New Analysis: Michigan Must Supercharge Climate Action

Reposted with permission by NRDC. Written by Samantha Williams, climate & clean energy program director, Midwest

Amidst important climate achievements at the federal level this year (e.g., the Inflation Reduction Act), Michigan has been making important progress in its own right. The state has been busy at work developing a climate roadmap that will implement Governor Whitmer’s goals of cutting GHGs from the state’s economy 28% below 2005 levels by 2025 and 52% by 2030, ultimately achieving carbon neutrality by 2050. Michigan’s goals reflect the scientific consensus on climate change and the scale and pace of decarbonization that must be undertaken for the state to do its part in tackling emissions and avoiding the worst impacts of the climate crisis. The final roadmap—the MI Healthy Climate Plan—was released in April to chart the course for the state’s GHG reduction goals, with an emphasis on this critical decade leading up to 2030.

On the heels of the roadmap, just this week 5 Lakes Energy, RMI, Michigan Environmental Council, and NRDC released a new analysis that asks the question: is the MI Healthy Climate Plan ambitious enough to ensure that Michigan does its part to tackle the pollution that is fueling climate change and harming public health, while seizing the opportunity to lower energy costs and creating an incredible wealth of job opportunities for Michiganders in the clean energy economy?

As detailed in the 2030 Report: How Michigan Should Meet Its Climate Change Goals (“2030 Report”), we find that the MI Healthy Climate Plan puts Michigan on a strong path to begin to tackle emissions.

Read the report

That said, we also find that reaching the ambitious (and necessary) goal of carbon neutrality by 2050 and achieving the state’s GHG reduction milestones this decade by 2030, requires even bolder action in the near-term than is currently outlined in the state’s roadmap. The MI Healthy Climate Plan acknowledges this fact and actively seeks out additional policy changes to reach the state’s 2030 goal, noting that gaps exist in getting Michigan from its 53% reduction goal this decade to full carbon neutrality two decades later in 2050.

Our modeling steps in to fill this gap and provide additional policy guidance for the Administration, regulators and lawmakers as we grapple with the critical next decade of climate action. The 2030 Report includes a set of policies in the “Climate Solutions Pathway” that sets the course for Michigan to reduce its emissions by over 94% by 2050 (from 2005 levels), focusing on the state’s four largest sources of emissions: electricity generation, transportation, buildings and appliances, and industry.* Within each of these areas, we recommend a bench of high-impact policies that Michigan should immediately—before 2030—prioritize as it works to address climate and pollution burdens, and if the state hopes to take advantage of the economic juggernaut that is the clean energy transition.

*For brevity, this blog does not cover our conclusions on industrial decarbonization. Please refer to the 2030 Report for more details, including our recommendations that Michigan’s industrial sector focus first on electrification.

Our modeling also confirms the significant public health and economic benefits of taking bold policy action to shift to clean energy, once again proving that we do not have to choose between a thriving economy, healthy people, and a livable climate. For a deep dive into those benefits, check out RMI’s blog, which will be posted this week.

WHERE MICHIGAN HAS BEEN, AND WHERE IT’S HEADED

Before we discuss where Michigan needs to go on GHG reductions, it’s important to touch briefly on where the state has been. Michigan has made tremendous strides in the last few decades toward lowering its GHG emissions—to be exact, 15% across the entire economy in the 15-year period between 2005 to 2019.

But while the state should celebrate this accomplishment, when you dig deeper into each of the areas that contribute to pollution emissions a picture of what progress has been made, and what still needs to be done, starts to emerge. The transition away from coal-fired power has largely driven these reductions. As discussed below, this progress will not last if Michigan continues to replace its retiring coal with gas-fired power.

In the same 15-year period, emissions from the buildings, industrial, and agriculture/land use sectors have remained largely static and are unlikely to make progress without significant policy intervention.

Transportation is an outlier, in which Michigan is on track to see emissions from that sector fall by 51% from 2005 to 2050 due to the market power of passenger EVs. Even with the popularity of EVs, however, deeper reductions in transportation emissions are necessary to reach carbon neutrality, and they will require new policies to achieve.

