Energy and Environment

Yesterday, the Supreme Court ruled that the federal government is empowered to regulate wholesale demand response, or targeted reductions in electricity use by consumers in response to peak demand. The ruling, in Federal Energy Regulatory Commission (FERC) v. Electric Power Supply Association (EPSA), has been hailed by a broad coalition comprising environmental activists, regulators, and companies, because demand response can reduce rates and ease strain on the grid. Insofar as it places demand response on firm legal footing, the decision is eminently sensible. But the broader implications of this decision for the line between federal and state jurisdiction in the electricity sector could be problematic for a more decentralized future power system intended to be cheaper, cleaner, and more reliable. My take is that this decision can guide the development of demand response, but we still need Congressional action (and perhaps a broader Supreme Court decision) to update a U.S. electricity market framework that is over eighty years old. Think Back to Econ 101 The full Supreme Court decision is actually riveting reading. In particular, Justice Kagan, writing for the majority, takes pains to clearly explain a fairly complex power market issue, urging readers to “think back to Econ 101” and quipping that artificially stable electricity retail rates “short-circuit the normal rules of economic behavior.” (By the way, Justice Scalia’s dissent promptly ridicules the majority for misconstruing elementary economics, “notwithstanding its own exhortation.” Entertaining stuff.) The case arose because of a 2011 FERC regulation (“Order 745”) that compensates providers of demand response identically to traditional electricity generators in wholesale markets (most commonly inter-state markets for generated electricity that is then transmitted and sold to customers). That means that a consumer—or, more commonly, a group of consumers pooled through a third party aggregator—can bid into wholesale energy markets and get paid per unit of energy they save at the same rate that generators are paid per unit of energy they produce. [1]  At issue was whether Order 745 overstepped the jurisdiction granted in the 1935 Federal Power Act (FPA) to FERC to regulate wholesale power sales but devolved to states authority over retail prices, which are final prices consumers pay for electricity that include wholesale energy costs as well as other costs to deliver the energy to the consumer. A lower court had ruled that Order 745 had overstepped, leaving demand response in a regulatory “no-man’s land,” chilling the investment climate for such services. The Court’s majority opinion lays out a three-part argument upholding the legality of FERC Order 745. First, FERC has jurisdiction over demand response, because it directly affects wholesale power rates. If bids to reduce energy consumption displace bids to produce power, then the marginal price of electricity—which sets the wholesale market rate—falls. Second, FERC is not straying into regulation of retail rates because it does not tell states how to set final consumer rates (and in fact, Order 745 allows states to prohibit their consumers from participating in demand response). Although wholesale demand response may increase or decrease (more likely decrease) the retail cost of power by changing an input cost—the wholesale power cost—the Court found that such knock-on effects are inevitable in any lawful regulation of the wholesale market. And third, FERC pursued a reasonable decision-making process to stipulate identical compensation for demand response providers as for traditional generators. The Court acknowledges FERC’s sound justification that demand response providers are providing the exact same service as traditional generators, thereby meriting equal compensation, and that demand response can help the power grid when it is overburdened. Still, the Court defers to FERC’s technical expertise and statutory mandate as the reasons why Order 745 is legal, rather than the correctness of its compensation decision. All of this makes sense, both legally and as good policy. But taking a step back, this case was important not just because of the narrow demand response issue at stake, but also because of the broader question of what the federal government gets to regulate and what states can regulate. By clearly coming down on FERC’s side in this decision, the Court makes it easier for the federal government to claim jurisdiction over other aspects of the power system that (a) directly affect wholesale rates and (b) only indirectly affect retail rates. Is this a good or bad thing? The Hazy ‘Bright Line’ That is probably the wrong question to ask. The existing U.S. framework for regulating the power sector, dating back to 1935, draws a “bright line” (a phrase used by the Supreme Court in 1964) “between state and federal jurisdiction.” Within that framework, the Supreme Court’s decision in FERC seeks to define where exactly that bright line is, in the process probably expanding the federal government’s jurisdiction. But as energy lawyer Robert Nordhaus points out, “the hazy ‘bright line’ ” is a poor construct for regulating the modern power sector. So this decision does not change the underlying imperative to update the regulatory framework to enable the evolution of the power system. The only aspect of the Court’s majority opinion in FERC that bothered me was this passage in footnote 7 (emphasis mine): The dissent’s framing of the issue is wrong if and to the extent it posits some undefined category of other electricity sales falling within neither FERC’s nor the States’ regulatory authority. Sales of electric energy come in two varieties: wholesale and retail. That was true in the last century, and that is tautologically true under the “bright line” regulatory framework. But the power market has become considerably more complex, and more issues after demand response will continue to pop up as regulatory ambiguities. As Nordhaus points out: Trying to apply the Bright Line to tomorrow’s grid may be even more problematic than applying it to today’s. New technologies and new commercial practices, including: micro-grids—where retail customers in an area take power from, and deliver the output of distributed generation into, a local network which in turn may purchase or sell at wholesale to a distribution utility; energy storage—where end-users may charge storage at retail and discharge and sell at wholesale; automated demand response—where an RTO [“regional transmission operator,” a nonprofit entity that operates the transmission grid] can signal retail customers to reduce demand or charge or discharge batteries or other storage; and real-time pricing—which permits customers to increase or decrease energy use based on wholesale prices; all challenge the assumption that we can easily distinguish between wholesale and retail service. They may require new forms of regulation that probably cannot be accommodated by the existing wholesale/retail division of labor. What’s more, initiatives like “Reforming the Energy Vision” (REV) in New York or Distribution Resource Plans (DRPs) in California aim to create localized, distribution-level markets for energy services—including, energy, capacity, ancillary services, and more. These markets would enable an efficient, decentralized power system that could partially replace today’s centralized grid. Such a system could avoid massive infrastructure build-outs to provide power more cheaply, improve reliability by spreading out the network, and reduce greenhouse gas emissions by integrating cleaner sources of electricity. But these distribution-level markets may very well meet the Court’s two part test in FERC of directly affecting wholesale rates and indirectly affecting retail rates, triggering federal jurisdiction over state initiatives.[2] The right response is for Congress to update the statutory framework for power sector regulation. A new framework should recognize that rather than a federal vs. state framework, the two most relevant levels of modern electricity systems are the regional level—i.e., the inter-state level at which wholesale markets now operate—and the local level—i.e., the sub-state level at which decentralized distribution markets may operate in the future. (I’m saving my specific recommendations for such a new framework for a future blog post.) The Court’s decision in FERC was the right one in relation to the narrow issue of enabling demand response. But even though this decision relied on an outdated framework, I hope it does not calcify that framework, leaving the country stuck with yesterday’s policy tools to deploy tomorrow’s technology. Instead, assuming that this decision is the first step toward broader reform, I’m going to join the celebrations. [1] Although the decision only dealt directly with wholesale energy markets, it is reasonable to assume that this decision empowers FERC to regulate demand response in wholesale capacity and ancillary services markets. See footnote 3 in the majority opinion and see also this helpful essay by attorney Scott Hempling. [2] Although the decision only dealt directly with wholesale energy markets, it is reasonable to assume that this decision empowers FERC to regulate demand response in wholesale capacity and ancillary services markets. See footnote 3 in the majority opinion and see also this helpful essay by attorney Scott Hempling. Full Disclosure: I am an advisor to New York’s REV. This piece reflects my personal views only.

