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Project Development & Finance, Oil Refinery

October 12, 2021

Illinois Bans Fossil Fuels

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Illinois Bans Fossil Fuels

Europe has been in the forefront in passing and implementing legislation to phase out fossil fuels and reach 100 percent clean energy within the next two decades. This shift in energy resources is driven by international commitments (such as the Paris Climate Accord) and recent United Nations reports, highlighting the urgency of carbon reducing and offsetting measures. While the United States has generally lagged behind Europe in shifting away from fossil fuels, the Biden Administration has set forth a new climate strategy that includes the goal of reaching net zero emissions no later than 2050.[1] While some states in the United States are considering climate change-specific legislation, Illinois recently became the first state in the United States to approve comprehensive legislation that aims to phase out fossil fuels and reach 100 percent clean energy by 2045.[2]

Climate and Equitable Jobs Act

On September 15, 2021, the Climate and Equitable Jobs Act (the “Act”) was signed into law by the Governor of Illinois. The Act, supported by both Democrats and Republicans, is one of the most comprehensive climate bills in the nation. The Act targets to transition Illinois to 100 percent clean renewable energy by 2045.[3] The Act is significant not only because it passed with some bipartisan support but because it signals a shift in the domestic policy of a fossil fuel producing state. Illinois, like other midwestern states, is a large exporter of coal. While the Act does not address Illinois’ coal exports, it is likely that future legislation will address the production of fossil fuels in the state.[4]

Additionally, the Act seeks to lessen the impact of climate change on low-income communities. The Act will provide low-interest loans in order to incentivize renewable energy projects in low-income communities. Workers who are displaced by the closure of coal mines and power plants will receive assistance with obtaining new occupations.[5]

The Act sets benchmarks to achieve its goal of 100 percent clean renewable energy by 2045 with the following targets:

  • By 2030, all private coal-fired power plants, with a capacity of 25 megawatts or greater, must reduce their greenhouse gas emissions to zero[6]
  • Natural gas-fired power plants must have zero greenhouse gas emissions by 2045[7]
  • By 2030, Illinois aims to be producing 40 percent of its electricity from wind and solar[8]

Illinois will also increase funding for clean energy, investing “roughly $700 million in nuclear reactors over the next five years.”[9] The Act provides around $580 million per year in renewable energy subsidies and aims to get at least one million electric vehicles on the road by 2030.[10] To ensure compliance under the Act, utility providers face new standards, penalties and enforcement mechanisms, including making their profits contingent upon achieving clean energy goals.[11]

Implications of The Act

While twenty-four U.S. states[12] have already adopted greenhouse reduction targets, Illinois is the first state to pass comprehensive change legislation.[13] States like California and Oregon have long prioritized renewable energy initiatives; however, just like Illinois, more states are making a transition away from fossil fuels a priority. Late last year, Nevada released its State Climate Strategy plan that aims to achieve net-zero emissions by 2050.[14] As private companies, like Ford and General Motors, prioritize reducing their reliance on fossil fuels, coupled with the shift in United States domestic policy, it is possible that other fossil fuel producing states will begin to pass legislation similar to the Act.

Other Clean Energy Efforts in The United States

  • States Moving to 100 Percent Electric Cars

In September of 2020, California became the first state in the United States to pass legislation banning the sale of new gas-powered passenger cars and trucks by 2035,[15] in an effort to combat greenhouse gas emissions produced by cars. Roughly a year later, New York followed California’s lead, passing legislation to ban the sale of new gas-powered passenger cars and trucks by 2035.[16] Both California and New York hope to phase out consumer’s reliance on gas-powered passenger cars and trucks and increase the number of “zero-emission vehicles.”[17] In order to achieve their goals, both California and New York will need to overcome a number of obstacles, including significantly increasing the number of electric charging stations and developing lighter and longer-lasting batteries.

  • Biden Administration Climate Change Agenda

Reducing the United States’ reliance on fossil fuels was an important part of President Biden’s campaign promises. On the campaign trail, he pledged to reenter the Paris Climate Accord and prioritize slowing global warming.[18] As president, Biden has already begun to shift the United States’ energy policy away from fossil fuels and toward renewable energy.

Soon after taking office, President Biden acted by executive order to impose a moratorium on new oil and gas leasing on federal lands and waters.[19] The move signals that the Biden Administration is focused on making the United States less dependent on fossil fuels. With roughly 25 percent of the United States’ oil and gas production coming from federal lands, President Biden’s moratorium significantly impacts the oil and gas industry.[20] In April 2021, President Biden announced that the United States would target a 50–52 percent reduction, from 2005 levels, in greenhouse gas pollution by 2030.[21] Methods of achieving this goal include reducing tailpipe emissions, supporting carbon capture programs, and investing in renewable energy infrastructure.[22] Please see our analysis on Hydrogen’s Present and Future in the U.S. Energy Sector.

Conclusion

The United States is currently undergoing a major shift in domestic energy policy. While it is likely that the United States will continue to rely on fossil fuels for years to come, the attitude toward clean energy is rapidly changing. Given the number of clean energy initiatives passed by different states, it is likely that more states could follow Illinois in passing legislation similar to the Act. Additionally, as clean energy becomes more affordable and widespread, the transition from fossil fuels is likely to accelerate.

Footnotes

[1] The White House, FACT SHEET: President Biden Sets 2030 Greenhouse Gas Pollution Reduction Target Aimed at Creating Good-Paying Union Jobs and Securing U.S. Leadership on Clean Energy Technologies, WhiteHouse.Gov (April 22, 2021).
[2] Ben Adler, Illinois Becomes 1st Midwestern State to Pass a Law to Phase Out Fossil Fuels, YAHOO NEWS (September 27, 2021).
[3] Id.
[4] Id.
[5] Id.
[6] Sebastien Malo, In Midwest First, Illinois Bans Fossil Fuel Electricity Sources, REUTERS (September 15, 2021).
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] Id.
[12] These states include California, Colorado, Connecticut, Delaware, Louisiana, Hawaii, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington; Center for Climate and Energy Solutions, State Climate Policy Maps, C2ES.ORG (last visited October 6, 2021).
[13] Id.
[14] Heidi Kyser, Nevada Outlines Strategy to Combat Climate Change, KNPR.org (December 4, 2020).
[15] Governor Newsom Announces California Will Phase Out Gasoline-Powered Cars & Drastically Reduce Demand for Fossil Fuel in California’s Fight Against Climate Change, CA.gov (September 23, 2020).
[16] N.Y. Legis. Assemb. A-4302. Reg. Sess. 2021-2022 (2021).
[17] Id.
[18] Id.
[19] Ben Cahill, Biden Makes Sweeping Changes to Oil and Gas Policy, CSIS.ORG (January 28, 2021).
[20] Id.
[21] The White House, supra.
[22] Id.

Authors and Contributors

Omar Samji

Partner

Private Equity

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Houston

Gabriel Salinas

Counsel

Private Equity

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Houston

Brody G. Hinds

Associate

Private Equity

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Dallas