MICHIGAN MUST PRIORITIZE THE HIGHEST-IMPACT, NEAR-TERM CLIMATE POLICIES

All of this points to the central conclusion of the 2030 Report—significant new policies will be needed for Michigan to speed up its momentum in cutting emissions and ultimately reach its climate goals. Simply put, policy matters.

This is illustrated when looking across all of Michigan’s major GHG-intensive economic sectors and comparing three scenarios of emissions reductions in 2030 and 2050:

1. The trajectory Michigan is currently on, in which no new policy progress is made (otherwise known in wonky circles as “Business as Usual”);
2. A scenario that models the policies explicitly included in the MI Healthy Climate Plan; and
3. A trajectory that will ensure Michigan does its part to cut emissions consistent with similar 1.5° C analyses (the “Climate Solutions Pathway”).  

The figure below tracks the course of each of these scenarios. The Climate Solutions pathway (in blue) is the only approach that will enable Michigan to meet its climate goals. Overall, in the Climate Solutions Pathway, emissions fall between 78%-100% in each major economic sector addressed in the report, leading to a total reduction of 106% in 2050 relative to 2005. Compared to the Business as Usual scenario (in gray), the MI Healthy Climate Plan is a vast improvement (in orange). In 2030, economywide GHG emissions would fall by 50% relative to 2005. And as GHG emissions are cut, Michigan will see greater public health benefits as fossil fuel reliance is replaced by clean power and electric consumer products like EVs and electric heat pumps—important benefits that will be missed if Michigan continues on its current trajectory.

The crux of the MI Healthy Climate Plan and Climate Solutions pathways are policies—and the details matter. Recommendations on clean energy and energy efficiency, for example, in the MI Healthy Climate Plan are a great start. But more must be done. The Climate Solutions Pathway picks up where the MI Healthy Climate Plan leaves off and drives emissions down even further by 2030, putting the state on a faster track to carbon neutrality by 2050.

If Michigan focuses on just three areas of policy in the next decade, our modeling confirms that the following are the most impactful steps forward that would put the state on a strong trajectory to meet its climate goals.

CLEAN POWER

• Enact a 100% clean electricity standard, additional to the MI Healthy Climate Plan recommendation of a 50% Renewable Portfolio Standard by 2030.
• Complement the state’s recommended phase-out of coal plants by 2030 by also committing to an end to the construction of new gas-fired power plants.

Electric power production is the 2nd-largest contributor to Michigan’s GHG emissions, but it’s also where many of the most cost-effective climate solutions exist and where the state needs to move the fastest to cut emissions. That’s because nearly every other area of Michigan’s economy—transportation, buildings, industry—will be plugging into the grid as they make the switch from relying on the combustion of fossil fuels to electric power.

We find that the Climate Solutions Pathway puts Michigan on the best trajectory to leverage its electric power sector for economy-wide emissions reductions. The state must cut emissions at least 94% this decade (from 2005 levels), getting as close to a carbon-free power sector as possible by 2030 and relying primarily on wind, solar, biomass, nuclear, hydropower, and geothermal energy for its electricity needs. This point cannot be overstated: Michigan must make progress on all fronts, but it must move the fastest in the clean power transition.

Indeed, the state simply cannot afford to wait to make the shift from coal and gas-fired power to clean power. When we modeled a business-as-usual trajectory that reflects only the current utility clean energy commitments, progress in cutting emissions leveled out—and even rebounded—over time as many coal plants are replaced by fossil gas-fired units. We find that if Michigan does not, in particular, halt gas capacity additions and make significant investments in renewables, GHG emissions from electricity generation will rise again over the next decade and beyond.

The MI Healthy Climate Plan charts a stronger course by committing to a 50% renewable energy standard and energy storage targets. But while that is important progress, we find it nonetheless doesn’t put Michigan on track to its climate goals, nor does it ensure the power sector transitions to clean energy fast enough to support electrification and emissions reductions in cars, buildings, and industry.