Confronting Nigeria’s culture of corruption was a primary campaign theme of Muhammadu Buhari’s successful campaign for the presidency. Since taking office, he has fired numerous high officials widely regarded as corrupt, made a reputation for incorruptibility a prerequisite for high appointments (though there have been exceptions), and directed the Economic and Financial Crimes Commission to launch investigations into the allegedly corrupt behavior of numerous high-ranking military and civilian officials. Those arrested have included the former national security advisor, Sambo Dasuki and Delta warlord Tompolo. However, the highest profile arrest was that of Diezani Alison-Madueke, the minister of petroleum in the Goodluck Jonathan administration, in London as a result of a British investigation. Nevertheless, President Buhari’s anticorruption campaign has already gone further than that of any of his predecessors since the resumption of civilian government in 1999. The Buhari administration is continuing to raise the corruption ante. It has just negotiated an agreement with the United Arab Emirates (UAE) on mutual legal assistance on criminal and commercial matters and on extradition and the transfer of sentenced persons. (The package also included agreements on taxation and trade promotion.) These new agreements provide a mechanism for the repatriation to Nigeria of stolen funds from the UAE and the extradition of Nigerians who have fled there. The Nigerian media is reporting that “panic” among “corrupt” Nigerian officials, whom, it has long been thought, have favored the UAE as a place to park ill-gotten gains. The UAE is a popular destination for wealthy Nigerians because of its highly developed infrastructure and luxurious accommodations. The Premium Times cites an investigator who maintains that at least $200 billion stolen from the Nigerian treasury has been “stashed in banks and invested in properties in Dubai and Abu Dhabi.”

President Muhammadu Buhari successfully ran for the presidency on an anti-corruption ticket and a promise to restore security by destroying Boko Haram. His geographical support was based in the north and the west of the country, and he also benefitted from a general sense among the political class that incumbent President Goodluck Jonathan was incompetent and had to go. But, in the predominately south and east of the country, a majority apparently voted for Jonathan and his Peoples Democratic Party’s (PDP) candidates in the National Assembly. Just how large a majority is not clear, as there was election rigging in the region on Jonathan’s and the PDP’s behalf. Nevertheless, the bottom line is that notwithstanding Buhari’s electoral victory, the PDP has not gone away. With its votes in the National Assembly, it remains a powerful political factor that can thwart Buhari’s reform agenda. Since election day, there have been complaints that Buhari’s government is “northern” in character, and that it is not moving to address the genuine grievances in the southern and eastern parts of the country, including the oil patch, that had voted for the PDP. There has been a revival of public sentiment in favor of Biafra, a predominately Christian, Igbo-dominated state that tried to secede from Nigeria and failed in the 1967-70 civil war. In a government misstep that risks inflaming Delta opinion, the Buhari administration has arrested the head of Radio Biafra and denies him bail. Since election day, President Buhari has vigorously pursued an anti-corruption campaign that includes senior associates of the Jonathan administration in its dragnet. Many of those arrested or under investigation are Christians from the areas that voted for Jonathan and the PDP. It should be no surprise that there are complaints that the Buhari government is selective in its investigations and prosecutions to the detriment of southern Christians, though, in fact, northern Muslims (including the former national security advisor and a close associate of Buhari himself) have also been caught in the anti-corruption dragnet. Last week, the Abuja High Court ordered the arrest of the warlord Government Ekpemupolo (or Tompolo), one of Jonathan’s more disreputable political allies from the oil patch, for corruption. Apparently as a result of the arrest, Niger Delta militants over the weekend attacked oil and gas pipelines that shut down two of Nigeria’s four refineries. Long out of operation, the four refineries had recently been revived as part of the Buhari administration’s effort to reduce Nigeria’s dependence on imported refined petroleum products. During the last round of unrest in the oil patch under the 1999-2007 Obasanjo administration, militant attacks on the oil infrastructure significantly cut production and reduced government revenue. The Yar’Adua and Jonathan administrations in effect bought off militant leaders, like Tompolo, through government contracts and office. Ex-war lord and man of violence, Tompolo faces credible charges. But, he is also seen by some in the Delta as a Robin Hood by a region that is feeling marginalized. As the anti-corruption campaign unfolds, it should be anticipated that Delta restiveness and associated attacks on the oil infrastructure will continue.

Oil Prices Plummet—Will Subsidies Follow? As crude prices fall below $30 a barrel, oil-producing states face mounting fiscal challenges. Saudi Arabia’s 2015 deficit neared $100 billion, roughly 15 percent of gross domestic product (GDP);Venezuela’s reached 14 percent; and Algeria expects foreign reserves to fall by $30 billion in the coming year to cover its looming fiscal gap. Across commodity-dependent nations finance ministers are looking to cut budgets. Energy subsidies are an obvious target, as these expensive and inefficient payments distort markets and undermine development. In December, Saudi Arabia reduced fuel subsidies and prices went up 50 percent. Algeria promised to cut energy subsidies (though in the short term, they are rising). Even in Venezuela, where citizens pay less for gas than water, rumors are the government is considering a hike. The hesitation? Price increases during recessions don’t go over well; in Venezuela, the unpopular move helped bring Hugo Chavez to power. Companies Accountable for Rights Violations Globally The United States is increasingly holding multinational companies liable for human rights abuses in other countries. This week, the U.S. Supreme Court upheld a verdict that found Nestlé guilty of aiding and abetting child slavery by knowingly purchasing cocoa from Ivory Coast suppliers that use child labor (Cargill and Archer Daniels Midland were also accused in the original case). Where Nestlé lagged, Intel is leading—announcing that it expects to entirely eliminate conflict minerals from sourcing and production this year. It is one company of many companies working to comply with Section 1502 of the Dodd-Frank Act, requiring them to disclose the use of “conflict minerals” to the Securities and Exchange Commission (SEC). Poland’s Democracy in Doubt Democracy is faltering within the European Union (EU). In Poland, long considered Eastern Europe’s democratic anchor, the right-wing Law and Justice Party (PiS) used its absolute majority to replace five judges on Poland’s constitutional court and mandated a two-thirds majority to overturn legislation, in defiance of a judicial challenge and thousands of protestors. The PiS then moved to “legally” curtail rights. President Andrzej Duda signed a law enabling his government to dismiss and replace state radio and television executives, inciting rumors that he may nationalize the media. Yet unlike many other governments that supress freedom of expression and dissent, Poland may face sanctions. The European Commission responded by launching an investigation into whether the new legislation violates the EU’s rule of law framework and democratic norms. Hungary, which managed to avoid EU sanctions for its own authoritarian shift, promises to block any action.

