The energy sector needs creative solutions for addressing the worsening and unevenly distributed impacts of climate change. There is growing scientific consensus that we have already surpassed 1.5 degrees Celsius of warming, the limit that would have prevented even more dire and irreversible climate consequences like permanent ice sheet melting, loss of entire ecosystems, and intensifying ocean warming. Instead, we are on a trajectory for 2.5 degrees Celsius warming by the end of 2100.
Ever-increasing global temperatures are directly related to more catastrophic events like intensifying droughts, floods, and extreme heat. These climate effects also have disparate impacts on racialized and historically oppressed communities, including communities of color, immigrant groups, the working class, LGBTQ+ communities, and those with limited English proficiency. This is true across educational attainment and age categories.
Longstanding structural forces including white supremacy, settler-colonialism, patriarchy, capitalism, and imperialism have produced deep systemic inequalities and power disparities across economic, social, and political outcomes, and these power differentials perpetuate uneven impacts of climate change. A mix of racist policies and practices stemming from these structural forces, including gerrymandering, mortgage and lending discrimination, and historic disinvestment, has created segregated, under-resourced communities that are especially frontline to environmental and climate catastrophes.
These compounding and intersectional factors have led to a lack of energy-efficient and healthy housing and have led to high energy burden (high amount for energy bills relative to income) for these same communities. Households with higher energy burdens are disproportionately headed by low-wealth people, Black, Latino, and Native American people, older adults, renters, and multigenerational families. In other words, people who have contributed the least to climate change are experiencing its worst effects, including those related to energy pollution and energy burden.
Burning fossil fuels like methane gas, coal, and oil is the leading contributor to the rapid and unprecedented warming over the last 10,000 years. These fuels release carbon dioxide, a greenhouse gas, into the atmosphere, which traps heat and warms the planet. Burning these fuels also releases other greenhouse gases and nitrous oxides, which are linked to adverse health outcomes like respiratory illnesses (including asthma), cancer, and heart disease.
These adverse health outcomes are disproportionately high across racialized groups. Due to systemic racism in lending and zoning laws, people of color, especially those who are low wealth, are more likely than other groups to live near oil refineries, gas plants, and other dirty energy infrastructure. Higher and disproportionate exposure to these facilities’ toxic emissions corresponds to higher rates of respiratory problems.
Overall, the electric power sector is second only to the transportation sector in terms of carbon dioxide emissions in the United States, 74 percent of all human-produced greenhouse gas emissions come from burning fossil fuels for electricity. Globally, the energy sector produces the most emissions of any sector, accounting for over 75 percent of greenhouse gas emissions. While the U.S. has seen a decrease in carbon dioxide emissions from the electricity sector due to investment in renewable energy resources like solar, wind, and geothermal technologies since the 1990s, energy-related carbon emissions increased by 7 percent in 2021, in part due to increased electricity demand as more of the economy electrifies.
Bold action is needed to mitigate the catastrophic and disproportionate climate and health harms from burning fossil fuels for electricity. Decarbonization is one of these bold and essential actions.
Decarbonization — the process of reducing or removing fossil fuels from production by switching to renewable energy resources in energy and economic systems — is necessary to slow or halt the adverse consequences of climate change and carbon dioxide emissions. Some scholars have coined the phrase “deep decarbonization” to describe more specific, impactful interventions, including energy efficiency measures (upgrading residential and commercial heating and cooling systems and insulating homes), removing carbon from the electricity sector (ending the use of coal and natural gas and switching to wind and solar energy on the electric grid), transferring clean energy to building and transportation sectors (solar-powered electric buses), and utilizing natural carbon sinks (replanting forests). Decarbonization must be conducted through the lens of equity and justice to fully and adequately address historic and present harms associated with fossil fuel-based pollution.
The electricity sector needs to deeply decarbonize, and to do so rapidly. However, the predominance of investor-owned electric utilities (IOUs) complicates, disincentivizes, and impedes clean energy investment and development for reasons explained in the Introduction.
Utility decarbonization targets can stem from legislative action like state climate laws, mandates from regulators at public utility commissions, emerging clean energy technology that is lower-cost and lower risk, market demand from customers or other stakeholders, or corporate environmental, social, and governance goals. Collectively, the electricity sector must reduce emissions by 80 percent by 2035 to limit its impact on climate warming, but within the current decarbonization efforts of IOUs, aggregate progress has been lackluster and is only slated to meet 50 percent carbon reduction.
In 2022, the Inflation Reduction Act (IRA) — the single largest piece of climate legislation in U.S. history — was signed into law to facilitate, among other things, widespread decarbonization. The IRA was intended to boost a clean energy transition for individuals, municipalities, nonprofits, and industrial stakeholders like electric utilities through subsidies, loans, and adders (a specific type of financial bonus) for energy communities (or, those communities historically overburdened by fossil fuel based pollution). Many core elements of the IRA — including Environmental and Climate Justice Block Grants, the Greenhouse Gas Emissions Reduction Fund, Home Energy Performance-Based Grants, Whole House Rebates and Training Grants, and the High-Efficiency Electric Home Rebate Program — are investments in low-income and disadvantaged communities to promote “legacy pollution reduction, affordable and accessible clean energy for disadvantaged communities, and a better quality of life and good jobs.”
The most prominent provisions of the IRA for utility-scale decarbonization are the Investment Tax Credit and Production Tax Credit, with additional credits for low-income communities. Unfortunately, these tax credits for utility-scale solar and wind projects, along with other credits, rebates, and subsidies, are now sunsetting earlier because of tax code changes in the “One Big Beautiful Bill Act” (H.R. 1) passed on July 4, 2025. With the effective repeal of the IRA, three impacts relevant to this brief are likely:
- “Reduction in cumulative capital investment in U.S. electricity and clean fuels production by $0.5 trillion from 2025-2035.
- Increase of greenhouse gas emissions by roughly 190 million metric tons per year in 2030 and 470 million tons in 2035 — or about 2 percent of 2005 emissions in 2030 and 7 percent in 2035.
- Decrease in clean electricity generation in 2035 by more than 820 terawatt-hours — more than the entire contribution of nuclear or coal to the electricity supply today.”
Within the IOU space, the scale and pacing of decarbonizing was already lagging; the effective repeal of the IRA means even fewer industry incentives to decarbonize and more carbon pollution. Creative solutions outside of IOUs are needed to facilitate a clean, equitable, and just energy transition in the utility space.
If IOUs aren’t up to the monumental task of deep decarbonization in the name of an urgent climate crisis, what are the viable alternatives for electricity? This brief will explore alternative models outside of the IOU structure — electric cooperatives, publicly owned utilities, and community choice aggregators — and outline the benefits and drawbacks of each of these in achieving an equitable, clean energy transition. We will also address legal mechanisms and barriers for adopting these alternatives.