Critically, the Climate Solutions Pathway is the only scenario that enables Michigan to reach its climate goals. It incorporates two policies that are not present in the MI Healthy Climate Plan and, if acted upon, would close the emissions gap and enable Michigan to reach a fully decarbonized power sector: 1) halting the construction of new gas-fired generation; and 2) amping up clean energy ambition with a standard requiring 80% emissions-free electricity by 2030 and 100% by 2035 and thereafter.

Our modeling also takes into account the need to preserve reliability and resource adequacy by selecting for flexible resources that can compensate for the intermittency of renewable energy, such as battery storage and demand response. Further to that, additional policies are added to complement the clean energy standard, including a 113% increase in transmission capacity by 2050, a near tripling of demand response resources, and the buildout of nearly 16,000 MW of battery storage in that same period.

The figure below illustrates Michigan’s electricity generation by source in 2030 and 2050 for each of the three modeled scenarios, with wind and solar dominating in the Climate Solutions pathway.

CLEAN VEHICLES

• Adopt clean cars and trucks sales standards, ramping up to 100% electric vehicle sales by 2030.
• Introduce incentives to speed up the turn-over of vehicles on Michigan’s roads.

Transportation is the most GHG-intensive area of Michigan’s economy. While we’ve seen huge progress in recent years with a shift to EVs that is well underway, our modeling confirms that policies will be needed to ensure Michigan can cut emissions even deeper—including passenger cars, medium and heavy-duty trucks and freight, and public transit—in order to meet the state’s climate goals.

In modeling the business-as-usual trajectory, we find that emissions will dip as passenger EVs and SUVs grow in popularity and begin to exceed gasoline vehicle sales in 2040. But we must move faster if Michigan is going to stay on track, not to mention the fact that other sectors of transportation show only sluggish progress without new policy progress—including trucks, buses and medium-duty freight vehicles, all of which are significant sources of local health-harming diesel pollution. Concerningly, emissions in most other transportation sectors actually increase in the absence of new policies, notably for aircraft and heavy-duty freight vehicles.

Unfortunately, this languishing pace speeds up only slightly in the MI Healthy Climate Plan. While the state’s roadmap recommended important measures to support electric transportation—like infrastructure build-out and state-level vehicle incentives—there are no explicit policy recommendations that would move the state to EVs by a date certain. The state’s roadmap does note that Michigan is aiming for “electric models to account for at least 50 percent of light-duty vehicle sales, 30 percent of medium- and heavy-duty vehicle sales and 100 percent of public transit vehicles and school [bus]” sales. But this high-level goal is not accompanied by specific policies that could have been modeled in the ESP.

This is where the Climate Solutions Pathway comes in (which the figure below starkly illustrates), recommending specific vehicle sales requirements—similar to the clean vehicles standards adopted in many states (including Michigan’s neighbor to the north Minnesota) that require all new light-duty vehicles sales to be electric by 2034. This trajectory also amps up the ambition on medium and heavy-duty vehicles such as school buses and freight, by assuming adoption of vehicle sales requirements similar to the advanced clean truck standards adopted in California.

Our modeling confirms that sales standards are high impact policies essential to ensuring that electric vehicles are available for Michiganders to buy and driving emissions down by 85% by 2035 from 2005 levels. And these policies reinforce and work in tandem with the EV purchase incentives and charging infrastructure build-out that the MI Healthy Climate Plan recommends—showing Michiganders that they can not only buy an electric vehicle in their own state, but they can reliably charge it on longer journeys away from home and do so cost-effectively.

POLLUTION-FREE BUILDINGS

• Strongly incentivize building electrification, coupled with energy efficiency of at least 2.5% savings per year for electric utilities and a strong focus on improving the building envelope.
• Set a building electrification standard that requires 100% of all new heating equipment sales to be electric by 2035, and interim targets leading up to 2035.

The climate impacts of electric power production and vehicles get a lot of attention in climate advocacy circles. But Michigan’s homes and buildings are also significant sources of GHGs, especially home heating which is heavily reliant on fossil gas. Switching from gas or propane appliances to highly efficient electric space and water heating and cooking are critical to meeting Michigan’s GHG reduction goals, not to mention avoiding the health impacts of combusting fossil fuels inside homes.

