, quite extreme levels of global warming, the Eastern US, which of course, is this extremely important area, if you're talking about global climate policy, the Eastern US isn't experiencing as much warming, at least compared to other places in the world.
So what this study found, the study is called “A Century of Reforestation Reduced Anthropogenic Warming in the Eastern United States.” What the study found is that basically in the Southeast US, especially, a lot of land that used to be tillage or farmland has since become reforested. And that reforestation drives local cooling and that has mitigated a lot of the global warming we'd otherwise expect to see, and that’s why recent temperatures have been cooler than we might have expected with global warming. And so the abstract says, “Ground and satellite-based observations showed that Eastern United States forests cool the land service by 1 to 2 °C annually compared to nearby grasslands and crop lands, with the strongest cooling effect during midday in the growing season when cooling is 2 to 5 °C.”
I just found that really fascinating. Of course, it raises lots of adaptation questions like should we be doing more reforestation in other places in order to generate local cooling in those places? Reforestation has, while not a silver bullet by any means, does also have climate benefits as well. You know, carbon cycle benefits. And so I just thought that was such a cool study and while it might not be kind of encouraging in the conventional sense in the same way that maybe yours was, I just found it to be so engrossing. It made me think about processes being connected to each other in ways I maybe hadn't thought about before. I thought it was really cool.
JENKINS: That is really fascinating. Those are not small effects. Those are quite substantial. So that's really quite interesting. I'm glad you shared that. I've heard a lot of conversation about urban forestation as an adaptation measure, right? Adding urban tree canopies does have appreciable impacts on local heat island effects that you see in cities, and that's maybe an important area of adaptation policy. Some of my colleagues here at Princeton are exploring those kinds of dynamics and there's a lot of interest there. But this is interesting. This is almost continental scale effects, right?
MEYER: Exactly.
JENKINS: Across a broad region for reforestation, not just in cities. So, wow, that's, that's really interesting. Thanks for sharing.
MEYER: Well, Jesse, I feel like we have so much here. There's just like 10 different things we could talk about next week. And I know I want to talk about China, I know I want to talk more about electric vehicles, I want to talk about transportation policy, maybe reforestation.
JENKINS: Yeah, there is so much to unpack here on Shift Key. I hope you all join us again next week as we dive in again.
MEYER: Thank you for listening to Shift Key.
[AD BREAK]
MEYER: Shift Key is a production of Heatmap News. The podcast was edited by Jillian Goodman. Our editor in chief is Nico Lauricella, multimedia editing and audio engineering by Jacob Lambert and Nick Woodbury. Our music is by Adam Kromelow. Thanks so much for listening and see you next week.
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In defense of “everything bagel” policymaking.
Writers have likely spilled more ink on the word “abundance” in the past couple months than at any other point in the word’s history.
Beneath the hubbub, fed by Ezra Klein and Derek Thompson’s bestselling new book, lies a pressing question: What would it take to build things faster? Few climate advocates would deny the salience of the question, given the incontrovertible need to fix the sluggish pace of many clean energy projects.
A critical question demands an actionable answer. To date, many takes on various sides of the debate have focused more on high-level narrative than precise policy prescriptions. If we zoom in to look at the actual sources of delay in clean energy projects, what sorts of solutions would we come up with? What would a data-backed agenda for clean energy abundance look like?
The most glaring threat to clean energy deployment is, of course, the Republican Party’s plan to gut the Inflation Reduction Act. But “abundance” proponents posit that Democrats have imposed their own hurdles, in the form of well-intentioned policies that get in the way of government-backed building projects. According to some broad-brush recommendations, Democrats should adopt an abundance agenda focused on rolling back such policies.
But the reality for clean energy is more nuanced. At least as often, expediting clean energy projects will require more, not less, government intervention. So too will the task of ensuring those projects benefit workers and communities.
To craft a grounded agenda for clean energy abundance, we can start by taking stock of successes and gaps in implementing the IRA. The law’s core strategy was to unite climate, jobs, and justice goals. The IRA aims to use incentives to channel a wave of clean energy investments towards good union jobs and communities that have endured decades of divestment.
Klein and Thompson are wary that such “everything bagel” strategies try to do too much. Other “abundance” advocates explicitly support sidelining the IRA’s labor objectives to expedite clean energy buildout.
But here’s the thing about everything bagels: They taste good.
