There is one word that I have frequently and widely used in my work in the energy sector throughout my career. It is a word that describes what sometimes happens intuitively and almost reflexively, although not always. It is a word that should almost always be an objective in decision making and policy making,
Here’s the formal definition according to Miriam-Webster: an act, process, or methodology of making something (such as a decision) as fully perfect, functional, or effective as possible. But it is the short, informal definition that source offers that I think is more applicable to policy making: the act or process of making something as good as it can be. And therein lies the problem.
In my time designing, marketing, and managing energy efficiency programs, the word optimization was a natural for trying to explain the difference between efficiency and energy conservation. The latter was simply using less. The former meant doing things different to get the same benefit while using less energy. Efficiency was an attempt at optimizing the combination of energy use and some other objective like heating comfort.
As my work moved squarely into the policy arena, with demand response, DER, and grid modernization being the main pond I was swimming in, optimization became the obvious concept to help explain what those things meant. By introducing smart, connected technologies into the electricity system, everyone from a homeowner to a grid operator could begin to have lots of information and controls with which to make the best decision at any moment or other interval of time desired. They had an increased ability to optimize.
But optimization cannot be an objective that exists in a vacuum. You must optimize for one or more things. Otherwise, optimization can have too many “masters” and possibly create a non-solvable algorithm. In my example of energy efficiency above, the optimization was for energy use and personal comfort. It did not include optimizing for environmental factors. It may or may not have included optimizing for payback period.
When it comes to policy making, optimization can take on some strange shapes and forms.
Sometimes policymakers sincerely and explicitly try to achieve an optimal policy that serves many masters, e.g. the economy, jobs, low-income needs, etc. They try to avoid cross-subsidies, and regressive taxation.
But then there is the legendary sausage-making aspect of policy making.
In my opinion, that kind of sausage is made two ways. The first is when things that are totally unrelated to one another end up in the same bill that is passed. This normally happens in what are called “must-pass” bills and often represent a policy maker’s price for a “yea” vote. But because they are unrelated to the main part of the Bill, they do not create a sub-optimization of the main focus of the Bill.
As I turn to the other type, maybe some of you can see where I am headed?
The other type of sausage making is when things of a related matter get included in the same Bill, with each trying to serve a different master.
That seems to be what is happening with climate policy, especially at the federal level. We are hamstringing climate policy by trying to make that policy serve other masters.
Take for example the EV tax incentive provisions of the IRA. The objective (as with any incentive) was to accelerate the adoption of EV, whose electricity will get cleaner and cleaner every year as the grid gets cleaner.
But policymakers also wanted to achieve other objectives with the EV incentives. They wanted to create U.S. jobs and establish a bigger base of EV and battery manufacturing. These are important objectives, don’t get me wrong, but are they in the same league as climate change and the timetable it is on?
Take EVs. As we enter 2024 fewer EVs are eligible for the tax incentives than there were in 2023 because of the domestic content requirements of the IRA. I understand that such a policy in the long run should work out and that the policy will create more U.S. jobs, more of a manufacturing base, and lead to a total vehicle conversion to EVs and therefore less emissions. But when, and over what time period? What exactly is the short run and long run when it comes to stemming emissions?
It seems the IRA EV policy is an example of where climate change and emission reductions were not really optimized for. It seems that it, as with most climate policy, is not optimizing for time, which we are in precious short supply of when it comes to our climate emergency.
Here is another example but with State Policy.
The State of California has dramatically reduced incentives to homeowners for rooftop solar. Among the reasons were good one from a policy making standpoint, such as reducing cross-subsidies from lower income homeowners to higher income ones.
But sales of rooftop solar installations in California have reportedly dropped as much as 85% in some months of 2023 from a year earlier. Some in the solar industry project that installations in California will drop more than 40 percent this year and continue to decline through 2028.
It is of the utmost importance that massive amounts of emissions be reduced as soon as possible. That is not just my opinion. It is the finding of the IEA, the UNFCCC, and countless other bodies. So, it matters WHEN the emissions reductions happen. Because when a ton of CO2 goes into the atmosphere on the day you are reading this, it is going to be there for a long, long time. I know that carbon capture and carbon extraction are coming, but not on the timeline that matches with the need for reductions.
The EV tax provisions and the change in California are highly visible examples of the challenge in climate policy making, but there are other less obvious ones. Take basic regulatory and administrative processes to implement a climate law. These should be accelerated, even if on a one-time basis, because of the climate timetable, to get the actual reductions to occur faster. As I wrote about last year in my “Faster” essay, if the standard process is to take 12 months to write the rules and structure for a grant program, we should try hard to see if we can do it in 6 months.
We must do things faster. We cannot simply do good things and even things in large magnitudes. They must be done faster and in magnitudes that lead to large amounts of emissions being reduced ASAP.
If to get a lot of immediate emissions reductions we need to optimize only for climate, and not for some other admirable policy objectives, then we should seriously consider that. As I wrote in my essay on “Being a Climate Voter”, we can get around to most issues a bit later. We can’t get around to addressing the climate situation “later”.
In saying all of this, I am not being naïve. I know how policy is made. I have been there. I have made it myself. I know the kind of horse-trading and other less savory things that go on.
But we have to at least change our thinking in making policy that either directly or indirectly addresses climate. We have to think about how in the policy making things can be included to not just create emissions reductions but to create near-term reductions. In turn, any related policy provisions which hamper the speed of emissions reductions should be avoided.
If we try to serve all masters in climate policy, the climate sub-optimization that results will end up not serving any of them.
Climate is different. And we need to act like it.