Enact Regulatory Reform To Unlock Climate Investment

Between Build Back Better, the Green New Deal, and the Infrastructure Bill, there has been no shortage of ambitious policy proposals to move the U.S. economy towards a cleaner, more climate friendly footing. These various programs share a policy structure wherein tax incentives, grants, and other dollars are used to spur investments in climate technology and infrastructure. Investments in new research and infrastructure alone, however, won’t be enough to supercharge progress on climate because a web of regulatory approvals and permits will continue to hold good projects back. These rules, established over decades by many of the same voices that now claim an eagerness to tackle climate issues, add cost and complexity to the development and deployment of new infrastructure, hindering the very progress we need. A recent article by Alex Trembath, posted on City Journal, gives a name to this phenomenon: “cost-disease environmentalism”. A failure to address it will unnecessarily hinder the development of next generation technology and infrastructure.

“Cost-disease environmentalism” refers to the process of enacting policy to stimulate demand, such as grants and tax incentives, without bothering to address the structural problems that inhibit supply. It is a close cousin of NIMBY-ism (“not in my backyard”), driving policymakers to advocate for money to support clean energy adoption while also supporting regulatory regimes that inhibit permitting and construction of those very clean energy projects. The most obvious culprit is the National Environmental Policy Act (“NEPA”) and the variety of state-level companion laws enacting its requirements. These regulations are designed to ensure new developments of all types consider the surrounding environment as part of the permitting and approval process. A noble goal for sure, but over time many have learned to weaponize these laws under the cover of ‘protecting local character’ or ‘maintaining local control’ in order to discourage or disrupt any development at all. The California Environmental Quality Act (“CEQA”), signed in to law by Ronald Reagan, has been used to block everything from bike lanes to enrollment increases at UC Berkeley. Many have bemoaned the inability of the United States to build large infrastructure the way China or Europe does; the regulatory burden is a key reason why.

These laws have been a cornerstone of the environmental movement for nearly half a century and are widely viewed among environmentalists as sacred protectors of the air we breathe and water we drink. Conversations about wholesale changes to these programs are dismissed as driven by a deregulation agenda aimed at plundering the natural world. Examples of polluting projects that would have been greenlit if not for the protections these laws provide are used to justify their existence. The problem is that these laws, enacted to defend the environment, are instead routinely used to defend the status quo. Why protect the status quo when it’s playing a key role in destroying the planet?

Environmental regulation should be focused on reaching the cleaner world we seek, not freezing the world as we have it today. Projects with obvious climate merit should have a streamlined permitting and approvals path, without risk of protracted legal battles and delays. Moderate innovations in regulatory policy would lower the cost and risk of developing climate-friendly projects, driving investment and deployment without the need to spend a single taxpayer dollar.

There are examples of this working. In California, residential rooftop solar has seen explosive growth over the last decade, in part thanks to demand-side financial incentives including the federal investment tax credit and the state-level net energy metering program. But equally significant in driving adoption were reforms on the supply-side that eased the permitting process for residential solar. California established a standard permit application for residential solar. When followed, an over-the-counter ministerial review is the only approval needed. Various laws did away with laborious planning department approvals, eliminated HOA restrictions on solar, exempted the value of the solar system from property tax adjustments, and removed the need for structural engineers, electrical engineers, and other specialists to develop and submit a permit. An expensive, multi-week process costing thousands in time and fees was replaced with a templated “standard plan” that takes under an hour to complete and is approved over-the-counter.

More action of this type is needed. Government tax breaks, grants, and incentives for new technologies and projects are necessary and welcome supports for the climate movement; realizing the full impact of these dollars requires coupling them with a regulatory framework that streamlines project approvals and permits for climate infrastructure.