They taste good because they combine ingredients that go well together. The question — whether for bagels or policies — is, are we using congruent ingredients?
The data suggests that clean energy growth, union jobs, and equitable investments — like garlic, onion, and sesame seeds — can indeed pair well together. While we have a long way to go, early indicators show significant post-IRA progress on all three fronts: a nearly 100-gigawatt boom in clean energy installations, an historic high in clean energy union density, and outsized clean investments flowing to fossil fuel communities. If we can design policy to yield such a win-win-win, why would we choose otherwise?
Klein and Thompson are of course right that to realize the potential of the IRA, we must reduce the long lag time in building clean energy projects. That lag time does not stem from incentives for clean energy companies to provide quality jobs, negotiate Community Benefits Agreements, or invest in low-income communities. Such incentives did not deter clean energy companies from applying for IRA funding in droves. Programs that included all such incentives were typically oversubscribed, with companies applying for up to 10 times the amount of available funding.
If labor and equity incentives are not holding up clean energy deployment, what is? And what are the remedies?
Some of the biggest delays point not to an excess of policymaking — the concern of many “abundance” proponents — but an absence. Such gaps call for more market-shaping policies to expedite the clean energy transition.
Take, for example, the years-long queues for clean energy projects to connect to the electrical grid, which developers rank as one of the largest sources of delay. That wait stems from a piecemeal approach to transmission buildout — the result not of overregulation by progressive lawmakers, but rather the opposite: a hands-off mode of governance that has created vast inefficiencies. For years, grid operators have built transmission lines not according to a strategic plan, but in response to the requests of individual projects to connect to the grid. This reactive, haphazard approach requires a laborious battery of studies to determine the incremental transmission upgrades (and the associated costs) needed to connect each project. As a result, project developers face high cost uncertainty and a nearly five-year median wait time to finish the process, contributing to the withdrawal of about three of every four proposed projects.
The solution, according to clean energy developers, buyers, and analysts alike, is to fill the regulatory void that has enabled such a fragmentary system. Transmission experts have called for rules that require grid operators to proactively plan new transmission lines in anticipation of new clean energy generation and then charge a preestablished fee for projects to connect, yielding more strategic grid expansion, greater cost certainty for developers, fewer studies, and reduced wait times to connect to the grid. Last year, the Federal Energy Regulatory Commission took a step in this direction by requiring grid operators to adopt regional transmission planning. Many energy analysts applauded the move and highlighted the need for additional policies to expedite transmission buildout.
Another source of delay that underscores policy gaps is the 137-week lag time to obtain a large power transformer, due to supply chain shortages. The United States imports four of every five large power transformers used on our electric grid. Amid the post-pandemic snarling of global supply chains, such high import dependency has created another bottleneck for building out the new transmission lines that clean energy projects demand. To stimulate domestic transformer production, the National Infrastructure Advisory Council — including representatives from major utilities — has proposed that the federal government establish new transformer manufacturing investments and create a public stockpiling system that stabilizes demand. That is, a clean energy abundance agenda also requires new industrial policies.
While such clean energy delays call for additional policymaking, “abundance” advocates are correct that other delays call for ending problematic policies. Rising local restrictions on clean energy development, for example, pose a major hurdle. However, the map of those restrictions, as tracked in an authoritative Columbia University report, does not support the notion that they stem primarily from Democrats’ penchant for overregulation. Of the 11 states with more than 10 such restrictions, six are red, three are purple, and two are blue — New York and Texas, Virginia and Kansas, Maine and Indiana, etc. To take on such restrictions, we shouldn’t let concern with progressive wish lists eclipse a focused challenge to old-fashioned, transpartisan NIMBYism.
“Abundance” proponents also focus their ire on permitting processes like those required by the National Environmental Policy Act, which the Supreme Court curtailed last week. Permitting needs mending, but with a chisel, not a Musk-esque chainsaw. The Biden administration produced a chisel last year: a NEPA reform to expedite clean energy projectsand support environmental justice. In February, the Trump administration tossed out that reform and nearly five decades of NEPA rules without offering a replacement — a chainsaw maneuver that has created more, not less, uncertainty for project developers. When the wreckage of this administration ends, we’ll need to fill the void with targeted permitting policies that streamline clean energy while protecting communities.
Finally, a clean energy abundance agenda should also welcome pro-worker, pro-equity incentives like those in the IRA “everything bagel.” Despite claims to the contrary, such policies can help to overcome additional sources of delay and facilitatebuildout.
