The Biden Administration has focused his governing agenda on recommitting the United States to the Paris Agreement and advancing environmental and racial justice. While much has been written about this focus, what has not been emphasized is how some of his efforts are a result of scaling up innovations from state and local governments. State and local governments are innovating and piloting policies that can help usher in not just a transition to a cleaner energy future, but a transition to a more clean and just future. One of the areas of significant local innovation right now is around what we might refer to as climate equity or climate justice policies.
As an example, the Justice40 Initiative that the Biden administration announced in an Executive Order earlier this year was created to ensure that Federal agencies deliver at least 40 percent of the overall benefits from Federal investments in climate and clean energy to disadvantaged communities. What is less known, however, is that this Justice40 Initiative was modeled after New York State’s landmark Climate Leadership and Community Protection Act of 2019, which contains a similar provision and was shaped by environmental justice community leaders from around the state.
As another example, consider the adoption by many cities of building performance standards (BPS) that would compel real estate owners and developers to improve energy and water efficiency, electrify and otherwise decarbonize their buildings to reach carbon neutrality by 2050. If enough cities and states were to adopt them, regulating from the bottom-up would clearly accelerate the transition to a low carbon economy nationwide. Buildings account for over half of total city emissions on average. Slashing their emissions ultimately will involve greening the electric grid. Cities like Boston, Washington DC, New York City and St. Louis have gone even further and placed equity at the center of these policies, as one of their core designing principles. Washington and Colorado have adopted similar policies. Whether these policies will make a positive difference for disadvantaged communities largely depends on their implementation as many crucial details remain to be worked out. Nevertheless, they introduce innovations that are worth emphasizing as improvements to more traditional climate policies.
One consequential innovation in terms of equity is the treatment of carbon offsets. Carbon offsets are problematic because they often water down GHG reduction requirements and are therefore incompatible with a just transition. Since in any given city most GHG emissions come from a small fraction of large buildings, a BPS puts the burden on property owners ─ mostly real estate corporations ─ to lead the way towards decarbonization. Building owners are allowed to take flexible compliance paths but must meet emissions caps by a certain deadline and are generally prohibited from purchasing carbon offsets. In case they are approved to take an alternative compliance path that would comprise offsetting part of their excess emissions, the credits will have to follow strict requirements to ensure new generation of in-state electricity from renewable energy sources and avoid double counting.
Another important equity feature consists of inclusive governance mechanisms that allow environmental justice (EJ) communities to participate in policy design and implementation, and ensure that these processes won’t be captured to serve the interests of developers and real estate. In Boston, EJ community members and community-based organizations were involved in the policy development process from the beginning through the Resident Advisory Group and their input was critical in informing the content of the regulation including the creation of a Review Board where a majority of the representatives are from specifically-defined community groups.
Similarly, in St. Louis, a nine-member Building Energy Improvement Board appointed by the mayor and that includes local stakeholder groups such as utilities, labor, affordable housing owners and tenants, and commercial buildings. The Board is responsible for approving equitable accommodations and overseeing the establishment of standards by property types in each compliance cycle, as well as reviewing and recommending amendments to proposed regulations. The extent to which the most vulnerable stakeholders will succeed in influencing these processes and having their needs prioritized by virtue of having gained a seat at the table remains to be seen.
A third equity aspect is redistribution and targeted financing. Fines for noncompliance are typically set at a level higher than the estimated building improvements cost but can be adjusted by building type and progress made at the end of each performance period. However, at the other end of the spectrum is the need to ensure a minimum level of benefit for all communities to avoid localized increases in pollution. In Boston, owners of buildings that don’t meet their emissions targets, or do not have an approved Hardship Compliance Plan, pay an Alternative Compliance Payment equal to $234 per metric ton of CO2 in excess of each building’s target. The resulting revenue is channeled into an Equitable Emissions Investment Fund that will prioritize EJ populations to finance relevant building upgrades and contribute to air quality improvements in their communities. Washington DC’s BPS sets aside dedicated funding for the District’s new Green Bank which leverages public funds to match financing offering rebates from the DC Sustainable Energy Utility and support work with diverse contractors. Loans from DC Green Bank are made available to residents, small business owners, building owners and operators, and commercial developers interested in energy efficiency improvements, clean energy installations, transportation electrification, and construction of green infrastructure.
Given historic and systematic disinvestment in minority neighborhoods and ongoing widespread disparities in terms of quality of housing and the right to live in a healthy and safe environment, better calibrated climate mitigation policies such as the ones described above could help redress some of these ills. The Justice40 Initiative is a much needed complement to these efforts. By making sure that local governments have enough funding available to help their most vulnerable communities invest in energy efficiency and cleaner energy alternatives, as big polluters do their fair share of work, we can move the country forward in a more just and equitable way.