Red Tape Hinders Global Clean Energy Goals
In order to support meaningful progress toward decarbonization in our energy industry, policy mechanisms must become clearer, less redundant, and more efficient. Removing headachey and byzantine permitting processes and providing more transparency and accuracy in oversight and application of policy and policy mechanisms will be critical to removing bottlenecks in green energy expansion. On a global scale, more efficient and effective energy policy will be critical to meet COP 28’s Consensus goal of tripling renewable energy capacity by 2030.
Analyses from Bloomberg New Energy Finance and the International Energy Agency (IEA) find that the goal of tripling renewable capacity by the end of the decade is feasible if governments cut down on lengthy permitting processes. “It often takes as long or longer to obtain permits and licenses for large-scale renewable energy projects as it does to build them,” the IEA stated in its report. There is proof that this approach works. Yale 360 notes that in Germany, where the government recently streamlined the renewable energy approval process, installation of solar and wind power have skyrocketed, reaching nearly double their previous levels.
In the United States, the tangle of red tape is particularly pronounced thanks to overlapping federal and state requirements. In addition to state and federal mandates, there are also about 2,000 local wind energy ordinances and nearly 1,000 solar energy ordinances in place across the country according to The National Renewable Energy Laboratory. “The gears of progress are often jammed by a convoluted web of separate approvals required from local, state, interstate, and federal authorities,” stated a June 2024 report from Deloitte. As a result, “new energy providers can expect a four-year wait just to connect to the grid.”
In addition to permitting woes, there are also considerable issues with Energy Attribute Certificates (EACs), which are market-based instruments used to track corporate renewable energy consumption. In practical terms, one EAC represents one megawatt-hour of electricity generated from a renewable energy resource. The primary purpose of these tradable credits is for compliance markets and voluntary markets. In 29 U.S. states, as well as the District of Columbia and Puerto Rico, renewable energy quotas by way of Renewable Energy Certificates, a type of EAC, are compulsory.
There is a “foundational confusion” in how EACs actually drive renewable energy expansion and how they could be better applied to do so, according to a recent op-ed published in Utility Drive by Jim Boyle, CEO and founder of Sustainability Roundtable, a Boston-based strategic corporate sustainability advisory firm. He argues that there are different tiers of EACs that impact renewable expansion in different ways, but that these are poorly defined, poorly understood, and therefore poorly applied.
The first type, unbundled EACs, “regularly come from projects developed years before procurement” and therefore do not contribute at all to the development of new clean energy projects. The second type, contributing EACs, “contribute modestly to the financing of a clean energy project primarily caused by others” but they are more costly than the unbundled version and are vulnerable to greenwashing tactics, “as multiple vendors misleadingly suggest they cause new renewable energy projects when they do not.” The last kind, purchaser-caused EACs, are the most effective for driving new renewable projects because they demand that procurements meet conditions for prefinancing, a contract term of at least 10 years, and renewable capacity of at least 40 MW.
As such, Boyle argues that we must demand truth in advertising in the EAC market. “To protect the EAC market’s integrity from the disrepute that plagues today’s voluntary carbon offset market, many directors of sustainability educate colleagues, suppliers and enterprise customers on how to differentiate PC, unbundled and contributing EACs,” he writes. “But as directors of sustainability grow in numbers worldwide, many newcomers who have not yet learned the distinctions are vulnerable to EAC vendors who manipulate imprecise language to exaggerate their product’s impacts.”
Making policy and policy mechanisms like EACs more navigable, transparent, and user-friendly is critical to driving meaningful clean energy growth. It’s not only critical to cut the red tape to incentivise growth, but to make sure that what regulation is left is clear, efficient, and demonstrably achieving what it’s meant to achieve.