For example, Community Benefits Agreements, which IRA programs encouraged, offer a distinct, pro-building advantage: a way to avoid the community opposition that has become a top-tier reason for delays and cancellations of wind and solar projects. CBAs give community and labor groups a tool to secure locally-defined economic, health, and environmental benefits from clean energy projects. For clean energy firms, they offer an opportunity to obtain explicit project support from community organizations. Three out of four wind and solar developers agree that increased community engagement reduces project cancellations, and more than 80% see it as at least somewhat “feasible” to offer benefits via CBAs. Indeed, developers and communities are increasingly using CBAs, from a wind farm off the coast of Rhode Island to a solar park in California’s central valley, to deliver tangible benefits and completed projects — the ingredients of abundance.
A similar win-win can come from incentives for clean energy companies to pay construction workers decent wages, which the IRA included. Most peer-reviewed studies find that the impact of such standards on infrastructure construction costs is approximately zero. By contrast, wage standards can help to address a key constraint on clean energy buildout: companies’ struggle to recruit a skilled and stable workforce in a tight labor market. More than 80% of solar firms, for example, report difficulties in finding qualified workers. Wage standards offer a proven solution, helping companies attract and retain the workforce needed for on-time project completion.
In addition to labor standards and support for CBAs, a clean energy abundance agenda also should expand on the IRA’s incentives to invest in low-income communities. Such policies spur clean energy deployment in neighborhoods the market would otherwise deem unprofitable. Indeed, since enactment of the IRA, 75% of announced clean energy investments have been in low-income counties. That buildout is a deliberate outcome of the “everything bagel” approach. If we want clean energy abundance for all, not just the wealthy, we need to wield — not withdraw — such incentives.
Crafting an agenda for clean energy abundance requires precision, not abstraction. We need to add industrial policies that offer a foundation for clean energy growth. We need to end parochial policies that deter buildout on behalf of private interests. And we need to build on labor and equity policies that enable workers and communities to reap material rewards from clean energy expansion. Differentiating between those needs will be essential for Democrats to build a clean energy plan that actually delivers abundance.
On DOE grants, OPEC, and construction costs
Current conditions: Air quality alerts remain in effect for the entire state of Minnesota through Monday evening due to wildfire smoke from Manitoba • An enormous dust storm is blowing off the Sahara Desert and could reach the Gulf Coast this week • Northern lights were visible on camera as far south as Florida on Sunday. You’ll have another chance to see them tonight.
In case you missed it, the Department of Energy canceled nearly $4 billion in funds for industrial and manufacturing projects on Friday. Many of the projects had been planned in rural or conservative areas, including $500 million awarded to ExxonMobil and Calpine’s carbon capture project in Baytown, Texas. A DOE spokesperson said in the announcement that the 24 canceled grants were for projects that “were not economically viable and would not generate a positive return on investment of taxpayer dollars.”
None of the awardees responded to my colleague Emily Pontecorvo’s inquiries about whether they plan to pursue legal challenges, but she did note in her analysis one critic of the Trump administration’s move who described it as “dismantling” the clean energy economy and “giving away the future of manufacturing.” Emily also observed a notable absence from the DOE’s list of canceled grants: steelmaking company Cleveland Cliffs, which she reported last month was in the process of renegotiating its award under the Industrial Demonstration Program.
This weekend, the eight members of OPEC+ announced that they would continue to increase oil production in July, the third straight month in a row. The group’s target is an additional 411,000 barrels a day, or more than three times what it had previously planned, AFP reports, though analysts expect the actual production amount will be less.
The increases have followed a period of low production by Saudi Arabia, though The New York Times notes that the Saudis and other OPEC+ members like the United Arab Emirates “had chafed because some members, including Iraq and Kazakhstan, had exceeded their ceilings. The Saudis are now sending a message that they will not restrain output if others don’t.” Though the prices for Brent crude have fallen this year by around 16%, the Times adds that the Saudis, “who have low costs, can still make money at those levels” even as shale drillers in the U.S. have slowed. OPEC produces approximately 40% of the global crude oil supply, with oil and gas operations accounting for around 15% of total energy-related emissions worldwide.