Unfortunately, tackling the pollution impacts of Michigan’s homes is the weakest area of the MI Healthy Climate Plan. If Michigan were to take no further action to spur the market for electric appliances, gas use would actually increase and decarbonization progress would stall.

Thankfully, the MI Healthy Climate Plan does recommend updating building codes to improve efficiency and increased statewide energy waste reduction standards, alongside customer incentives to purchase electric appliances with an assumption that 21% of those newly sold will be electric by 2030. The roadmap also references a goal of cutting emissions from the heating of homes and businesses by 17% by 2030 but does not include specific policies sufficient to include in our modeling. Unfortunately, without any specific policies recommended that would move Michigan’s home heating to efficient, electric appliances the MI Healthy Climate Plan misses the mark and would not cut emissions deeply enough to reach the state’s climate goals—barely reaching a 50% cut in building emissions by 2050 relative to 2005 levels (see the figure below).

As with the other sectors, the Climate Solutions Pathway includes a bench of necessary policies to ensure that Michigan can fill in these gaps and meet its goals. Shifting Michigan’s homes and businesses to electric appliances won’t happen overnight, but it’s important that the state get started now. Thankfully, opportunities abound to make electric heat pumps and other appliances more available and cost-effective in Michigan, to tighten up drafty homes, and to train the contractor network that will be tasked with installing and servicing electrified homes.

Of note, Michigan should immediately strengthen its energy waste reduction requirements, including allowing fuel-switching and electrification and reaching a 2.5% annual savings target for electric utilities (and a 1.5% annual saving target for gas) with a strong focus on whole home efficiency and the building envelope to ensure that homes are prepared for the building electrification transition. Michigan should set a goal of 100% of new building appliances and heating systems sold to be electric by around 2035. To facilitate that transition, we recommend Michigan set clear, state-level milestones for installation of electric heat pumps in residential homes, with a focus on low-to-moderate income and underserved households.

As more and more homes move off fossil fuels for heating, the Climate Solutions Pathways confirms that electricity use in buildings rises, but—importantly—overall energy use decreases primarily because of the shift to highly efficient electric heating systems like the latest generation of cold-climate heat pumps. Under the Climate Solutions Pathway, we find that total energy use for heating buildings in 2050 has cut emissions 97% relative to 2005 levels.

And while not included in the modeling for the 2030 Report, the Inflation Reduction Act introduced new, game-changing rebates and tax credits to make the switch from fossil-based heating to electric heat pumps, as well as funding for weatherization and energy efficiency upgrades to help Michiganders cut their energy bills as they electrify their homes.

MICHIGAN’S NEXT STEPS – STATE POLICY + FEDERAL INCENTIVES

Michigan has a historic opportunity to supercharge the impact of state-level policy by coupling it with federal incentives, like the Inflation Reduction Act’s tax incentives for wind, solar, and battery storage and purchase incentives for EVs and electric heat pumps. These incentives can be layered with the Infrastructure and Investment and Jobs Act’s game-changing funding to build out EV charging infrastructure to support the transition away from gas-guzzling cars.

While this report does not model the impact of either of these new laws on Michigan’s decarbonization pathways, preliminary assessments of the bill’s energy provisions have found that it will dramatically accelerate baseline U.S. GHG reductions. There is no doubt that the momentous federal climate achievements of 2022 will make Michigan’s goals more readily achievable, and more cost-effective.

It will also be important for Michigan to seriously consider how to set the course for not only cutting GHGs and other pollution, but doing so in a way that is equitable and just.  While outside the scope of the EPS model, Michigan policymakers should consult, at minimum, the Justice40 accountability framework, which are the guidelines developed by environmental justice movement leaders and academics to ensure that any plan to reduce emissions also prioritizes and outlines clear steps for reducing local emissions. We also recommend direct consultation with frontline and environmental justice communities in Michigan, many of whom submitted detailed comments on the state's roadmap.

If Michigan takes advantage of this critical moment and commits to bold action, the state’s climate goals will be well within reach, along with the many benefits of the clean energy transition—a strong economy with opportunities in the clean energy workforce, lower energy bills, less pollution and healthier people.