How Are State Lawmakers Decarbonizing Energy Portfolios and Combating Climate Change?

This article is part of our latest series: Major Issue Trends in 2023: State Legislative Recap. In this series, our experts examine the high-level legislative trends they saw in the 2023 state sessions. In addition to discussing the most prevalent issues considered by state policymakers, they explore some of the more surprising emerging trends we noticed, plus what to expect in 2024 for many of these policy areas. The series will be released during November and December, with new articles each week. Explore the full series here, and be sure to sign up for our email list so you don’t miss out on any articles (check the “Blog Posts” box).

During the 2023 legislative sessions, several states took significant action related to decarbonizing their energy portfolios and combating climate change. In particular, Colorado’s expansive climate change legislative accomplishments this year demonstrated leadership in the sector. From incorporating alternative energy sources to restructuring long-term climate goals, more and more states view climate change as a threat and are looking at alternatives to combat it.

Climate Change/Energy

New Energy Source Exploration

As many states attempt to transition to cleaner energy sources and rely less on fossil fuels, alternative energy possibilities have been floated as pieces to make up the clean energy puzzle. Highlights from 2023 include offshore wind expansions, hydrogen as a fuel, and biomass’s clean energy potential.

Both Arkansas (AR SB 407) and Oklahoma (OK SB 19) passed similar bills to declare bioenergy produced from biomass (meaning bioenergy feedstocks from forest products manufacturing) carbon neutral and declare it carbon negative when paired with a carbon capture and storage program. These bills allow the use of byproducts of manufacturing as energy sources for the future, but climate scientists still debate whether the clean energy properties of biomass are a net positive environmentally. In Arkansas and Oklahoma, bioenergy can now be regarded as a clean energy source according to state law.

Colorado’s clean hydrogen law (CO HB 1281) has been touted as a leading measure for hydrogen as a fuel source. The new law creates a tax credit for companies that use hydrogen and requires strict offset measures and emissions reporting due to remaining questions of hydrogen’s “green-ness.” Another enacted Colorado bill (CO SB 285) creates an underground hydrogen storage study. SB 285 also establishes the Energy and Carbon Management Commission’s regulatory capabilities over geothermal resource operations. In Nevada, SB 451 indicates the state’s intention to make hydrogen a component of the state’s clean energy solutions. Existing legislation empowers Nevada’s Joint Interim Standing Committee on Growth and Infrastructure to evaluate the state’s energy policy. This new law directs the Committee to study and submit a report with any recommendations for legislation. The study must encompass the production and storage of hydrogen, the use of stored hydrogen as a potential energy source in Nevada, and new hydrogen technologies. 

Offshore wind is another energy source that received attention in the 2023 legislative sessions and whose potential has been highly touted. In Maine, Governor Janet Mills (D) signed into law legislation (ME LD 1895) creating the Maine Offshore Wind Renewable Energy and Economic Development Program. The new law prepares Maine to solicit proposals for not less than 600 megawatts (MW) of aggregate nameplate capacity of floating extraterritorial wind projects. Maryland also passed a bill (MD SB 781) creating a state goal of 8500 MW of offshore wind energy capacity by 2031. The new law requires that Maryland offshore wind transmission projects be union projects and use American-made materials. A bill in California’s Assembly CA AB 3) attempts to further investigate offshore wind’s capabilities. If passed, the bill would task the State Energy Resources Conservation and Development Commission to investigate procurement strategies for offshore wind energy projects, along with a 2nd-phase plan and strategy for seaport readiness. AB 3 has passed the Assembly and is currently making its way through the Senate.

Renewable Portfolio Standards and Greenhouse Gas Emissions

For many states, setting or revising their renewable portfolio standards (RPS) or greenhouse gas (GHG) emissions reduction target creates their governing principle in coordinating decarbonization plans. Minnesota, Colorado, and Oregon made some of the largest changes in 2023 with commitments to reduce their GHG emissions or revise their RPS percentages. In Minnesota, a new law (MN HF 7) does both, as the legislation extends the RPS from 2025 to 2035, when the state will require electric utilities to generate at least 55 percent of electricity from renewables. The law also requires utilities to generate electricity from 100 percent carbon-free sources by 2040.

Colorado also set new targets for electric utilities’ GHG emission reduction targets under SB 198 and statewide GHG emission reduction goals under SB 16. The new state GHG emission reduction goal gradually reduces in increments of five years based on 2005 GHG pollution levels, culminating with a 100 percent reduction in emissions by 2050. Colorado’s electric utility emission reduction target under SB 198 requires electric utilities to reduce GHG emissions by at least 80 percent in 2030 relative to 2005 levels.