This post is co-written with Sagatom Saha, research associate for energy and foreign policy at the Council on Foreign Relations. In his final State of the Union address, President Obama celebrated the remarkable growth of clean energy, particularly solar power, which in 2015 added 7.4 GW of capacity in the United States and 55 GW globally. However, he also omitted an equally remarkable trend: over the same year, the Global Solar Index, which tracks the overall industry, collapsed, losing nearly half its value from a mid-year high. The divergence between solar market growth and solar industry market value began in July, perplexing analysts and investors. By December, company stocks may have finally bottomed out after news broke that Congress had extended generous U.S. solar tax credits for five years. Despite record global installed capacity and falling costs, solar companies either stagnated or fell in value in 2015 depending on the measuring stick applied. What explains solar’s paradoxical year? The three charts below demonstrate how falling crude oil prices and overzealous expansion combined to undermine solar companies. For an in-depth look at other factors—like the glut of public stock offerings and fears about interest rates—that affected renewable energy Yieldcos in particular, see my piece in Fortune. Since the end of 2015, SunEdison’s stock has fallen even further, losing approximately half of its market capitalization as of mid-January 2016.

Voices from the Field features contributions from scholars and practitioners highlighting new research, thinking, and approaches to development challenges. This article is authored by Sarah Degnan Kambou, President, and Lyric Thompson, Senior Policy Manager, of the International Center for Research on Women (ICRW). UN Women recently hosted a dialogue with women’s rights advocates from around the world to discuss how to link the world’s new development framework, the Sustainable Development Goals (SDGs), with the world’s women’s rights framework, which was designed to promote and achieve gender equality. The theme of the discussion was an acknowledgement that, as scholar and former UN official Anne Marie Goetz noted in her remarks, women’s rights activists did not initially mobilize around the SDGs. Despite a belated start, women’s rights groups ultimately conducted considerable advocacy through various forums, including the Women’s Major Group, the Commission on the Status of Women, and online and regional consultations with the goals’ drafters. This effort bore fruit: with respect to women’s and girls’ issues, the SDGs represent a considerable improvement over their predecessor, the Millennium Development Goals (MDGs) when it comes to the inclusion of women and girls. As with the MDGs, there is a stand-alone goal dedicated to gender equality, but the level of ambition has increased considerably, from the previous promise to “promote gender equality and women’s empowerment” to today’s commitment to “achieve” gender equality and empowerment of both women and girls, which echoes what is outlined in the world’s women’s rights framework. Under this overarching gender goal, there are a series of targets the world hopes to achieve in the next fifteen years. Importantly, these include numerous issues that were wholly ignored in the MDGs—violence against women and girls chief among them. As we mark the close of the 16 Days of Activism to End Gender-Based Violence, we should celebrate the inclusion of targets focused on ending child marriage, female genital mutilation, trafficking and exploitation, and violence against women and girls in the SDG framework. Other important women’s rights issues—such as the burden of domestic and unpaid care work, economic rights, sexual and reproductive health, and political participation—are also included. Additionally, girls, in particular, are referenced eleven times across the agenda’s seventeen goals---a big change from the MDGs, where girls’ needs were barely mentioned. So where do we go from here? First, while the goals and targets of the SDGs have been adopted, a measurement and accountability framework is still in development—and this will really be where the rubber hits the road. The new goals will mean little if they are not tracked, measured, and financed.  In his final progress report last summer, UN Secretary-General Ban Ki-moon pointed out that the most neglected goals of the MDGs were those focused on women and girls. We cannot let this happen again. To truly achieve the goals that are set under the measurement and accountability framework, however, we need to get creative. One as-yet untapped resource could be the private sector, which has been highlighted by governments as a critical partner in achieving the SDGs. Indeed it seems as if not including the private sector will handicap our efforts to improve women’s lives and spur economic development. Recent research has shown that India alone loses approximately $56 billion a year in potential earnings due to early pregnancy, early marriage, secondary school attrition, and under- or unemployment among young women. If we don’t fix some of the biggest barriers to girls’ and women’s empowerment and economic opportunity, we’ll see this trend of tremendous economic loss continue in other countries throughout the world. The need for private sector involvement in achieving these goals and targets becomes even more salient when you consider that private sector financial flows dwarf official development assistance. As such, it’s critical that those in the private sector are tapped to support the women’s rights agenda. A recent study from the McKinsey Global Institute found that if the private and public sectors worked together toward women’s full economic participation, the global economy stands to gain up to $28 trillion in the next ten years, providing governments and private sector actors alike with a solid case for investment. ICRW has worked with a number of corporate partners interested in supporting the social and economic development of women and girls, including mapping trends around private sector investment in women’s economic empowerment, which totals $300 million. We hope to see this interest and commitment grow. This focus on the economic empowerment of women is a strong foundation on which to expand, and gives us the opportunity to look at the role the private sector can play in supporting empowerment across sectors and age groups. Studies have shown that investment in girls’ empowerment and reductions in early marriage rates have economic and social benefits to societies, and that they are relatively inexpensive to implement. For example, ICRW’s Planning Ahead for Girls’ Empowerment and Employability (PAGE) program works with the private sector to empower adolescent girls and prepare them to transition into adulthood. Considering how much India loses per year when women and girls can’t participate in the labor market, it is clear that this type of investment is a win-win, creating a skilled work force for employers and governments. However, if the private sector is to be engaged in a greater role under the SDGs, our yet-to-be-developed accountability framework must speak to corporate actors as well as governments. So far, this has not been the case. The refining of the indicators and measurement framework presents an urgent and closing window to address accountability, so that we can ensure that this is a truly universal framework that leaves no one behind.

Ashlyn Anderson, Rachel Brown, Lincoln Davidson, Ariella Rotenberg, and Gabriel Walker look at five stories from Asia this week. 1. North Korea announces its “H-bomb of justice.” Jaws dropped around the world as news of North Korea’s fourth nuclear test lit up phones, tablets, and televisions on Tuesday. Those in South Korea and China reported tremors caused by the detonation, which registered as a 5.1-magnitude earthquake--almost identical to North Korea’s last nuclear test in 2013. North Korea’s official news agency released a statement claiming a successful test of a hydrogen bomb. Although the seismic evidence is consistent with a nuclear explosion, many doubt that North Korea tested a hydrogen bomb. Still, the test has renewed the call for action, and many are looking to China to toughen its stance toward North Korea. The UN Security Council is expected to layer on the sanctions, which so far have been ineffective in curbing North Korea’s nuclear program. Despite international isolation, Pyongyang appears bent on boosting the Kim Jong-un regime’s legitimacy in the eyes of its citizens through its display of nuclear capability, and on pursuing the unattainable goal of gaining the world’s recognition as a legitimate nuclear weapons state. 2. Literary disappearances rattle Hong Kong. Over the past week, anxieties have been mounting in Hong Kong over the mysterious disappearance of publisher Lee Bo and four of his colleagues. Mr. Lee, a British citizen, is the editor of a Hong Kong–based publishing house and a major shareholder in a bookstore that specializes in reading material critical of the Chinese Communist Party. Many suspect that the mainland Chinese government was involved in the disappearances, calling into question its respect for freedom of speech in Hong Kong and its agreement with Britain to allow Hong Kong’s “one country, two systems” doctrine to persist until 2047. In early 2014, another Hong Kong publisher was arrested while crossing into the mainland, but Mr. Lee’s case, if mainland authorities were indeed involved, might signal that Chinese security forces are becoming more brazen. CFR Adjunct Senior Fellow Jerome Cohen stated that such actions reflect “not only the extending reach of Chinese law, but the extending reach of Chinese lawlessness.” 