Analysis of the Impacts of the Clean Power Plan

U.S. Energy Information Administration

[From Introduction] This report responds to an August 2014 request to the U.S. Energy Information Administration (EIA) from Representative Lamar Smith, Chairman of the U.S. House of Representatives Committee on Science, Space, and Technology, for an analysis of the Environmental Protection Agency’s (EPA) proposed Clean Power Plan under which states would be required to develop plans to reduce carbon dioxide (CO2) emissions rates from existing fossil-fired electricity generating units.1 Appendix A provides a copy of the request letter.

The starting point for EIA’s analysis of the Clean Power Plan is the Annual Energy Outlook 2015 (AEO2015) Reference case rather than earlier AEO projections that were developed using versions of EIA’s National Energy Modeling System (NEMS) that lack the model structure needed to analyze key features of the Clean Power Plan proposal. With EIA’s decision, unrelated to this project, to publish shorter and longer editions of the AEO in alternating years, AEO2015 does not include all of the alternative cases presented in earlier AEO editions. However, in the spirit of Chairman Smith’s request, this report analyzes the Clean Power Plan in the context of the AEO2015 High Economic Growth and High Oil and Gas Resource cases as well as the Reference case in order to examine indicators of the proposed rule’s impacts on energy markets under varying assumptions regarding economic growth, electricity demand, and fuel prices…

[Wall Street Journal Economics Blog by Amy Harder] A new report released Friday by the U.S. Energy Information Administration is reinvigorating a common debate in Washington over how to calculate projected economic impacts of regulations.

The report, written at the request of House Science and Technology Chairman Lamar Smith (R., Texas), concludes that a proposed Environmental Protection Agency rule cutting carbon emissions from power plants will, by 2020, cause electricity prices to go up by 4.9% and drive more than double the amount of coal-fired electricity to go offline than what EIA predicts would occur without the rule.

That sounds a lot like the criticism coming from congressional Republicans and the energy industry, both of whom are fighting the rule and are pointing to EIA’s report as evidence it will hurt the economy.

Looking closely at the numbers shows a more complicated picture.

First, the basics of the rule: Proposed in June 2014 and expected to become final in August, the draft EPA rule calls for a 30% cut in power-plant carbon emissions by 2030 based on emissions levels in 2005. It’s the centerpiece of President Barack Obama’s efforts to address climate change, which he hopes to leaves as a legacy of his time in the White House…

[Union of Concerned Scientists Press Release] …Below is a statement by Steve Clemmer, director of energy research and analysis at the Union of Concerned Scientists.

“Early headlines about the EIA’s report on the Clean Power Plan don’t tell the whole story. The analysis actually shows that the Clean Power Plan is affordable. The increase in natural gas use in early years followed by a big shift to less polluting renewable energy enables the country to continue the transition away from coal. By 2030, EIA estimated that non-hydro renewable energy sources such as wind and solar power will provide 19 percent of the country’s electricity generation. That’s more than twice as high than what EPA projected and more than triple today’s levels.

“A closer look at EIA’s analysis shows that the overall electricity price impacts from the rule are modest and prices will come down significantly as the shift to renewables takes hold, with some regional variation. In fact, by 2040, electricity bills nationwide will be lower. However, EIA noted that if states shift to renewables sooner, it could keep electricity prices down even more earlier on. EIA also greatly underestimated the potential for energy efficiency to further displace natural gas and lower consumer energy bills.

“States can keep rate increases to a minimum and help avoid an over reliance on natural gas by implementing or strengthening policies to ramp up renewables and efficiency, including proven policies such as renewable electricity standards, energy efficiency standards, and carbon caps. EIA’s analysis also showed that regional collaboration would result in more renewable energy and lower costs of compliance. Congress can help by passing a multi-year extension of federal tax credits to allow renewables to continue its recent momentum and drive down costs even further. Luckily, doing these things would mean we tackle climate change faster too.

“EIA also showed that EPA could adopt stronger emission reduction targets for the states. The analysis found that the U.S. could achieve carbon reductions of at least 36 percent below 2005 levels by 2030. These levels could be even higher if the EPA included a stronger role for energy efficiency and renewable energy as projected in recent studies by UCS and DOE.”


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