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Economic, political, and fiscal realities have shifted energy policy priorities across the globe toward the goals of affordability and competitiveness.
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Insights from the Center on Global Energy Policy
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Economic, political, and fiscal realities have shifted energy policy priorities across the globe toward the goals of affordability and competitiveness, with decarbonization goals taking a back seat. The United States is slashing funding for federal climate measures, and China’s long-awaited climate commitment for 2035 promises little beyond current trends. Support for climate ambition may be shifting even in the United Kingdom, which had seemed to have achieved a broad consensus on its ambitious climate law.
Against this backdrop, it is notable that a new industry-led coalition, including BlackRock’s Global Infrastructure Partners, ExxonMobil, BASF, and Mitsubishi, is calling for carbon accounting frameworks and low-carbon-intensity standards across sectors. This group and effort, announced this week, will be known as Carbon Measures. While strong skepticism is warranted given a long history of hollow corporate commitments, if these companies were to put their full weight behind the proposal, it could lay the groundwork for the next generation of ambitious climate policy proposals.
Due to the current political climate in the United States, it is highly unlikely that Washington will consider any ambitious federal climate policy anytime soon, and yet climate advocates will continue to propose federal action. The newly announced coalition’s accounting framework and carbon-intensity standards arguably meet this moment, in large part because the go-to climate strategies of the past are ill-suited to the present day.
For example, a price on carbon dioxide emissions can be a cost-effective centerpiece of a decarbonization strategy, as the EU Emission Trading System has proven after a rocky start. But carbon prices can be politically challenging to implement and maintain. The Canadian government pursued this pathway as well, but eliminated its consumer carbon price earlier this year because the opposition made it a primary target in a tight election. The US Congress has failed to enact a national carbon price, and with concerns about energy prices front and center, policymakers will likely be especially wary of proposals to raise prices further.
To keep costs off consumers, governments have utilized subsidies and grants to promote low-emitting technologies. In the United States, the 2021 Infrastructure Investment and Jobs Act (IIJA) and the 2022 Inflation Reduction Act (IRA) together would have poured over a trillion dollars into climate and clean energy projects. However, many of the IIJA programs and IRA subsidies have been canceled or reduced by the new administration this year. Given high federal debt levels and interest rates, climate policy proposals with lofty price tags may now be untenable.
Carbon-intensity standards, such as those proposed by the coalition, offer a pathway to rapidly reduce emissions without the fiscal costs of subsidies or the price hikes caused by carbon prices. Such standards impose limits on the amount of greenhouse gas emissions that can be produced for a given amount of output, either at the source level, such as a facility, or along the value chain of a product. Any standard stringent enough to drive emissions reductions will impose costs on companies and consumers. But steps can be taken to minimize these costs while retaining the policy’s ambition.
First, gradually ratcheting up standards with simultaneous support for innovation can help ensure only modest “green premiums” associated with low-emitting alternatives. Second, standards can be designed so that companies facing large burdens from the standards can buy credits from those who overperform.
Finally, because carbon-intensity standards apply to products rather than fuels, they raise complex questions about how to estimate the emissions embedded in production. Standards will only reduce emissions effectively and efficiently if accompanied by carbon accounting standards that are transparent and clearly linked to emissions outcomes and that robustly monitor energy consumption (e.g., gigajoules of natural gas) or production data and associated process emissions (e.g., tons of clinker for cement and the associated process CO2).
Like all climate policy alternatives, the history of emissions standards is rife with examples of weak ambition, lax enforcement, and harmful unintended consequences. Nevertheless, when appropriately designed and implemented, standards coupled with robust carbon accounting have a track record of driving large-scale market shifts that are arguably unrivaled by other climate policy tools.
One key example is the Montreal Protocol on Substances that Deplete the Ozone Layer, which is a landmark international treaty aimed at phasing out the production and consumption of chemicals that harm the Earth’s ozone layer, such as hydrochlorofluorocarbons (HCFCs). The protocol has significantly reduced the atmospheric concentrations of these harmful substances and has put the ozone layer on a path to recovery. Success has been achieved via a collaborative and iterative approach involving governments and key industries and a legally binding framework that leverages trade mechanisms and includes assistance for developing nations.
California has also experimented heavily with market-based standards. The state has achieved notable success with its Zero-Emission Vehicle standard, which enabled the development and survival of Tesla. The state is now extending the concept to freight vehicles. California’s Low Carbon Fuel Standard, on the other hand, is a market-based program designed to reduce the carbon intensity of transportation fuels sold in the state. While moderately effective at reducing GHG intensity (by 15 percent since 2011), its design led to very high credit prices and compliance dominated by biofuels with questionable emissions benefits―the emphasis of the program has since shifted to credits for fleet electrification.
The industry-led coalition’s proposal for product-specific carbon-intensity standards and a carbon accounting framework could attempt to incorporate successful elements of previous attempts while avoiding the failures.
First, they could propose mandatory standards, recognizing that voluntary efforts have failed to achieve large-scale changes.
Second, they could call for gradually tightening standards while allowing flexibility for companies in picking carbon-reducing technologies and allowing those that overperform against their target to collect credits that they can sell to underperformers. California’s ZEV policy has similarly incorporated flexibility, including introducing credits for partial compliance that encouraged the success of hybrids like the Prius.
Third, they could propose a global framework with varying timelines for different participants. This mirrors the Montreal Protocol, for which compliance timelines differed for developed and developing countries.
Finally, as a contrast to the current patchwork of ineffective and inefficient carbon accounting standards, the coalition could seek to standardize accounting frameworks across geographies.
Some might scoff at an industry group proposing a policy measure with no prospect of becoming law anytime soon. And there are notable omissions to the proposal, such as the stringency of the emissions standards.
But the coalition effort is notable for its timing, influential proponents, and geographical scope. With the appropriate follow-through, the collective action of these companies to push governments to implement these standards could drive significant progress. The coalition notes it will take up to two years to develop the frameworks, and five to seven to scale. The ultimate success metric will be the coalition’s ability to influence policy by establishing and harmonizing regulatory regimes across the world in a way that decreases emissions without burdening consumers of the products.
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Plug-in electric vehicles (EVs) are reshaping the transportation energy landscape, providing a practical alternative to petroleum fuels for a growing number of applications. EV sales grew 55× in the past decade (2014–2024) and 6× since 2020, driven by technological progress enabled by policies to reduce transportation emissions as well as industrial plans motivated by strategic value of EVs for global competitiveness, jobs and geopolitics. In 2024, 22% of passenger cars sold globally were EVs and opportunities for EVs beyond on-road applications are growing, including solutions to electrify off-road vehicles, maritime and aviation. This Review updates and expands our 2020 assessment of the scientific literature and describes the current status and future projections of EV markets, charging infrastructures, vehicle–grid integration and supply chains in the USA. EV is the lowest-emission motorized on-road transportation option, with life-cycle emissions decreasing as electricity emissions continue to decrease. Charging infrastructure grew in line with EV adoption but providing ubiquitous reliable and convenient charging remains a challenge. EVs are reducing electricity costs in several US markets and coordinated EV charging can improve grid resilience and reduce electricity costs for all consumers. The current trajectory of technology improvement and industrial investments points to continued acceleration of EVs. Electric vehicles are increasingly adopted in the USA, with concurrent expansion of charging infrastructure and electricity demand. This Review details these trends and discusses their drivers and broader implications.
CGEP recently hosted a private roundtable conducted on a not-for-attribution basis that focused on key geopolitical issues and oil markets in various hotspots, including the Middle East, Russia/Ukraine, China, and the Americas.
