Research and Development
Federal investment in research and development (R&D) supports economic growth, drives down costs for key technologies that can be used domestically and exported abroad, and promotes U.S. leadership on clean energy and climate. Investment in R&D for industrial electrification is driven primarily by the U.S. Department of Energy’s (DOE’s) Office of Energy Efficiency and Renewable Energy (EERE). Further R&D for industrial electrification comes from DOE’s National Labs and Advanced Research Projects Agency-Energy (ARPA-E).
Federal policymakers should increase investment and enact programmatic reforms to ensure DOE focuses on advancing R&D for:
- Electrification of process heating at very high temperatures;
- Electrolytic cells and other novel smelting and reduction approaches for steel making; and
- Improved electric-arc steel production processes.
Validation and Early Deployment
Before we can deploy promising clean energy technologies at scale, we must demonstrate and validate their cost and performance in real-world conditions. Since demonstration projects reduce the economic and institutional risks of new technologies, DOE should develop a robust portfolio of such projects for industrial electrification, including electrification of process heating and low-GHG electric-arc steel production.
Absent targeted policies to promote early-stage deployment, producers often are not sufficiently incentivized to develop new technologies and consumers tend to shy away from using emerging products. Tax credits, loan guarantees, and other fiscal incentives targeted at the next generation of manufacturing electrification technologies can reduce the green premium and drive private sector demand. Well-designed tax incentives must be technology neutral, predictable, flexible, and accessible to all.
Buy Clean procurement aims to reduce carbon emissions by focusing on incentives and requirements for lower-carbon infrastructure and building materials. This policy approach uses the carbon intensity of materials, or the lifecycle GHG emissions involved in their production or use, as a key criterion for procurement decisions for publicly funded projects. Buy Clean sets allowable carbon-intensity performance thresholds that decrease over time. This encourages the disclosure of emissions data via environmental product declarations (EPDs), creates a market for low-GHG materials, often lowers financing costs, and reduces harmful emissions from manufacturing.
Rapid, Large Scale Deployment
Carbon pricing, whether through a carbon tax or a cap-and-trade system, will accelerate the rapid deployment of carbon-reducing manufacturing electrification solutions. Carbon pricing policies must include equity considerations to ensure that low-income and communities of color see direct benefits. Design elements requiring on-site GHG reductions and reductions in air pollution should be included in any carbon pricing measures. They should also include competitiveness protections such as border-adjustment tariffs and carbon price exemptions for exported goods. In the manufacturing sector, carbon pricing can also be coupled with other deployment policies such as a clean product standard to potentially achieve deeper levels of decarbonization.
Clean Product Standard
A clean product standard (CPS) is a technology-neutral approach to reducing emissions from the manufacturing of industrial products. In this approach, the government sets a target for the GHG intensity of a set of basic manufactured products and allows flexibility in how to meet that target—including the potential to trade with other producers. A CPS would facilitate a cost-effective, market-based system to drive down the average GHG intensity of key manufactured goods like steel or cement.
A CPS offers an alternative or complementary approach to a carbon price for the industrial sector.
Technology-Neutral Deployment Tax Credit
Tax credits have already successfully enabled the deployment of clean energy technologies—especially wind and solar. A technology-neutral refundable tax credit for the electrification of manufacturing activities can spur more open-ended innovation in that suite of technologies.
Technology-neutral deployment tax credits offer an alternative to a CPS or carbon pricing. This mechanism is less economically efficient than a carbon price or a CPS and would be more effective if paired with regulatory carbon pollution standards to ensure emissions reductions.