Abby L. Harvey
GHG Monitor
5/30/2014
Of four scenarios modeled by the Bipartisan Policy Center (BPC) in its recently released analysis exploring the impact of greenhouse gas regulation, those which featured a price on emissions yielded the most significant reductions of greenhouse gases. As the Environmental Protection Agency (EPA) prepares to release its performance standards for existing coal-fired power plants developed under section 111(d) of the Clean Air Act, speculation grows as to what the potential effects of regulation could be. The analysis’s goal is twofold. First it “highlights trends already underway in the power sector that have reduced CO2 emissions in recent years, such as flat demand growth and low natural gas prices.” Second, it “delves into how the power sector could respond to a [Clean Air Act] 111(d) regulatory approach, depending on the level of stringency, the price of natural gas, the cost of demand side energy efficiency, and the future of the nuclear power fleet.”
A reference, business as usual, scenario was found to sit 10 percent below 2005 CO2 levels in 2025 but continue to increase from today’s levels, which fall 10 percent below the emissions peak in 2007. While it is uncertain what year EPA will use as a baseline, 2005 has been mentioned as this is the baseline for the Obama Administration’s emissions reduction targets which call for a 17 percent reduction by 2020.
A second scenario, calling for a one-time plant upgrade would fall three percent below the reference scenario and continue at that level into 2025 sitting 13 percent below 2005 levels. Two scenarios, one applying a $12/ton price for carbon emissions and the other applying a $43/ton price for carbon emissions were able to reach the Administration’s goal of 17 percent below 2005 levels by 2020. The $12/ton scenario achieved reductions of 30 percent below the 2005 baseline in 2025, while the $43/ton scenario achieved 54 percent reductions in 2025. However, the analysis shows that other variables such as the price of natural gas, the cost of demand side energy efficiency and the future of the nuclear power fleet could in some cases significantly adjust these estimates.
Both scenarios featuring a carbon price saw significant decreases in generation from coal, modest to significant increases in the use of natural gas for generation (depending on the price of natural gas) and a notable increase in demand-side efficiency making up for the decrease in coal. These scenarios also resulted in more coal plant retirements than did the reference scenario and one-time upgrade scenario. As the regulations are yet to released and because there are many elements that cannot be predicted this study is not intended to “predict, propose, or endorse a path forward for the EPA,” BPC said, going on to state that “the magnitude of power sector impacts from a 111(d) regulation will largely depend on EPA and state interpretations of the rule, technical analysis and decisions, and market factors.” Because of these factors, BPC expressed intentions to update the analysis after the announcement of the proposed rule.