3. Myanmar sets first meeting date for new parliament. Two months after historic elections, Myanmar’s new parliament led by the National League for Democracy (NLD) will begin meeting on February 1. Though the NLD captured approximately 80 percent of votes in the election, one quarter of parliamentary seats still remain allocated to the military. Many of the incoming members of parliament lack experience in the legislature, and thus the NLD has decided to offer a series of classes to prepare incoming politicians. Among the first orders of business for the parliament will be for the upper house, lower house, and the military to each put forward a candidate for president, who will then be selected by the vote of the entire legislature. The new president will take power after March 31 when the sitting president steps down. NLD leader Aung San Suu Kyi is ineligible for the presidency due to a provision barring those with close foreign relatives from serving in the position, but she has indicated that she will serve “above” whomever is chosen as president. 4. Delhi institutes odd-even traffic control program. Starting Monday, the Delhi government instituted traffic restrictions that limit private cars on the road depending on their license plate numbers. These restrictions are aimed at curbing dangerous air pollution levels in Delhi; the city’s air was ranked the most polluted of 1600 cities studied by the World Health Organization. Monday was the start of a two-week experimental period for the odd-even rules and the city has seen noticeably reduced traffic. The city government deployed thousands of traffic personnel to enforce the restrictions. Over one hundred violators were caught and fined in the first hour of the first day.  Furthermore, an additional three thousand buses were deployed to help transport those who were on their prohibited driving day. Promisingly, unlike on a typical day when the packed buses would be stopped in traffic, the buses this week were able to complete their routes. Proponents of the plan hope that experiences like the faster bus rides will help garner support for the program. 5. Chinese court to hear same-sex marriage case. A district court in the central Chinese city of Changsha has agreed to hear a lawsuit brought by a gay man named Sun Wenlin against the district’s civil affairs bureau for refusing to register Sun and his partner for marriage. Sun argues that China’s marriage law only specifies marriage as being between a husband and wife, not between a man and a woman. This is the first time a case on same-sex marriage has been heard by a court in China, making it the latest indication that attitudes about homosexuality are changing in the country. Until the mid-90s, China criminalized homosexuality and continued to officially label it a mental illness until 2001. Last year, a college student brought a court case against the Chinese Ministry of Education challenging anti-gay bias in the country’s textbooks and gay right activists claimed victory in a fight over a documentary on mothers of gay children that was censored by video-hosting sites. Bonus: China goes to Hollywood. In a historic deal, a Chinese real estate firm has agreed to purchase a majority stake in Legendary Entertainment, the producer of popular films like Inception and The Dark Knight, valuing the movie studio between $3 and $4 billion. The Dalian Wanda Group, China’s largest property developer founded with just $80,000 of borrowed money by Wang Jianlin, now China’s richest person, will be the first Chinese company to control a Hollywood studio. The move is no surprise given Wanda’s aggressive acquisition strategy, in areas ranging from healthcare to ecommerce, and the fact that movies are a big business in China. The purchase is also part of a broader trend of increasing foreign direct investment in the U.S. by Chinese companies, which grew from just $2.5 to $57 billion over the past decade.

From the breakthrough at the Paris climate change conference to the adoption of the Sustainable Development Goals at the UN General Assembly, summits in 2015 heralded major progress in international cooperation. As we ring in the New Year, it’s time to look at what lies ahead for global summitry. In the latest Council of Councils Global Memo, I preview the seven summits that deserve your attention in 2016: 1. The Nuclear Security Summit (Washington, DC, March 31–April 1) 2. UN General Assembly Special Session on the World Drug Problem (New York, April 19–21) 3. World Humanitarian Summit (Istanbul, May 23–24) 4. Group of Seven Summit (Shima, May 26–27) 5. Group of Twenty Summit (Hangzhou, September 4–5) 6. Habitat III (Quito, October 17–20) 7. Conference of Parties to the UN Framework Convention on Climate Change (Marrakech, November 7–18) To learn why these summits made the cut, check out the Global Memo.

While western governments are currently transfixed on events in Iraq and Syria, it is important that they do not forget Africa. Boko Haram has become the world’s deadliest terrorist organization and Libya is increasingly becoming a base of operations for the Islamic State. Below, CFR’s Africa program outlines six African issues to watch in 2016. While they could certainly affect the lives of millions of Africans, these issues could also have serious implications for international politics. 1. President for Life?   This year violence broke out in Burundi over President Pierre Nkurunziza’s bid to hold on to power in a third presidential term. Several other African presidents have recently followed his lead to try to hold on to power. Both Sassou Nguesso in Congo-Brazzaville and Rwanda’s Paul Kagame have taken the legal steps necessary to extend their time in office. Both countries have presidential elections in 2017 that could become violent. In 2016, we should also watch the Democratic Republic of the Congo where many in the opposition believe that President Joseph Kabila is pursuing a policy that would allow him to retain power after his current term ends in 2016. 2. Migration   With at least 2.5 million displaced persons in the Lake Chad region alone, there is the potential for a large wave of Africans to migrate. This could take the form of international migration, similar to the Eritreans who have fled to Europe, or to destinations elsewhere in Africa. Between 2006 and 2012, South Africa received the highest number of asylum seekers of any country in the world. It is possible that as conflicts continue and economies contract due to low commodity prices, there will be a wave of migration to wealthier African countries where they could face the risk of rising xenophobia. 3. Will Zuma Survive Politically?   Pressure on South Africa’s president has been increasing. Over the past year Zuma has battled allegations of corruption related to $20 million in public funds spent on upgrades to his private estate, Nkandla. Despite a police report stating that the upgrades were security features, including a swimming pool, the opposition continues to call for legal action. Zuma’s most recent faux pas, firing the minister of finance and replacing him with an unknown, has galvanized opposition to his administration within his own party, the African National Congress (ANC). It is possible that in 2016 the ANC could remove Zuma as their party leader and subsequently as president, just as they did with Thabo Mbeki in 2008. 4. Buhari’s Anti-Corruption Campaign   Since Muhammadu Buhari’s election as president of Nigeria, he has had a small number of high profile figures arrested for charges related to corruption. How far will this campaign go? Will it pursue high level leaders from the Jonathan administration, perhaps including the former first lady? If so, will Buhari politically overreach? As military head of state Buhari aggressively went after corruption. Many claim this is why the military abruptly removed him from office. 5. Expansion of Instability in the Sahel   With the attack on a hotel in Bamako, Mali, and continued jihadist operations in the country’s north, it is clear that jihadist activity in the Sahel is not over. In December, there was an attempted military coup in Niger. Boko Haram continues to be active in Niger, Chad, and Cameroon, as well as in Nigeria. The Islamic State is strengthening its presence in Libya, and Boko Haram has sworn allegiance to it. Thus far, that relationship appears to be mostly one of rhetoric, but it could further develop. 6. Climate Change   Across Africa the effects of climate change are already visible. The shrinking of Lake Chad contributes to the large number of displaced persons in the region. Since 1963, the lake has shrunk to nearly a twentieth of its original size. Tanzania and Zambia have both been suffering from power shortages because of the impact of drought on hydroelectricity. In South Africa the government has declared disaster zones in five of nine provinces due to drought related to El Niño. Among other things El Niño is also the cause of massive floods that have left thousands of Somalians homeless. In 2016, we can expect to see more severe climate related issues, including migration, as the effects of El Niño are fully felt. This piece was co-authored by John Campbell and Allen Grane.

