Brief

EIA: Clean Power Plan emissions cuts depend on state compliance decisions

Dive Brief:

  • How U.S. states decide to comply with the EPA's Clean Power Plan will have an effect on the level of carbon emission reductions from the U.S. power sector from now until 2030, a new assessment from the Energy Informaition Adminstration reports. 
  • Under the proposed regulation, EIA estimates emissions would be lowest in 2030 if all states chose mass-based standards for compliance. Interregional trading would raise emission levels slightly, and would increase more if all states chose rate-based standards. Emissions would be highest if the CPP was struck down in court, and lowest if the carbon standards are extended to 2040.
  • Clean Power Plan compliance decisions will also have an impact on cost, EIA projects, with consumer prices rising slightly more if emissions credits are allocated to generators, rather than to load-serving entities that sell power to customers. 

Dive Insight:

The stringency of the Clean Power Plan has been a topic of debate in energy circles, but according to the EIA, the federal carbon regulations will have a profound impact on power sector emissions, given present trends and regulations. 

If the CPP is struck down, EIA estimates power sector emissions in 2030 will be 19% below 2005 levels — far from the regulation's goal of a 30% emission cut by that time. But if it stays in place, EIA projects the power sector will overshoot that benchmark, reducing emissions about 35% in 2030. 

Under the rule, states may choose between mass-based compiance standards, which impose a cap on absolute emissions, and rate-base standards and limit the CO2 emitted per unit of generation. If all the states choose one or the other — an unlikely outcome — EIA projects emission reductions would be about the same. 

 

If the CPP goals are extended to 2040, EIA projects emissions would fall 45% below 2005 levels by that time. Interregional trading with mass-based standards would slow emission cuts, allowing some fossil generators to stay online longer. 

Compliance decisions will also affect the cost of CPP regulations to consumers, EIA reports. In all cases, the agency expects higher retail prices due to fuel costs associated with a shift to natural gas and capital expenses for renewable energy buildouts. 

"Price effects are similar in the [mass] and CPP rate cases where the average electricity price from 2022 through 2030 in both cases is 2% higher than in the No CPP case, and 3% higher on average from 2030 through 2040," analysts wrote. If emissions allocations under a mass-based regime are given to generators rather than load-serving entities, EIA expects higher prices. 

 

EIA cautions that its findings are projections, not predictions, and that changing laws or market conditions could dramatically alter outcomes years down the line. A more complete analysis of the EIA's methods and CPP cases is available in its Issues in Focus article on the Clean Power Plan. 

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Filed Under: Generation Regulation & Policy
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