he Committee for Economic Development (CED), the public policy center of The Conference Board, has issued a new Solutions Brief, The Role of Markets in Reaching Net Zero. It offers recommendations to achieve net zero by 2050 as seamlessly as possible, while ensuring reliable, affordable access to energy for economic growth.
The Solutions Brief—the latest in CED's Sustaining Capitalism series—comes as the world struggles to meet the goals set by the Paris Agreement to reduce the risks and impacts of climate change. Even if all countries fully comply with their current emissions reductions plans, emissions will rise 9% above 2010 levels by 2030.
As the Solutions Brief emphasizes, market mechanisms and innovation play an essential role in driving adoption of new technologies and promoting the ultimate goal: to shift the energy mix while driving growth and human prosperity.
"Only through greater reliance on and sensitivity to the workings of markets will the US be able to reach net zero, accelerate innovation, stimulate markets eager for that innovation, and maintain US competitiveness," said John Gardner, Vice President, Public Policy at CED.
Key Recommendations
Policymakers and the business community will need to work together to ensure that the energy transition succeeds in a way that spurs global and US economic growth while recognizing the social costs of the transition. CED's recommendations include:
The power of markets and using federal funding wisely
- Generous tax credits in the Inflation Reduction Act (IRA) cannot (and should not) remain part of the tax code forever. The best use of the credits is to incentivize companies to make further innovations to bring new technologies to scale and develop compelling options that the market will eagerly take up—making net-zero options truly economically sustainable.
- Determining whether these credits spur further development of technologies at scale and at lower cost will require expanded research and investment, continuous oversight of projects funded and credits given through the IRA, and transparency of rules for credit use.
- Regulations should be based on sound science; promote competition; and propose practical, actionable steps clear to regulated entities. Regulations should be as technology neutral as possible to avoid skewing market incentives, focus on intended outcomes rather than favored choices, and encourage all options for decarbonization.
Fossil fuels and methane
- Natural gas is a highly effective fuel for the transition. Simply switching from unabated coal (in which carbon is not captured) to gas brings about at least a 30% reduction in emissions.
- The current review of natural gas exports should permit the US to increase exports of liquefied natural gas to promote both global energy security and emissions reductions.
- Methane emissions in both the oil and gas and agri-food sectors should be addressed through actions in both the public and private sectors, such as by reducing leaks in wellheads and related systems, and greater adoption of regenerative agriculture.
Carbon markets
- While there are many ways to design carbon markets, the basic principles of a system for the US should include revenue neutrality so that the system becomes self-funding; promoting net-zero carbon; a bias for simplicity; and ensuring fairness, which includes concepts such as a carbon border adjustment mechanism to maintain US competitiveness.
- Other factors that will need to be considered include regional coordination to account for differences between states that rely heavily on energy production and those that do not, and pricing mechanisms with sensitivity to those most impacted by higher costs from higher prices on carbon, including the poorest and most disadvantaged Americans.
- Policymakers should develop such a plan in coordination with the private sector.
- Voluntary carbon markets offer an important way for business to participate in emissions reductions. As these markets grow, it will be essential to ensure that carbon credits are of high quality and deliver the promised emissions reductions.
Technologies for emissions reductions
- Despite challenges, carbon capture and storage (CCS) offers great potential—if it can be scaled—in both natural and engineered solutions. Both public and private research efforts should continue, including for direct air capture and for energy storage.
- The US should support international efforts through the Carbon Management Challenge.
- While maintaining its focus on safety, the US should remain at the forefront of the global nuclear renaissance, promoting nuclear power through permitting reforms and finding a solution for the long-term storage of nuclear waste.
- Permitting reform will speed adoption of renewables by reducing the backlog of requests for interconnection awaiting approval and facilitating faster expansion of the power grid.
The role of business leaders
- Businesses of all sizes can take significant steps to reduce energy consumption and improve energy efficiency in operations and invest in research and development (R&D) related to the energy transition; most can recognize achieving net zero as a business imperative.
About The Conference Board
The Conference Board is the member-driven think tank that delivers Trusted Insights for What's Ahead®. Founded in 1916, we are a non-partisan, not-for-profit entity holding 501(c)(3) tax-exempt status in the United States. ConferenceBoard.org
The Committee for Economic Development (CED) is the public policy center of The Conference Board. The nonprofit, nonpartisan, business-led organization delivers well-researched analysis and reasoned solutions in the nation's interest. CED Trustees are chief executive officers and key executives of leading US companies who bring their unique experience to address today's pressing policy issues. Collectively, they represent 30+ industries and over 4 million employees. ConferenceBoard.org/us/Committee-Economic-Development
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