Each of the past two years, I’ve done a roundup of the developments and stories that mattered the most in South Asia. In 2014, India’s historic national election and the coming together of Afghanistan’s hard-won unity government topped my list. The year before, Indian women’s political activism, and Nawaz Sharif’s election in Pakistan’s first transfer of power from one civilian to another, were my top two picks. Looking back at those posts compared with the ten events I’ve selected for 2015, this year suggests a markedly less hopeful mood. The most chilling development has been the steady trickle of reports about the self-proclaimed Islamic State and its presence in the region, particularly in Afghanistan, border areas of Pakistan, and possibly in Bangladesh. Other developments in India, Nepal, Sri Lanka, and Maldives present a mixed picture of both progress and setbacks. Here is my selection of 2015’s most consequential stories in South Asia: Security deteriorates in Afghanistan: In December 2014, President Barrack Obama ceremonially marked the end of the U.S. combat mission in Afghanistan, as did the North Atlantic Treaty Organization. The U.S. troop presence “transitioned” to a train and support role, with the intention of completing troop withdrawal by the end of 2016. But grim news from Afghanistan, including a resurgent Taliban and “little nests” of the Islamic State, led Obama to revise his plan in October. Afghanistan’s unity government remains dysfunctional and without a full cabinet; the Taliban stepped up attacks (despite the belated revelation this year that Mullah Omar had died some two years ago), and hopes for a secure and stable Afghanistan in the near term have dimmed. In a tragic sign of the country’s situation, by year’s end, Afghans had become the second largest population of migrants after Syrians seeking refuge in Europe. Modi juggernaut slows, narrative returns to earth: In 2015, Indian Prime Minister Narendra Modi continued to successfully project India overseas, but faced a changed narrative at home. The expectations that he would be able to usher in transformational “big bang” economic reform proved unrealistic as his government found itself stymied by uproar in parliament’s upper house. Modi government officials spoke of “creative incrementalism” as the cumulative effect of a series of smaller reforms and performance improvements instead. Politically, hopes for continued gains by the Bharatiya Janata Party in state-level elections were dashed when the populist Aam Aadmi Party won Delhi by a landslide in February, and a “grand alliance” of regional parties swept Bihar in November. In the second half of the year, Modi’s much-delayed response to a shocking murder of a Muslim man merely suspected of eating beef—among the most visible of a series of similar incidents—led to a significant and politically polarized public debate in India and abroad over whether the country was growing more intolerant. India’s economy fastest growing in the world, top foreign direct investment (FDI) destination: Even as expectations changed in India, and as political problems became more salient for the Modi government, the Indian economy chugged ahead to become the world’s fastest-growing major economy, growing at 7.4 percent in the third quarter of 2015, overtaking China. It also became the world’s top foreign direct investment destination, according to the Financial Times, as announced FDI commitments to India surged to $31 billion in the first half of 2015. Those figures more than double India’s FDI levels from the first half of 2014. China and Pakistan announce vast “economic corridor” project: In April, Chinese President Xi Jinping visited Pakistan and announced a major investment package of some $46 billion. China has been Pakistan’s “all-weather friend” for decades, but the April announcement promised infrastructure developments of another order. The vision will link western China down to the Arabian Sea through a “China Pakistan Economic Corridor” that will require roads from Pakistan’s Gwadar deep water port all the way up through the Karakorum Highway linking Pakistan to China via hairpin turns carved into Himalayan mountainsides. Nepal suffers massive earthquake: On April 25 a massive quake measuring 7.8 on the Richter scale shook Nepal. Its epicenter was forty-eight miles (seventy-seven kilometers) northwest of Kathmandu. Homes and ancient buildings crumbled; nearly nine thousand people were killed, 2.8 million displaced, and more than 600,000 homes were destroyed. Despite an outpouring of international support, delays in distributing aid with in the country led to criticism. Tourism, a mainstay of the Nepali economy, has not returned to its earlier levels. The passage of a new constitution—eight years in the making—led not to strengthening of democracy, but mass protests from Nepal’s Madhesis; a supply blockade at the India-Nepal border has further resulted in economic disruption. By the end of the year, concerns about Nepal’s economy had grown, even as the country had not yet managed to fully rebuild from the April tragedy. Bloggers and foreigners assassinated in Bangladesh: Bangladesh’s political problems worsened in 2015. During the first half of the year, an astonishingly gruesome series of murders made international headlines as small groups of machete-wielding terrorists targeted secular and/or atheist bloggers for assassination. By September and October foreigners became the targets, and later in October a bomb exploded during a Shia procession. Following the September and October attacks, the Islamic State has claimed responsibility, but the Bangladeshi government has stated instead that the violence must be the work of domestic groups. Concerns about Bangladesh’s security have now become the headline. Sri Lankans unseat strongman Rajapaksa, elect “combined opposition” in surprise outcome: On January 9, Sri Lanka’s Maithripala Sirisena defeated ten-year incumbent President Mahinda Rajapaksa. It was an upset by any measure. Sirisena previously served in the Rajapaksa cabinet, but defected along with more than twenty other members of parliament to form an opposition coalition only two months before the January polls. Rajapaksa conceded graciously. The results represent a victory for Sri Lankan democracy. Under Sirisena, Sri Lanka has also “rebalanced” its foreign relations, rebuilding its ties with India—badly frayed by 2014—as well as with the global human rights community. In a step unimaginable a year back, in September Colombo even cosponsored a consensus resolution in the UN Human Rights Council on accountability for rights violations in Sri Lanka during the war. India emerges as a leader in Paris climate negotiations, deal reached: India has been willing, in previous multilateral negotiations, to say “no” to deals, no matter the consequences for global consensus. The India that arrived in Paris for the Conference of Parties negotiation on climate showed up with a different plan, including a proactive proposal for a new international solar alliance, which Modi inaugurated with French President Francois Hollande. Over the more than two weeks of deliberations India was a voice for the developing countries, and pushed for its priorities, but focused on a deal. The outcome—a global climate agreement—provides a good indication of how India’s new ambition of being a “leading power, rather than just a balancing power” is already positioning it to shape outcomes. Raheel Sharif rises, Nawaz Sharif sinks in sadly predictable setback for Pakistani democracy: As the Wall Street Journal put it, “Powerful General Raheel Sharif Eclipses Pakistan’s Prime Minister.” Though General Sharif had been in place since 2013, it was not until this year that his profile appeared to shine brighter than the democratically-elected Nawaz Sharif. But Nawaz became hobbled domestically by street protests throughout 2014, and the military clipped his foreign policy efforts to build better ties with India. In 2015, Pakistan’s military once again rose in prominence as the institution that can “deliver,” and General Raheel Sharif became the subject of social media memes and “cult hero” tributes. Maldives court sentences former president to prison in Kafkaesque trial: In a continued setback to Maldives’ nascent democracy, former President Mohamed Nasheed remained in prison at the end of 2015, despite the high-profile efforts of his legal team led by Amal Clooney, who has single-handedly helped this case gain visibility it might not have enjoyed otherwise. In March, a Maldivian court sentenced Nasheed to thirteen years’ imprisonment on the charge of terrorism relating to his actions in office when he ordered the arrest of a judge. The trial itself was ridden with numerous irregularities. The UN Human Rights Council Working Group on Arbitrary Detention issued an opinion in favor of Nasheed in September. Follow me on Twitter: @AyresAlyssa

