Last week in Paris, over 190 countries came together and made history. They agreed to move ahead immediately with nationally-determined actions to bend the global greenhouse gas emissions curve lower. And they committed to a durable framework grounded in 5-year review cycles that will spur greater ambition over time. For the first time, this gives us a credible chance to hold global warming well below 2º C, eliminating the worst risks of climate change.
United States leadership was essential to realizing this agreement, and was founded on successful action to reduce our carbon dioxide emissions to the lowest levels in nearly two decades. A key component of that success has been a surge in renewable energy. Since President Obama took office, wind energy has tripled and solar energy has increased 30 fold. Last year, the U.S. produced more energy from wind than any other country in the world and the solar industry added jobs 10 times faster than the rest of the economy – creating well-paying jobs that cannot be shipped overseas.
Federal tax incentives have been an important driver of this rapid progress, most notably the production tax credit (PTC) for wind and other renewables and the investment tax credit (ITC) for solar. However, the PTC expired at the end of 2014, and the ITC is set to expire at the end of 2016. The package now in front of Congress would provide long-term certainty by extending both of these important clean energy tax incentives for five years, which will drive construction of new projects beyond 2020.
Passing this legislation would be one of the biggest investments to deploy renewable energy in our nation’s history. It would provide a clear signal to the market that would spur investment in wind, solar and other renewables – creating jobs and cutting U.S. greenhouse gas emissions. In fact, preliminary NREL analysis indicates that an extension of the PTC and ITC through 2020 – a rough proxy for the bill in front of Congress - would help spur the construction of enough wind and solar to power 30 million homes in 2020. This would reduce carbon dioxide emissions by more than 200 million metric tons in 2020 alone, helping to ensure that the United States achieves our 2020 target to reduce emissions in the range of 17 percent below 2005 levels, and providing momentum towards our 2025 target.
Would these gains be offset by lifting the ban on crude oil exports? The short answer is No. Recently, the EIA analyzed impacts of the crude ban on production and exports. EIA’s core case – the one considered most likely – projects that removing the ban has no impact on production or exports and thus no impact on greenhouse gas emissions between now and 2025. So our expert agency’s best estimates indicate the greenhouse gas impacts of removing the crude oil ban is negligible. Of course, there are other reasons to object to lifting the ban, which is why it is not something the President supports doing on its own. But the emissions impact is likely to be minimal.
Indeed, even in a case that EIA considers less likely, in which lifting export restrictions does lead to increasing crude oil exports and production, the impacts are still limited. Based on EIA results, we estimate global cumulative emissions would increase by about 18 million metric tons per year on average between now and 2025. In other words, even in this less likely case, the greenhouse gas emissions reductions delivered by the PTC and ITC in one year – 2020 – exceed the greenhouse gas increases over an entire decade from lifting the crude export ban.
In driving forward on renewables, the United States will be competing in a global clean energy race and contributing to global solutions. Meeting the Paris commitments will require scaling up low-carbon solutions, including wind and solar energy, at an unprecedented pace. By 2030, global wind deployment will need to triple, and solar deployment will need increase nearly five-fold – in total, about 2,000 gigawatts (GW) of additional renewable electricity capacity by 2030. The United States can lead this global renewables race, just as we led in Paris.
This is where the virtuous cycle really kicks in. A recent report by MIT and Tsinghua University estimates that these deployment commitments will drive down costs for technologies like wind and solar, ensuring that, by 2030, renewables will be broadly cheaper than coal and natural gas, globally.
As clean energy gets ever cheaper, the market will deploy these solutions at an increasing clip, further spurring cost reductions through economies of scale and learning-by-doing. This will give all governments confidence to set stronger pollution reduction targets every 5-years so we can deliver the long-term emission reductions we need.
Passing extensions to renewable energy credits is the best step the United States could take after Paris. It would signal continued momentum to low-carbon energy solutions here in the United States, and around the world.