How 2023 changed the way states do climate policy

By Adam Aton | 12/21/2023 06:25 AM EST

Democrats used their newfound state power — and historic climate funding — to create what one expert called a “banner year for clean energy policy.”

Michigan state Rep. Laurie Pohutsky (D).

Michigan House Speaker Pro Tempore Laurie Pohutsky (D) helped lead legislative efforts on climate change in 2023. Carlos Osorio/AP

Minnesota Democrats, newly in control of the state government, began 2023 by enacting a clean electricity standard. Michigan lawmakers followed suit months later — as one of their final acts before gaveling out for the year.

The two laws were bookends to a year of climate action, experts say, as Democratic state officials advanced major policies that climate hawks could once only dream of.

State officials committed serious money and political capital to cleaning up the electricity sector — the backbone of the energy transition — while also boosting electric vehicles, restricting gas in new buildings, and building factories to manufacture batteries and other clean technology. Climate activists hope such actions ripple out nationwide, as the U.S. lags in its goal of halving emissions by 2030.


While some states took steps to boost oil and gas, or turned down federal funds for clean energy, such setbacks were the exception, not the rule, said Sonia Aggarwal, CEO of the climate policy firm Energy Innovation: Policy and Technology.

“We’re not talking about broad, sweeping programs that take us backwards,” said Aggarwal, who was formerly a White House climate aide to President Joe Biden. “On the whole, it’s really been kind of a banner year for clean energy policy in the states.”

The turnaround was seeded last year, when Congress passed $369 billion for clean energy programs in the Inflation Reduction Act. Then, in the wake of the Supreme Court overturning federal abortion rights, Democrats overperformed in the midterm elections to hold or flip key state capitols.

Those officials took power just as unprecedented federal climate money began flowing to states. That dovetailed with an equally important, but less tangible, change: Democrats got more aggressive.

Controlling each statehouse by a single vote, Minnesota and Michigan Democrats defied Republican warnings that major climate legislation would spark a backlash after a year of high energy prices. Instead, swing-state Democrats treated climate action as an electoral asset.

Polling has long pointed to strong public support for more renewable energy, but Democrats have often hesitated to risk higher prices or disruptive mandates. The falling cost of renewable energy (especially relative to fossil fuels) has eased that reluctance.

And with the fresh example of voters rewarding Democrats for embracing progressive fights on abortion, some state lawmakers said they felt emboldened to push further on popular climate policies, too.

“Abortion changed the political landscape for Democrats,” said Michigan House Speaker Pro Tempore Laurie Pohutsky. “I think that was the first instance of us just taking the public at their word about what they wanted — and not worrying about pushing things too far.”

When Michigan lawmakers faced Republican and industry pushback over their climate package, Pohutsky said, Democrats looked to abortion as a road map: They defended their policies using some traditionally conservative messages, like property rights and energy independence, and trusted polling that showed voters generally supported their agenda.

“It was just kind of a matter of getting out of our own way,” Pohutsky said.

From EVs to gas bans

Over the past year, states stretching from California to New York have advanced major climate policies for electricity, transportation, buildings and industry.

New Jersey and a half-dozen other states adopted California’s stringent tailpipe-emissions standards, extending the Golden State’s pollution rules to about one-third of the U.S. car market. (Others, like Massachusetts, already adopted them last year.) The standards require automakers to sell an increasing percentage of “zero-emission vehicles, effectively banning new gas car sales by 2035 — though Colorado and New Mexico stopped short of adopting that total ban.

In Minnesota, lawmakers set new standards for their transportation planning that seek to cut down on vehicle miles traveled — an innovative approach, experts said, that could inspire similar efforts in other states.

Several states also tackled the hot-button issue of transitioning away from gas appliances. In New York, for example, lawmakers passed a ban on fossil fuel infrastructure in most new buildings that will phase in between 2026 and 2029.

Washington state was also poised to ban gas hookups in new buildings, but the state pulled back after a federal court in April overturned a gas ban in Berkeley, California. Instead, Washington state will allow builders to install gas systems only if they can match the energy efficiency of a heat pump — meaning they will have to offset gas appliances by installing more insulation or cutting energy use elsewhere.

Washington state also began its new cap-and-trade system, with its carbon auctions fetching the state more than $1.5 billion in revenue so far this year. Washington state law directs that money toward emissions-cutting projects, with a mandate that at least 35 percent of the funding directly benefit overburdened communities.

Other states, enticed by federal climate programs that require matching funds, passed hundreds of millions of dollars in subsidies or grants. Some, like Michigan’s $350 million “Make it in Michigan Competitiveness Fund,” gave state officials broad leeway to pursue federal funding for clean manufacturing and vehicle electrification as well as investments further afield from climate, like semiconductor production.

