New Jersey’s Clean Energy Future: What Needs to Be Done

Infrastructure Networks

With the upcoming gubernatorial election, there is a lot of excitement and hope that the next governor will establish and implement a meaningful climate agenda.  Almost weekly, a group or organization recommends a long list of proposals for the next governor to consider.  Although what is on and not on these lists is important, it is also worthwhile to step back and think through what foundations are needed to support a successful climate policy.  Here is such a list:

First, set priorities.  Although different clean energy technologies do address multiple priorities such as reducing air pollution and greenhouse gases, the appropriate mix and timing depends on what those priorities are.  One clean energy technology may reduce greenhouse gas emissions at a lower cost than another, but not address a local air pollution problem in a low-income neighborhood.  Moreover, even if New Jersey makes tremendous strides in curtailing its greenhouse gases, the State will still likely have to spend a lot of money on adaptation efforts.  Every dollar spent on mitigation is one less dollar available for adaptation and vice versa.

Second, select an internally consistent policy framework.  Either the New Jersey should pursue market-based approaches using competition to obtain cost-effective outcomes or a regulatory one in which a regulatory agency conducts the necessary due diligence to ensure efficient use of ratepayers’ funds.  Currently, New Jersey does both.  Furthermore, some policy proposals fit in neither basket, and instead, call for the legislature to act, bypassing both market discipline and regulatory scrutiny.

Third, establish a meaningful price on greenhouse gas emissions with revenue recycling.  As the market share of clean energy increases, a subsidy approach will soon become too expensive.  Instead, pricing greenhouse gases can provide the incentive to move towards clean energy while making available a funding source to offset the increase in energy prices.  Economists are almost unanimously agreed that “pricing carbon” is the most efficient policy to mitigate greenhouse gases.

Fourth, ensure that polices are cost effective.  The shift to a clean energy economy is a major undertaking and must be done cost effectively both if the transition is to be accomplished and to maintain public support.  The State cannot afford to spend several hundred dollars per reduction of ton of carbon dioxide equivalent when it could accomplish the same goal at tens of dollars per ton; it cannot afford to spend thousands of dollars per megawatt-hour of resiliency when it could spend only hundreds of dollars and achieve the same result.

Fifth, establish a meaningful and timely evaluation process.  Not all policies will perform as planned particularly when they involve a fundamental shift in a major sector of the economy.  Being able to identify problems and correct them requires policymakers to be open to changing course and supporting the data collection and analytical capabilities that may provide them with answers they may not want to hear.

Frank Felder

Future of NJ Clean Energy Felder Nov 2017