Oregon’s climate change omnibus bill (OR HB 3409) sets new emission reduction targets and additional energy efficiency measures for buildings. The bill establishes the state’s policy to reduce GHG emissions targets below 1990 levels at 45 percent by 2030, 70 percent by 2040, and 95 percent by 2050. The bill additionally focuses on heat pumps with a new state plan to deploy the technology and encourage residents to adopt heat pumps to align with GHG emission targets.

Alaska established a program this year to offset carbon on state lands. The new law (AK SB 48) creates carbon offset credits which can be sold once projects are evaluated and registered. Twenty percent of the revenue from the carbon offset program will be put into the state's renewable energy grant fund with the legislature appropriating the rest. 

Vermont’s GHG emission reductions relate specifically to fossil fuel use to heat buildings. A new law (VT SB 5) creates the Clean Heat Standard to achieve the thermal sector’s GHG emission reduction required under the Global Warming Solutions Act, which was passed in 2020. Similar to Alaska’s carbon offset credit program, Vermont’s new law tasks its Public Utilities Commission to establish a clean heat credit system with the ability to trade these for profits when clean heat measures reduce greenhouse gas emissions. The Public Utilities Commission will establish rules about the heat credits and their specific numbers. Additionally, Vermont passed another bill (VT SB 112) to establish the Legislative Working Group on Renewable Energy Standard Reform. The Group must investigate whether any barriers remain in achieving Vermont’s established energy goal of 100 percent renewable standard for all electrical utilities by 2030.

Maine’s LD 1411 starts the process to establish new sectoral limits on greenhouse gas emissions. The bill requires the Department of Environmental Protection to adopt rules capping sector-specific GHG emissions from energy sources in the commercial, industrial, residential, and transportation sectors. Caps must be set for electricity and combined heat and power plants whose business sells electricity or electricity and heat to the public. 

In California, CA SB 122 reaffirmed the state’s goal of achieving net zero GHG goal as soon as possible but not later than 2045. The California Global Warming Solutions Act of 2006 established this as the state’s policy. Late last year, Governor Gavin Newsom and the California Air Resources Board introduced their proposal to achieve that goal. SB 122 revises the Legislative Analyst’s Office requirement to conduct independent analysis on this goal from every two years to every year.

Local Preemption

Some states focused energy this session on creating uniformity across the state when choosing energy sources. Montana’s SB 208 gives the state enormous power to keep more conventional energy sources as the main sources. The bill prohibits local governments and the state building code from banning or limiting energy choices. The measure specifically protects natural gas, propane, and their respective utilities as energy sources which cannot be regulated on the local level or within the state building code. Texas’s SB 784 rallies directly against local provisions intended to fight greenhouse gas emissions. The bill establishes the state as the exclusive authority over GHG emission regulation and prohibits local governments from directly regulating GHG emissions via any ordinance or other measure.

Decarbonization

Climate Change Response Bills and Global Warming Analysis

In Maryland, HB 261/SB 424 will require the Department of General Services to establish acceptable global warming potential of materials included in public construction projects. These materials include cement, glass, steel, and wood. Producers of these materials will be required to submit environmental product declarations to the Department. Maryland’s goal is to first understand and then limit how much its construction projects contribute to climate change.

In this past session, Washington committed to overhauling its current climate commitment with an eye toward the future. HB 1170 updates the state’s Integrated Climate Change Response Strategy, which is the state’s climate change prevention guiding document. The bill directs the Department of Ecology to convene an updated Integrated Climate Change response strategy, which will pull information from other departments, partner agencies, local governments, and stakeholders to make recommendations to the Governor and the legislature. Guiding principles include GHG emission reductions, climate preparedness, natural solutions, and a focus on overburdened communities and vulnerable populations. Another new law in Washington looks to delve into the best strategies for the future. SB 5269 authorizes the Commerce Department to convene a new study on how the state’s transition to net-zero emissions by 2050 will affect manufacturing in the state. The legislature is interested in identifying new technologies and industries that will benefit the net-zero economy and make it possible.

New York’s budget bill (SB 4006/AB 3006) creates the Climate Action Fund, a new tool to assist with climate-related risk and energy transition projects. There are three separate accounts within the fund: a consumer climate action account used to help offset consumer costs for climate-related goods and services, an industrial small business climate action account to help offset increased costs that are climate-related for small businesses, and a climate investment account to assist the state in transitioning to a less carbon-intensive economy. Each fund has specific requirements for projects to receive funding including prevailing wages for workers and limitations on what can be constructed. The bill makes provisions for the accounts and how money will be appropriated. 

In California’s budget bill this session, the legislature appropriated specific funding to create a working group of stakeholders from different industries to create a zero-emission roadmap. CA SB 101 appropriates $500,000 for the Office of Planning and Research to identify what specific actions will be needed to hit California’s zero-emission goals. With a specific focus on transportation and minimal worker displacement, the study will be a promising step in California’s journey to implement processes in pursuit of its climate change goals. 