Other states passed more narrowly targeted subsidies. Oregon’s$90 million climate package included an energy performance standard for commercial buildings, offering subsidies to building owners who meet their benchmarks ahead of schedule. The state intends to align those incentives with federal programs, allowing building owners to stack their subsidies.

Will all those new climate policies translate into deep emissions cuts? The real test will come as states begin to implement the programs they pushed through this year, experts say.

“The gears are turning, but we’re still very much in the planning phase,” said Miguel Moravec, a senior associate at the nonprofit RMI who focuses on transportation policy.

Pledges vs. action

Even as state climate policies multiply, U.S. oil and natural gas production has reached record highs. Some analysts expect that growth to continue into next year.

There has been little appetite among some Democratic governors — like Govs. Michelle Lujan Grisham of New Mexico, Jared Polis of Colorado and Josh Shapiro of Pennsylvania — to curb drilling, even as they back some limits on the industry’s environmental impact.

Indeed, climate-oriented governors across the country are behind their own decarbonization targets, according to a report this month from the Environmental Defense Fund.

Twenty-three states, along with Puerto Rico and Guam, are on track to miss their emission reduction targets by about 29 percent, according to the EDF report, an overshoot of almost 6 billion tons of carbon dioxide equivalent.

“Many of these governors have been in a position of climate leadership for years,” said Pam Kiely, EDF’s associate vice president for U.S. climate. “It’s time for them to move beyond pledges and plans.”

Some Democratic governors have also worked against climate policy. Grisham vetoed several climate programs, including EV subsidies of up to $4,000 and geothermal research funding, citing their costs.

And in Kentucky, Democratic Gov. Andy Beshear rejected federal funding to develop a climate plan — a decision that forgoes millions of dollars from EPA’s climate pollution reduction grants. Some Kentucky cities hope to step into the state’s role, create a plan and claim the funds.

Republican governors in Florida, Iowa, South Dakota and Wyoming rejected those same grants, one of the Inflation Reduction Act’s biggest pots of money for states.

Wyoming Gov. Mark Gordon pulled out of the program last month after initially applying, citing “my ever-growing concern that EPA will turn Wyoming and other states’ planning efforts upside down into a mandate to prematurely shut down Wyoming’s ‘all-of-the-above’ energy development approach.”

Other Republican-governed states took direct action to boost fossil fuels. Texas passed legislation to encourage construction of new gas-fueled power plants, including $5 billion in loans and grants.

And North Carolina’s GOP-dominated Legislature blocked Democratic Gov. Roy Cooper’s clean car standards, as well as new energy efficiency codes for homes, defanging the state’s building code-writers in the process.

‘Hotly contested space’

That split-screen — more renewables on one hand; more oil on the other — has some climate advocates questioning whether 2023 will mark a true turning point.

“There is an open question of whether or not we’re actually investing in a transition away from fossil fuels,” said Erik Schlenker-Goodrich, executive director of the Western Environmental Law Center.

Simply adding more renewables on top of fossil fuels means missing the decarbonization timeline that science demands, he said. But that’s been the approach from New Mexico and other oil-producing states, and it’s been reinforced by federal policies.

The Inflation Reduction Act ties auctions of federal offshore wind leases to offshore oil leases, and it subsidizes carbon capture and hydrogen — all priorities of the oil and gas sector. The 2021 bipartisan infrastructure law also provided billions for EV chargers, capping oil and gas wells, and traditional roads and bridges.

“Those laws are focused on carrots, not focused on sticks,” Schlenker-Goodrich said.

Efforts to directly limit emissions have seen mixed results. An example came in September, when Colorado finalized its regulations on major industrial polluters.

The Polis administration hailed the rules as a pioneering effort to curb emissions from a hard–to-regulate sector. But climate advocates assailed it as “worse than doing nothing,” because its carve-outs and high emissions cap could enable manufacturers to pollute more than the status quo.

The Regional Greenhouse Gas Initiative — an 11-state mandatory cap-and-trade market — has also had a bumpy road.

A Pennsylvania court decision blocked the state’s participation in the market and though the Shapiro administration is challenging that decision, the governor has remained officially noncommittal to joining the carbon-trading program. Meanwhile, Republican Gov. Glenn Youngkin’s effort to pull Virginia out of RGGI suffered a setback after Democrats recaptured full control of the Legislature.

While states are opening new doors to climate action — thanks in part to the climate and infrastructure laws — the future is still uncertain, said Schlenker-Goodrich.

“[The Inflation Reduction Act] turned the entire advocacy, political and economic landscape into hotly contested space. But it remains contested,” he said. “That is a positive step in the right direction. But in many respects, for the folks who are leaning into what comes next, it is also illuminating how politically and economically difficult that transition is going to be.”