The average energy infrastructure project costs 40% more than expected for construction and takes nearly two years longer to complete than initially planned, according to a new study of 662 such projects in 83 countries by the Boston University Institute for Global Sustainability, published in the journal Energy Research & Social Science. Nuclear power plants were the worst offenders, with construction costing 102.5% more on average, or $1.56 billion more than expected. Hydrogen, carbon capture and storage, and thermal power plants that rely on natural gas were also among higher-risk infrastructure projects, the study found. “I’m particularly struck by our findings on the diseconomies of scale, with projects exceeding 1,561 megawatts in capacity demonstrating significantly higher risk of cost escalation,” Hanee Ryu, one of the researchers, said. “This suggests that we may need to reconsider our approach to large-scale energy infrastructure planning, especially as we commit trillions to global decarbonization efforts.”
Solar energy and transmission projects, on the other hand, had the lowest investment risks for construction and time costs, and are often completed ahead of schedule and for less than expected, the research found. Wind, similarly, “performed favorably in the financial risk assessment.” You can read the full report here.
Airline industry decarbonization goals are “in peril,” according to comments made by the International Air Transport Association’s senior vice president for sustainability, Marie Owens Thomsen, at a trade conference in India on Sunday. While several major aviation groups have set 2050 as the goal for achieving net-zero carbon emissions for air travel, Owens Thomsen specifically cited the Trump administration’s policies as “obviously a setback,” Barron’s reports.
Programs to support the development of sustainable aviation fuels are also in jeopardy. The European Union requires carriers to include 2% lower-emission biofuel in their fuel mix starting this year, but Owens Thomsen said the cheap cost of oil is still diminishing the “sense of urgency that people have.” She expected a $4.7 trillion investment in SAF would be needed to meet the 2050 emission goals. “It is entirely achievable,” she went on, calling the money involved “very comparable to the money that was involved in creating the previous new energy markets, notably, obviously, wind and solar.”
Tesla is no longer the best-selling electric vehicle in Canada. Late last week, GM announced it has officially taken the crown as the “#1 EV seller” in the country, following a surge in sales of 252% in the first three months of the year, led by the Chevy Equinox EV.
Though Tesla’s dethroning is also indicative of the brand’s diminished reputation abroad — Electrek notes Tesla registered just 542 cars in Quebec, the country’s top EV market, in the first quarter of 2025 — the numbers also reflect GM’s successes, with even sales of its GMC Hummer EV Pickup up 232%. Combined Q1 EV sales in Canada were nevertheless still down significantly, to 5,750 from 15,000 EV sales in Q4, Electrek adds, a dip attributable to Quebec’s pause on federal EV incentives between February and April.
NOAA
Happy second day of meteorological summer! It could be a toasty one: The National Oceanic and Atmospheric Administration’s Climate Prediction Center expects hotter-than-average temperatures across much of the Southwest and Northeast this year.
Justice Brett Kavanaugh’s decision in the case of Seven County Infrastructure Coalition v. Eagle County, Colorado enlists the nation’s highest court in the campaign to reform federal environmental enforcement.
A new chapter opened for one of the country’s most important environmental laws this week.
On Thursday, the Supreme Court transformed the National Environmental Policy Act, or NEPA, an environmental permitting law that affects virtually every decision that the federal government makes. The quasi-unanimous ruling limits the law’s scope and cuts off future avenues for challenging energy and infrastructure projects under the law.
It could reshape the scale of legal challenges that projects could face in the future, giving the Trump administration — and any successive administration — greater leeway to approve energy projects.
Under NEPA, federal agencies must study the environmental impacts of their decisions before they make them. The strictest studies can run into the hundreds of pages, and they can take years to complete.
But in what was essentially an 8-0 decision, the Court ruled that federal agencies almost never need to analyze the second-order environmental effects of their decisions. In other words, an agency need only study the environmental impact of a project itself — be it a pipeline, a solar farm, or, in the case at issue, a railroad — and not its metaphorically downstream consequences. That remains the case even if a given project might indirectly make it much easier to do something with a big environmental footprint, such as drilling for oil or natural gas.
That is the clearest effect of the ruling. But Justice Brett Kavanaugh, writing for the court’s conservative majority, went much further than that summary alone suggests. In a broad and forceful ruling, he told lower courts that they should stop nitpicking the environmental studies that federal agencies must publish under NEPA to justify their own decision-making. Courts should, instead, defer to federal agencies as much as is reasonable when reviewing a NEPA study. “The goal of the law,” he writes, “is to inform agency decision-making, not to paralyze it.” (Justice Neil Gorsuch recused himself from the case because of his connection to an oil magnate who could have benefited from the ruling.)