Carbon Sequestration and Capture

Carbon sequestration, the natural or artificial process of removing carbon from the atmosphere and storing it in either liquid or solid form, has become a polarizing, potential solution to the climate crisis. The idea has enormous promise, but current technology does not yet allow for large-scale implementation. Legislators in Louisiana (LA HB 571) and Colorado (CO HB 1210) both passed measures to explore carbon sequestration. Louisiana’s law delineates how carbon dioxide must be transported and stored along with the environmental analysis, reporting, and record-keeping that is necessary to capture carbon within the state. The law additionally creates funding opportunities and allows sequestered carbon withdrawals to be taxed. In Colorado, HB 1210 tasks the Colorado Energy Office to develop a carbon management roadmap. Carbon management is an all-encompassing definition including carbon dioxide removal, carbon storage, carbon capture, and carbon utilization. The roadmap will be submitted to the legislature to initiate and implement it statewide. Oregon’s climate omnibus bill also addresses carbon sequestration. HB 3409 requires the  Department of Energy and Oregon Global Warming Commission to establish a net biological carbon sequestration and storage baseline for natural and working lands.

Transportation

The transportation sector accounts for the largest contributions of GHG emissions within the United States. Some blue states this session attempted to lessen this trend through long-term planning solutions. Connecticut’s long-term plan to green out its transportation sector started with SB 904’s passage. The bill requires the Commissioner of Transportation to establish a transportation carbon dioxide reduction target, which will set the maximum amount of CO2 emissions permitted within the transportation sector. The bill won’t go into effect until October 2030, but it will be biennially adjusted. 

Rhode Island’s (SB 856/HB 6293) new law incentivizes clean transportation programs. The state changed its utility base rate statute to make clean transportation projects eligible to receive grants from the Rhode Island Infrastructure Bank. These bills became law without Governor Dan McKee’s (D) signature and also established grant eligibility for projects in clean heating, zero-emission technology, energy efficiency, and greenhouse gas reduction.

On the flip side, Colorado will penalize those in the transportation sector who have not undertaken steps to decarbonize their transportation systems. Colorado’s new Fuels Impact Enterprise and Clean Fleet Enterprise from SB 280 create fees taken from fuel product manufacturers and heavy-duty diesel vehicle registration to fund state and local responses to hazard and environmental mitigation and replacement of diesel trucks with new models.

Minnesota’s efforts at reducing the transportation sector’s carbon footprint will begin when its new Clean Transportation Fuel Standard Working Group convenes this summer. Under its omnibus transportation finance and policy bill (MN HF 2887/SF 3157), the working group has specific targets for a clean transportation fuel standard that it must hit related to the aggregate carbon intensity of transportation fuel supplied to the state including a 100 percent reduction below the 2018 baseline level by the end of 2050. Governor Tim Walz’s (D) legislative agenda in 2023 illustrated his and Minnesota’s commitment to combating climate change.

Outlook for 2024

While many states have passed clean energy legislation in the past, a potential barrier to implementing these projects remains the upfront transition costs of moving from a grid centered around fossil fuels to a grid that can reliably incorporate renewables. While clean energy programs may be less costly than fossil fuels in the future, the transition to clean energy will be expensive to start. States fund their clean energy goals in numerous ways, from utility ratepayers funding, to cap-and-trade system of emissions allowances, to specified grants from public and private climate funds. Look for states this upcoming session to rethink funding ideas and come up with creative solutions to fund clean energy projects. States will also distribute funds to the clean energy projects of their choosing.

Another trend to watch involves battles between red states and blue cities. Will more states go down the path that Montana and Texas established in preempting local government decision making on clean energy projects? It’s likely that more local governments and utilities will look to build out clean energy goals, especially with increased access to federal funding under the Clean Energy to Communities (C2C) program. On a national level, conservative strategy hopes to remove federal regulations under Project 2025, including clean energy programs while reinvigorating domestic fossil fuel production.

Finally, states will continue to expand on new types of renewable energy. Many of these technologies are still in their infancy, and even renewable energy sources such as wind and solar have new avenues to go down such as offshore wind farm expansion and increased access to solar panels after earlier supply chain issues. Continued expansion into carbon capture and sequestration technologies via studies and investment is likely to occur in many states that hope to keep carbon-intensive energy sources like gas and oil as their primary sources.

Tracking State Climate Change Legislation 

MultiState’s team is actively identifying and tracking legislation related to climate change and decarbonization so that businesses and organizations have the information they need to navigate and effectively engage. If your organization would like to further track climate change or other related environmental issues, please contact us.