This guest post is co-authored by Joshua Busby, Associate Professor, and Sarang Shidore, Consultant and Visiting Scholar, at the LBJ School of Public Affairs at the University of Texas at Austin. For further analysis from the blog, see: "How India Could Achieve Its Audacious Solar Ambitions" The Paris climate negotiations produced an agreement that was satisfactory to all the major parties, including India. While much has been made of its negotiating position during the climate negotiations, less analysis has been dedicated to the implementation challenges going forward for the ambitious targets in India’s Intended Nationally Determined Contribution (INDC), namely the commitments to improve emissions intensity and scaling up of non-fossil energy. In addition to the generic challenge of affordable energy storage for intermittent renewable power, there are four India-specific challenges related to solar scale-up including (1) viability of the current bidding process, (2) the major challenges of grid integration, (3) the persistent financial crisis of distribution companies, and (4) multiple barriers to rooftop solar roll-out. India’s Emissions Profile and Trajectory Though its historic contribution to greenhouse gases is small, India is the fourth largest emitter of carbon dioxide, responsible for 7 percent of global emissions. However, India’s growth potential is enormous. India has more than 240 million people without access to electricity. Much of the rest of the country has intermittent power. As a consequence, the country’s energy use (and emissions) per capita are the lowest of all major economies and will inevitably grow as the country gets richer and people acquire more access to energy. According to the International Energy Agency, under current policies, India’s electricity generation will increase by 250 percent by 2040. In 2013, more than 70 percent of India’s electricity was generated by coal. Under business as usual policies, that would only reduce slightly by 2040, but in the post-INDC world the anticipated solar scale-up would reduce this number very substantially to about 50 percent of net generation. In its INDC, India committed to reduce its emissions intensity by 33 to 35 percent below 2005 levels by 2030. India also announced its intent to increase the non-fossil share of the country’s electricity to 40 percent by 2030, with an explicit commitment to scale-up wind to 60 GW and solar power generation to 100 GW by 2022, split nearly evenly between large-scale solar parks (60GW) and rooftop solar (40GW). With these more aggressive mitigation strategies, India could reduce that increase in carbon dioxide emissions by as much as 57 percent compared to the baseline. However, that would require India overcome many of the obstacles to implementation of its INDC targets. The Obstacles Solar scale-up is the principal hope for non-fossil energy. A significant portion of the wind potential has been exploited, and nuclear energy and large hydropower have stalled in the face of high costs and public opposition. The partial good news is that land acquisition, which has historically been a major challenge for Indian infrastructure projects, may be less of an obstacle this time around with the concept of solar parks – such as Charanka in western India – taking off. But key obstacles remain. Solar Bidding: How Low Can You Go? The Indian government has adopted the lowest-bid model for solar bids. This is due to the drive for greater transparency in the wake of the major scandals on coal blocks and telecom bandwidths during the previous government. However, companies that are making these bids may not be able to generate power at the price they have offered on a sustainable basis. There is precedent for problematic bids in India in the power sector. Nearly a decade back, India adopted a similar model for building large coal-power plants known as UMPPs (ultra mega power projects) of 4 GW capacity. The low bids these attracted made electricity rates unviable, especially when imported coal costs rose in the later part of the decade, and the contractual design had no allowance for passing on these costs to consumers. If the current solar bids result in electricity rates that cannot be profitable for the generators, then the anticipated solar scale up would fail. Fuel costs are zero for solar projects, but cost escalations routinely occur in Indian infrastructure projects. Part of the blame also lies with the private sector which submitted unrealistically low bids, hoping for upward adjustments in due course, thus inviting accusations that it has acted in bad faith. Most infamously, Reliance Power won two UMPP projects with extraordinarily low bids of Rs. 1.77 and Rs. 1.196 (approximately $0.039 cents and $0.026 cents per kWhr respectively at the then-prevailing exchange rates) for its projects in Tilaiya and Sasan in central India. The courts subsequently detected irregularities and invalidated a part of the contract terms for Sasan triggering a company lawsuit, while Reliance abandoned the Tilaiya project accusing the regional government of delays.  Reliance has also halted construction for the third UMPP in Krishnapatnam in southern India while challenging the bid rates with the central regulator. The final UMPP contract, won by Tata Power in Mundra in western India, is also mired in a legal dispute over the original bid rates, which Tata wants increased. With solar bids recently plunging below Rs. 5 per unit, a possible repeat of the UMPP failures looms on the horizon. The DISCOM Crisis: Who’s going to buy all this power? Tied to flaws in the contractual process is the financial ill-health of India’s mostly state-owned distribution companies, commonly known as DISCOMS, who are in debt to the tune of $66 billion. DISCOMS tend to under-buy power to reduce losses, a major barrier to large new additions of solar capacity. The Indian government has unveiled a rescue package for DISCOMS, but some analysts are still not convinced this will solve the problem. The Grid: Will the power flow? Another challenge is the inadequacy of the existing grid to be able to move renewable power from sites of generation to sites of consumption. This is already hampering scale-up in wind – for example, the southern state of Tamil Nadu wastes a substantial fraction of its generated wind power due to grid challenges. Moreover, the amount of electricity lost during transmission is still too high and needs to be reduced substantially. Although the Indian government has announced  spending of nearly $16 billion for this purpose, much more will be needed. Rooftop Stall: Why can’t I generate my own power? 40 GW of the 100 GW solar target is slated for rooftop solutions. At one level, this is a no-brainer from the economic standpoint because commercial and industrial users pay electricity rates in India that are above costs of solar generation. However, net metering, the technological and policy framework that is required for rooftop solutions to work, has not yet been implemented in a majority of Indian states. The financing environment for rooftop installations is far from being in place. Finally there is significant resistance from India’s largely state-owned distribution companies, many of which are deep in the red, towards widespread net metering - for the entirely legitimate reason that they will lose their best-paying customers. A win-win revenue model that does not penalize these companies is essential for net rooftop solar to be politically viable. Conclusion In sum, India is going to build significant solar generation capacity in the next few years, but unless these obstacles are overcome, that capacity may only be a fraction of the intended 100 GW target in the country’s INDC.