That suggests a significant change is coming to how the court system interprets NEPA, a law that is little known to the general public but that plays a defining role in how federal agencies make decisions or approve infrastructure projects. NEPA creates a procedural requirement that federal agencies study the environmental impact of any “major decision,” but that category is so broad that it affects virtually everything the federal government does — spend money, write a new regulation, or approve a new project on federal land. The law and the yearslong lawsuits that it spawns have been blamed for delays in building solar farms and transmission lines, but also oil refineries and gas pipelines.
Kavanaugh’s ruling is “pretty striking for just how strident it is, and how assertively it tries to shut the door on further NEPA litigation,” Nicholas Bagley, a University of Michigan law professor who studies the permitting system, told me. Kavanaugh’s message to lower courts is, in essence, “We keep telling you to knock it off. You keep not listening. So knock it the fuck off,” Bagley said.
At the very least, the ruling suggests that a new phase in the effort to reform the country’s permitting laws has arrived. Now that movement has, in essence, been blessed by the Supreme Court.
The case in question — Seven County Infrastructure Coalition v. Eagle County, Colorado — concerns an 88-mile railroad proposed to connect the Uinta Basin in eastern Utah to the national freight rail network. In 2021, the Surface Transportation Board, a federal agency that regulates railroads, approved the project after completing a roughly 3,600-page study of the railroad’s potential environmental impact.
Almost immediately, environmental groups argued that the board’s study did not go far enough. The ground beneath the Uinta Basin is rich in a waxy and particularly carbon-intensive crude oil; right now, very little of that oil is extracted because the only way to get it out is by truck, along windy mountain roads. The railroad, if built, would allow for much larger volumes of crude to be transported out of the basin and sent to Gulf Coast refineries. Building the railroad, in other words, would indirectly increase local oil extraction, and thereby raise global greenhouse gas emissions.
The board argued that its NEPA study did not need to consider these downstream effects because the board itself does not regulate oil extraction — that is, it regulates the building of railroads, not what gets moved on them.
The eight justices agreed that the board was right: It didn’t have to consider the effects of second-order oil drilling when it approved the railroad. (The railroad remains on hold for other reasons, Sambhav Sankar, a senior vice president at Earthjustice, told me.) But by going further in his ruling, Kavanaugh entered into a running debate about the role of NEPA and other permitting laws in the American economy.
NEPA was never meant to play the commanding role that it does today, Kavanaugh writes. When it was first signed into law in 1970, NEPA was meant to act as a “purely procedural” check on federal decision-making. Agencies were supposed to conduct environmental studies, make their decisions, then move on. But in a famous 1971 ruling concerning a proposed nuclear power plant in Maryland, Judge Skelly Wright of the D.C. Circuit Court of Appeals transformed the law. He found that agencies had to carry out NEPA’s procedural requirements “to the fullest extent possible,” and crucially that courts could reject agencies’ analysis for lack of completeness.
Over the years, as hundreds of cases following Wright’s have added up, NEPA has turned into a “fearsome project killer,” Bagley said. Agencies spend decades of person-power and hundreds of thousands of dollars to prepare fastidious environmental reviews of their decisions. Any new infrastructure project or new policy change — even New York City’s congestion charge — requires some form of NEPA study.
Many conservatives have long opposed the modern NEPA process. But in recent years, some liberals have joined them, arguing that the law primarily slows down clean energy infrastructure and encourages NIMBYism. In practice, they say, NEPA acts as more of hindrance to the clean economy than the old fossil fuel economy: Because of a 2005 law, most oil and gas drilling has been exempt from the NEPA process, while wind farms, solar plants, and other forms of zero-carbon energy infrastructure still have to face it. Environmental groups rebut that the law is a useful tool to slow down fossil fuel pipelines, which do not generally get a NEPA exemption.
Data supports the idea that NEPA holds back clean energy projects, but that is partly because it holds back so many kinds of projects. The R Street Institute, a center-right think tank, has found that 42% of projects stalled by NEPA involved green infrastructure or conservation. Another analysis from the Center for Growth and Opportunity at Utah State University found that it takes more than two years on average for federal agencies to complete environmental reviews of solar and wind projects. Reviews for new hydroelectric or nuclear power plants take even longer.
