A handful of energy policies can drive deep decarbonization across all sectors of the economy, but they must be properly designed and implemented. Six policy design best practices can ensure energy policies have their intended impact in accelerating clean energy and reducing emissions. This presentation walks through each policy design best practice, and offers examples of their application to transportation sector policies.

1. 1
POLICIES THAT
WORK
2016 EDITION

2. 2
WHY POLICY?
Peter Essick, National Geographic NREL
CLEANLINESS

3. 3
WHY POLICY?
SECURITY

4. 4
WHY POLICY?
PRODUCTIVITY

5. 5
THREE COMPLEMENTARY TYPES OF ENERGY
POLICY
Performance
Standards
Support
for R&D
Economic
Signals
Create markets for
Reduce costs of

6. 6
ECONOMIC SIGNALS
Advantages:
 Markets allowed to find the lowest
cost solution
 Reduced government interference
 Prices affect decisions about the
purchase and usage of
technologies, and these reinforce
each other
Disadvantages:
 Some sectors are resistant to price
signals (ex. split incentives)
 Setting a ‘true’ price can be
politically difficult
 For some consumers, energy prices
do not affect their behavior
 Costs still too low to matter
 No alternative option
Set the price of energy to reflect its ‘true value’

7. 7
PERFORMANCE STANDARDS
Advantages:
 Proven very effective, historically
 Overcomes market barriers
 Stimulates technological
innovation
 Accelerates market saturation
Disadvantages:
 If poorly-designed, may
unintentionally induce
unreasonable prices
 If well-design, may fail to change
consumer behavior…
 Or inadvertently affect the
wrong behavior
 Ex: rebound effect
Set requirements for technology performance

8. 8
SUPPORT FOR R&D
Advantages:
 Accelerating innovation can…
 Spur private investment
 Create news jobs and businesses
 Increase the number of
alternatives, drives ‘healthy
competition’
Disadvantages:
 Energy R&D is enormously
underfunded
 <0.5% of both the U.S. federal
budget and U.S. private sector
expenses
 Scale of investment needed is too
financially risky for private companies
 Some technologies have benefits that
are currently not monetized
 Ex: pollution reduction
Invest in and assist early-stage technologies

9. 9
DESIGNING POLICIES THAT WORK
There is global experience in good and bad energy policy
Japan’s current FIT: $0.25/kWh
Dubai solar PPA: $0.03/kWh
Mexico solar PPA: $0.05/kWh

10. 10
SIX POLICY DESIGN PRINCIPLES
1. Provide regulatory certainty
2. Create long time horizons
3. Set performance standards that are technology-neutral and
price-finding
4. Require continuous improvement
5. Reward performance, not investment
6. Go “upstream” to capture 100% of the market

11. 11
1. PROVIDE REGULATORY CERTAINTY
Create long-term signals
for the market
THE U.S. PRODUCTION TAX CREDIT
PTC has expired and been extended
six times since 2000

12. 12
2. CREATE LONG TIME HORIZONS
 Establish clear R&D strategies
 Create investment targets
 Cost-effective
 Less political uncertainty
 Comports with capital cycle
CALIFORNIA’S AB 32
Lawrence Berkeley National Laboratory; E3
California sets emissions goals for 2050,
with interim targets in 2020 and 2030

13. 13
3. TECHNOLOGY-NEUTRAL, PRICE-FINDING
Let market compete to
create solutions
RENEWABLE PORTFOLIO STANDARDS
Solicit bids for solutions,
and accept the lowest offer

14. 14
4. REQUIRE CONTINUOUS IMPROVEMENT
 Overcome market barriers
 Self-tightening
Image sources: 1) NRDC Switchboard, 2) ACEEE
CA BUILDING CODES AND APPLIANCE STANDARDS
The 35-Year Impact
Since 1978, Californians have saved more than $65
billion in electricity and natural gas bills through
energy efficient building and appliance standards.
These standards have avoided the emission of 250
million metric tons of green house gases, the
equivalent to removing 37 million cars from the road.
Future Codes
Code compliance for new
construction costs $2,290.
After 18 months, the installed
improvements pay for
themselves in energy savings.
 No new legislation needed
 Little administrative action

15. 15
5. REWARD PERFORMANCE, NOT
INVESTMENT
China as top wind installer …but 15 percent is curtailed
CHINA’S CAPACITY INCENTIVES

16. 16
6. GO UPSTREAM, CAPTURE 100% OF
THE MARKET
 Target emissions at the source
 Minimize loopholes
 Selective target group
 More effective, efficient
 Less expensive, time-consuming
THE CLEAN AIR ACT’S 111(D) STANDARDS

17. 17
EXAMPLE: THE TRANSPORTATION SECTOR
Clean alternative
mobility
Clean FuelClean
Vehicles
Standards
Fiscal
 Renewable Fuel Standard
 Low Carbon Fuel Standard
 Vehicle efficiency
standards*
 Sustainable urban
design
 Smart urban transport
1
 Fuel Pricing Vehicles Pricing
 VMT pricing
 Congestion pricing
 Road fee
* Vehicle efficiency standards includes fuel economy
standards and CO2 / GHG standards
654
32

18. 18
SIX POLICY DESIGN PRINCIPLES
1. Provide regulatory certainty
2. Create long time horizons
3. Set standards that are technology-
neutral and price-finding
4. Require continuous improvement
5. Reward performance, not investment
6. Go “upstream” to capture 100% of
the market
Fuel economy standards
Set final standard 10+ years into future,
with nearer-term interim target
Access to government resources for
equipment and efficiency testing
Increase efficiency standards every year
Feebates, subsidies, fuel taxes
Set efficiency standard with the
manufacturer, do not let
underperformance enter the market

19. 19
VEHICLE EFFICIENCY STANDARDS
0
5
10
15
20
25
30
35
40
45
0 2000 4000 6000 8000 10000 12000
Vehicle weight (lbs)
Use GHG as metrics
Size-based standards, not weight-based
Cover 100% market2
3
4
Increase stringency annually, ratcheting at 3-4% per year1
Improved Design elements
120
140
160
180
200
220
240
260
280
300
GHGemissions
(gCO2e/mile)
Footprint (ft2)
2016
2025
ratcheting at ~3% per year
605040
Source: . ICCT presentation, Nic Lutsey, Design Considerations for Fuel Economy/GHG standards
2. ICCT presentation, Drew Kodjak , International experience with greenhouse gas and fuel economy standards
MPG
5
6
7
Optimize the slope
Continuous curve instead of steps
Improve test cycle

20. 20
FEEBATES AND VEHICLE FEES
CO2 emissions
Pivot point
10,000
0
5,000
-5,000
-10,000
Rebate($)
Rebate Fees
Source: ICCT report, John German, “Feebate review and assessment: best practices for feebate program design and implementation”

21. 21
TOP TEN POLICIES
Transportation:
1. Vehicle performance standards
2. Fuel and vehicle taxes
3. Smart urban design
Utilities:
4. Renewable Portfolio Standards
5. Utility-scale energy efficiency
programs
Buildings and Industry:
6. building codes and
equipment/applicance standards
7. Industrial energy efficiency
programs
System-wide:
8. Carbon pricing
9. Properly aligned economic
incentives
10. Support for R&D and innovation

22. 22THANK YOU
HAL HARVEY
@HAL_HARVEY
WWW.ENERGYINNOVATION.ORG