Ashlyn Anderson, Rachel Brown, Ariella Rotenberg, Ayumi Teraoka, Gabriel Walker, and James West look at five stories from Asia this week. 1. Canadian pastor sentenced by North Korea to life in prison with hard labor. Hyeon Soo Lim, a Canadian pastor, was sentenced to a life term of hard labor by the highest court in the Democratic People’s Republic of Korea. After a ninety-minute trial, Lim was convicted of crimes against the state that included running a human rights campaign against North Korea in cooperation with the United States and South Korea, as well as assisting defectors who wished to leave North Korea. A video was circulated of Lim admitting his guilt in what is suspected to be a staged confession. The Canadian government is doing what it can to negotiate his release and repatriation, and has characterized his sentence as “unduly harsh” particularly given Lim’s “age and fragile health.” 2. Pakistan surprised by inclusion in “Islamic military alliance.” In a rare press conference on Tuesday, Saudi Deputy Crown Prince and Defense Minister Mohammad bin Salman announced the formation of an “Islamic military alliance,” with a permanent base in Riyadh that will coordinate the efforts of thirty-four Muslim countries to combat global terrorism, including providing assistance with military training and equipment and countering violent extremism messaging. Pakistan—along with several other countries, including Indonesia and Malaysia—was caught off guard by the announcement of a military alliance, with reports indicating that Saudi Arabia had reached out to states simply to establish a coordination center and that senior officials and lawmakers learned about it from news reports. On Thursday, the Foreign Office confirmed Pakistan’s support for the alliance, but cautioned that Pakistan “is awaiting further details to decide the extent of its participation in different activities in the alliance” and it is unlikely Pakistan will send combat troops abroad. Earlier this year, Pakistan declined a Saudi request for troops, naval, and aircraft support for its intervention in Yemen against Houthi rebels. 3. Xinjiang mine attack suspect spoke of jihad. Chinese state media released a video of one of the alleged perpetrators of a September knife attack at Sogan coal mine in northwestern Xinjiang. As many as fifty people are believed to have died in the attack, which sparked an eight-week manhunt for the attackers. In the video, the sole suspect to have surrendered, Turghun Emet, describes his motives in Uighur. “If we die when we do jihad, then we will go to heaven… At that time, they gave me a knife. There was a knife in everyone’s hands—if you cut someone, kill someone, then you will be a martyr and go to heaven.” Twenty-eight other terrorists died during the manhunt. Concerns about terrorism, and particularly the Islamic State group, have increased in China following the killing of a Chinese hostage held by the Islamic State in November and the release of a chant in Mandarin exhorting Chinese Muslims to “take up weapons to fight.” Chinese officials recently cited the Xinjiang mine attack and manhunt as evidence to compare their nation’s experiences with terrorism to other incidents such as the Paris attacks. 4. Japanese journalist found not guilty for defaming South Korean president. Tatsuya Kato, former Seoul bureau-chief of the Sankei Shimbun, was acquitted of a charge of defaming South Korean President Park Geun-hye. This decision came amidst the two governments’ efforts to improve relations, and led the South Korean Ministry of Foreign Affairs (MOFA) to appeal to its Ministry of Justice for leniency in the case. In October 2014, Kato was indicted for his online article on Park’s whereabouts on the day of the Sewol ferry disaster, in particular regarding the mysterious seven hours during which she was missing. The article introduced a scandalous rumor that she may have been with her former secretary, quoting a column published by the Chosun Ilbo, a major Korean newspaper. Kato was barred from leaving the country until April 2015, and this fueled Japanese public anger towards South Korea for its lack of freedom of press, worsening an already deteriorated bilateral relations due to complicated issues of history. Japanese Prime Minister Shinzo Abe took this incident so seriously that he met with Kato the day after he returned to Japan in April. Although both Abe and South Korean MOFA viewed the court’s decision positively, the Japanese public, as represented both in conservative and liberal newspapers, still remains unhappy about the prosecution itself. 5. To cut smog in New Delhi, India restricts vehicle use. On Wednesday, the Supreme Court of India passed a number of temporary restrictions on vehicle use in Delhi in order to address the capital’s dire air pollution problem. The move included a ban on some diesel vehicles and SUVs, old “transport vehicles,” and an increased tax on commercial vehicles. Additionally, all taxis operating in the city must switch from gasoline or diesel to compressed natural gas by March of 2016. Though international media frequently make Beijing out to be Asia’s most important battleground in the fight against air pollution, the World Health Organization reported in 2014 that Delhi’s mean annual concentration of PM2.5, the smallest and potentially most dangerous particles, was nearly three times that of Beijing. Beginning on January 1, Delhi will implement a Beijing-like, odd-even license-plate restriction system, and also has plans to close a coal-fired power plant and further upgrade vehicle emissions standards. But because vehicles in Delhi only produce about a quarter of PM2.5 pollution, and the majority comes from industry, road dust, and burning firewood, and other sources, the vehicle restrictions are just a first step to clearing the city’s smoggy skies. Bonus: South Koreans are living through the experience of death. In response to high suicide rates, “fake funerals” are now being offered to South Koreans as a way to reflect on their lives and contemplate the reality of death. Providers of the service offer coffins for clients to lay in as they mediate on death. High amounts of professional stress and social pressure have led to increased suicide rates, giving South Korea the nickname the “suicide capital of the developed world.” The near-death experience encourages clients to imagine their deaths by writing letters to their friends and family before walking out to the graveyard and entering their coffins. By offering a near-death experience, the goal of the service is to bring clients a new appreciation and relationship with life.

This post is coauthored by Varun Sivaram and Michael Levi. Congress is set to vote on a budget deal that would permanently end the long-standing ban on crude oil exports in exchange for temporary extensions of tax credits that support solar and wind energy. Michael wrote on Tuesday about the market, climate, and geopolitical impact of lifting the oil export ban. In this post we’re going to estimate the climate impact of the renewables tax credit extensions. We focus on 2016-2020 for three reasons: (a) it’s the period for which we have the best data; (b) beyond 2020, complex interactions with the Clean Power Plan make things much tougher to model; and (c) most important, beyond 2020, the primary effect of the ITC/PTC extension should be to make reducing emissions cheaper, and thus enable stronger policy, something that can’t be quantitatively modeled. Our bottom line: Extension of the tax credits will do far more to reduce carbon dioxide emissions over the next five years than lifting the export ban will do to increase them. While this post offers no judgement of the budget deal as a whole, the deal, if passed, looks like a win for climate. What the Budget Deal Includes The tax credit extensions would be a big deal for the renewable energy industry. The solar investment tax credit (ITC) is especially lucrative—new solar installations that begin operating before 2020 will continue to receive a tax credit equal to 30 percent of their system cost. The ITC steps down to 10 percent by the end of 2021, but projects that commence construction in 2020 and 2021 are still eligible for 26 and 22 percent tax credits, respectively. Given that solar industry leaders like SolarCity and First Solar have tailored their business models to withstand the impending ITC cliff (without this deal, the ITC would plunge down to 10 percent for any project completed after 2016), the six-year extension/phasedown is an unexpected Christmas present. The revival of the currently expired PTC is also a welcome development for the wind industry. The PTC—which compensates wind generators for ten years after they begin operating for the power they produce—would return to its full value of 2.3 cents per kilowatt-hour (kWh) for any project under construction by the end of 2016. The proposed budget bill articulates a five-year phase-out (1.84 cents/kWh for projects commencing construction in 2017, 1.38 cents/kWh in 2018, 0.92 cents/kWh in 2019, and nothing thereafter) that gives the industry visibility into the future. This is important because over the last decade, the wind industry has been plagued by boom and bust cycles driven by uncertainty over the future of the PTC. Even though the PTC would phase out faster than the ITC, then, the wind industry arguably needs policy stability as much as policy support. That should make the PTC deal a welcome development for the wind industry. Impact of the Budget Deal on Wind and Solar Deployment The first step toward estimating climate benefits is to project the effect of the new