Kavanaugh, in essence, rejects all of this. NEPA was never supposed to block or hinder large-scale energy or infrastructure projects, he writes; it was meant to “inform agency decision-making, not to paralyze it.”
“A 1970 legislative acorn has grown over the years into a judicial oak that has hindered infrastructure development ‘under the guise’ of just a little more process,” he says. When federal agencies write environmental studies under NEPA, courts should broadly defer to the decisions that they make. And even if an agency gets something wrong in its study or omits something important, that does not mean the entire study — and the decision that it justifies — should be thrown out. (There’s some irony to Kavanaugh’s call for deference to agencies here, given that the Supreme Court rejected the idea that agency regulations deserve deference last year.)
“What’s notable for me is that they didn’t just rule on the case,” Sankar, the Earthjustice lawyer told me. (Earthjustice participated in the case.) “They decided to take a broad swipe at NEPA itself, really unnecessarily.”
Alexander Mechanick, a senior policy analyst at the Niskanen Center and former White House regulatory official, agreed with Sankar about the scope of the ruling. The court’s decision “does communicate over and over again, with a heavy hand, a real desire to get lower courts out of the business of fly specking the environmental impact assessments,” he told me.
It’s this forthrightness that seems to announce a new era of NEPA jurisprudence — one where the courts will accept a level of environmental review that they may have once rejected. In a way, Kavanaugh’s ruling is a fitting sequel to Wright’s 1971 decision in that both set the tone and capture the overarching environmental concerns of their respective eras, Bagley said.
Half a century ago, Judge Wright wanted to make sure that the American public could slow the wave of infrastructure that threatened to overwhelm the country’s landscape. NEPA represented “the commitment of the government to control, at long last, the destructive engine of material ‘progress,’” he wrote, asserting that judges must make sure the law’s goals are not “lost or misdirected in the vast hallways of the federal bureaucracy.”
Now, Kavanaugh seems to fear that progress itself has been held up. He writes that the modern NEPA process, with its cycles of “speculation and consultation and estimation and litigation,” has slowed down infrastructure projects and driven up their cost. He can sound more like an op-ed writer than a legal scholar as he lays out the law’s consequences in the ruling:
Fewer projects make it to the finish line. Indeed, fewer projects make it to the starting line. Those that survive often end up costing much more than is anticipated or necessary, both for the agency preparing the EIS and for the builder of the project. And that in turn means fewer and more expensive railroads, airports, wind turbines, transmission lines, dams, housing developments, highways, bridges, subways, stadiums, arenas, data centers, and the like. And that also means fewer jobs, as new projects become difficult to finance and build in a timely fashion.
In this declaration, Kavanaugh seems to put himself on the side of a growing and tenuously bipartisan movement to reform NEPA. A 2023 debt ceiling bill, signed by President Biden, included modest reforms to the NEPA process, imposing page limits and deadlines on the strictest forms of environmental studies. A more sweeping bipartisan effort to change the law failed last year. Now, House Republicans are taking their own crack at revising NEPA, creating an optional and more expensive permitting “fast track” for developers in the reconciliation bill.
Sankar, whose organization has championed NEPA, argues that the ruling’s practical upshot will be to allow the Trump administration greater leeway to build fossil fuel infrastructure. Kavanaugh’s ruling exhibits “a shocking disregard for the realpolitik of what's going on with this administration in particular,” he said.
“As we’ve been saying all along, NEPA gets demonized as the problem,” Sankar said. With the law’s role reduced, “I think people will see that there are a lot of other things that are the problem here, and taking federal agency expertise out of the equation is not going to hurry things up.” He added that state and local governments often rely on federal NEPA reports for their own analyses, and now those reviews may be less trustworthy.
Bagley, who has generally supported permitting reform efforts, agreed that NEPA is just one of several laws holding back clean energy projects nationwide. But it is an important one, he said, and reducing its scope will likely allow more projects to happen. He added that by changing it, advocates will learn of additional bottlenecks that are holding back construction — including laws that nobody has noticed yet because they were previously less important than NEPA. Advocates can also now focus their attention on state and local barriers to building.
“If you want to look at the permitting burdens across the United States, probably 80% to 90% of them are state and local. This [ruling] isn’t going to inaugurate a new era of American dynamism,” Bagley said. “It’s a small step in the right direction.”