A range of incentives are required to make the transition to renewable energy.

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A range of incentives are required to make the transition to renewable energy.

Over the last two years, there have been increasing calls for a clean energy transition to rapidly decarbonize the global economy. A increasing list of multibillion-dollar climate disasters in the United States and abroad has highlighted climate vulnerability and the risk of ignoring climate change.

The road forward for the United States in terms of decarbonization is being debated in Congress. The Senate recently enacted a bipartisan infrastructure package that includes billions of dollars in renewable energy expenditures. A bill on the reconciliation track in Congress aimed at enacting most of President Joe Biden’s domestic policy agenda could be another way to combat carbon emissions.

To properly incentivize the clean energy transition in the United States, a wide range of energy incentives may be required to account for regional variances in energy markets. Many Democrats want a version of a Clean Electricity Standard in the reconciliation package, which is a program that requires utilities to deliver a specific quantity of clean electricity.

Traditional CESes, on the other hand, which have only ever been passed at the state level, are usually implemented as regulatory policies, which is not permitted during the budget reconciliation process. The way Congress designs a CES to comply with reconciliation criteria has a number of consequences for how the CES achieves low-carbon results.

The source of funding for utilities to transition to clean electricity, including expenses connected with power generation and delivery, is one element to consider. The transition to clean power generation would be funded by additional charges in utility bills under a traditional CES approach, whereas a proposal under consideration for inclusion in the reconciliation bill would pay utilities to expand clean power generation and tax them if they did not meet a certain threshold.

The first is a regressive system, in which lower-income households pay a higher proportion of their income for electricity than their richer counterparts. The second strategy is to utilize a progressive tax structure, in which higher earners and companies pay higher taxes than lower earners. By more fairly collecting tax revenues to support a CES implemented through reconciliation, policy measures to remove corporate and individual taxes loopholes could boost the power of this difference in financing sources.

A federal CES may boost the amount of distributed renewable energy facilities, which are frequently required… Article Summary from Nokia News

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