tax credit policies on renewable energy adoption. GTM Research published a helpful research note projecting solar adoption through 2020 with and without the proposed ITC extension. The contrast is stark—whereas installed solar capacity was set to peak in 2016 and then plunge over a cliff as the ITC expired, under the budget proposal there is a smaller pause in solar deployment in 2017 as the glut of projects in the current pipeline get built. From 2017 onward, all three industry segments—residential, commercial, and utility-scale solar—grow faster than without the ITC extension. This leads to around 25 gigawatts (GW) of additional capacity under the budget proposal by 2020. To estimate the impact of the PTC extension, we used analysis released this week by Bloomberg New Energy Finance comparing wind deployment under the proposed PTC phase-out to deployment without any PTC support at all for the next five years. Again, there is a stark contrast between the two projections. Without the extension, wind deployment is projected to peak in 2016, as developers rush to take advantage of the Internal Revenue Service’s determination that projects operational before 2017 will be eligible for the full 2.3 cent/kWh PTC that expired in 2014. Now, under the budget proposal, the steep cliff in capacity coming online in 2017 is replaced by a gentle hill and then a flurry of new construction to take advantage of the PTC extension. By 2020, around 19 GW of incremental wind capacity is projected to come online because of the budget proposal. The resulting projections are displayed in Figure 1. The two panels at left show the cumulative installed capacity of solar and wind in a world without tax credits and under the budget proposal. The middle panel plots the annual capacity that is incremental to the budget proposal—that is, all new solar and wind excluding projects that would be built anyway without the budget proposal. The rightmost panel shows the cumulative capacity additions due to the new policy. Two trends are important to note. Both incremental solar and wind deployment are actually negative in 2016, reflecting the forecast that under an extended ITC and PTC, there would no longer be a mad rush to build projects before a 2016 cliff. However, solar and wind deployment trends diverge in later years. Through 2020 incremental solar construction accelerates as solar becomes cheaper while the tax credit remains at 30 percent. But incremental wind deployment peaks in 2017–2018, because developers that begin construction on projects in 2016 will be eligible for the full value of the PTC (even if the projects are only operational in subsequent years). Then as the PTC phases out to zero in 2020, additional wind capacity spurred by the budget deal will decline, so by 2020 the additions under the budget proposal are roughly similar to the additions without any tax credit extensions. Emissions Impact We can use these projections of incremental capacity additions to estimate the climate benefits of the new renewable energy. We conservatively focus on the 2016–2020 period before Clean Power Plan incentives kick in fully; this means that we’re going to underestimate the climate benefits of the ITC/PTC extension. Figure 2 details the assumptions in this calculation. First, we assume that new solar and wind will on average displace a mix of fossil-fuels—coal and natural gas—as well as nuclear power in some cases. (All other sources have zero marginal cost and therefore won’t be displaced.) Nuclear power will be displaced in big chunks (if it is displaced at all), corresponding to retirements of entire plants, because as a baseload, low marginal cost resource, nuclear plants either run at near-full capacity or not at all (and some argue that zero-marginal cost renewable energy like wind and solar can make a nuclear plant’s operation unprofitable enough that it may have to shut down). To be safe, we investigated a range of values of the carbon intensity—or the emissions per unit power—of the electricity sources that solar and wind displace. At the low end, we considered the emissions intensity of a mix of nuclear, coal, and gas, weighted by their generation. And at the high end, we assumed that no nuclear reactors close because of renewable energy and instead stipulated that renewable energy displaces a mix of coal and natural gas, again weighted by generation. Second, we assume that since the solar and wind plants that will be incentivized by the tax credit extensions will be new projects, they will have high capacity factors—that is, they will be relatively efficient at generating power compared with older counterparts. New utility-scale solar plants now boast capacity factors of 30 percent. New residential solar installations deliver half that. New wind plants perform at a capacity factor of around 37 percent. Third, to be conservative, we consider an effect of up to 10 percent additional emissions from integrating renewable energy into the grid. Because renewable energy is intermittent—that is, solar and wind only produce when the sun shines and the wind blows—the rest of the power plant fleet must compensate for this added unpredictability. This leads to natural gas plants changing their power output rapidly, which reduces their efficiency and requires them to emit more CO2 per unit of generated electricity. Moreover, more power plants may have to be kept running on standby as “reserve margin” to compensate for any unanticipated shortage of renewable energy. Our final assumption deals with an early compliance mechanism for the Clean Power Plan, the Clean Energy Incentive Program, which kicks in from 2020 onward. Under the proposed program, which has not yet been finalized, states can claim credits for renewable energy projects commencing construction after September 2018, and they can use these credits to avoid equivalent emissions cuts from 2022 onward when the Clean Power Plan takes full effect. This suggests that any savings in emissions from renewable energy that gets built thanks to the tax credit extensions may result in a future emissions increase because states will have additional emissions headroom to comply with the Clean Power Plan. Because this early compliance mechanism has yet to be finalized, we excluded the effect of future offsetting emissions from our central 2020 estimate of CO2 reductions; we do, however, include it in assessing the full range of possible impacts. To express the sensitivity of our central emissions estimates to the assumptions outlined above, we have added uncertainty ranges to the bars in in Figure 2 to indicate uncertainty. The pronounced uncertainty range in 2020 reflects the open question of whether emissions saved by renewable energy will be offset by future Clean Power Plan compliance headroom. The take-home point from this figure is that the emissions reductions from solar and wind energy through 2020 is substantial, reaching as much as 90 million metric tons of avoided CO2 per year in 2020. The average annual emissions reduction over the 2016-2020 period is 25-46 million metric tons with a most likely value around 40 million metric tons. For reference, the Obama administration’s Clean Power Plan is projected to reduce CO2 emissions by about six times that level, or 240 million metric tons per year, in 2025. Putting It All Together: Renewable Energy Climate Impact Overwhelms That of Oil Exports In contrast to the considerable emissions savings from renewable energy, the climate impact of lifting the crude oil export ban is likely to be small. A previous post estimated the average annual emissions impact of lifting the oil export ban as around 10 million metric tons of CO2 per year over 2016-2025 (with a possible range of 0–20). Over the time period we have examined in this post, 2016–2020, the same methodology yields an estimate of 2 million metric tons of CO2 annually (with a possible range of 0–5). Figure 3 extends the previous figure by adding the range of positive emissions from crude oil exports to the emissions savings from new renewable energy incentivized by the budget deal.  The diamonds represent the central estimates of the net emissions impact of oil exports and new renewable energy, and the dotted bars represent the uncertainty range of how much oil exports could increase emissions. The net impact of the exports-for-renewables-credits trade, then, is to reduce carbon dioxide emissions by at least 20-40 million metric tons annual over the 2016-2020 period. The most likely emissions reduction in our estimate is around 35 million metric tons. The climate benefit of the tax credit extension is over a factor of ten larger than the climate cost of removing the oil export ban over this period. What About the Longer Run? This of course does not answer the question of what will happen over the longer run. The impact of lifting the oil export ban will persist while the ITC/PTC will be phased out. One could, in principle, extend the analysis above through 2025. (A very simple extension of the central estimates through 2025, assuming no emissions savings from the PTC/ITC after 2020, leaves one with an ITC/PTC impact considerably outweighing that of oil exports.) This would, however, be misleading. Extension of the PTC/ITC should drive down zero-carbon energy costs and reduce business as usual emissions beyond 2020. Both factors should enable stronger rules under the Clean Power Plan (or other policies that are additional to the plan). This is part of the potential payoff of an ITC/PTC extension. This can’t, of course, be modeled quantitatively. But it is the right way to think about the longer run impact of the budget deal.