How large a reduction in emissions would it propose, and by when?
What year would it choose as the base against which to measure progress?
How flexible would it make the regulations? Would it adopt a “mass-based” limit on total emissions or a rate-based (e.g., pounds of carbon dioxide per megawatt- hour of electricity) approach?
What role might allowance systems play in meeting the goals?
Will compliance be determined only by the actions of power companies (i.e., “inside the fence” actions) or will actions by energy consumers (“outside the fence”) be part of compliance strategies?
Would states and power companies that have already reduced GHG emissions receive credit for doing so? What about states and power generators with high levels of emissions, perhaps due to heavy reliance on coal-fired power? Would they be required to reduce emissions more than others, less than others, or the same?
The effectiveness of investment subsidies depends on the existing array of regulatory and information mandates, especially in the energy efficiency space. Some consumers respond to information disclosure by purchasing energy-efficient durables (and thus may increase the inframarginal take-up of a subsequent subsidy), while other consumers may locate at the lower bound of a minimum efficiency standard (and a given subsidy may be insufficient to change their investment toward a more energy-efficient option). We investigate the incremental impact of energy efficiency rebates in the context of regulatory and information mandates by evaluating the State Energy Efficient Appliance Rebate Program (SEEARP) implemented through the 2009 American Recovery and Reinvestment Act. The design of the program - Federal funds allocated to states on a per capita basis with significant discretion in state program design and implementation - facilitates our empirical analysis. Using transaction-level data on appliance sales, we show that most program participants were inframarginal due to important short- term intertemporal substitutions where consumers delayed their purchases by a few weeks. We find evidence that some consumers accelerated the replacement of their old appliances by a few years, but overall the impact of the program on long-term energy demand is likely to be very small. Our estimated measures of cost-effectiveness are an order of magnitude higher than estimated for other energy efficiency programs in the literature. We also show that designing subsidies that reflect, in part, underlying attribute-based regulatory mandates can result in perverse effects, such as upgrading to larger, less energy-efficient models.
Taking action to address climate change by reducing U.S. emissions of greenhouse gases (GHGs) is among President Obama’s major goals. At an international conference in Copenhagen in 2009, he committed the United States to reducing emissions of greenhouse gases 17% by 2020, as compared to 2005 levels. At the time, 85 other nations also committed to reductions.
Since U.S. GHG emissions peaked in 2007, a variety of factors—some economic, some the effect of government policies at all levels—have brought the United States more than halfway to reaching the 2020 goal. Getting the rest of the way would likely depend, to some degree, on continued GHG emission reductions from electric power plants, which are the largest source of U.S. emissions.
In June 2013, the President released a Climate Action Plan that addressed this and other climate issues. At the same time, he directed the Environmental Protection Agency (EPA) to propose standards for “carbon pollution” (i.e., carbon dioxide, the principal GHG) from existing power plants by June 2014 and to finalize them in June 2015. Under the President’s timetable, by June 2016, states would be required to submit to EPA plans to implement the standards.
On June 2, 2014, EPA responded to the first of these directives by releasing the proposed standards.
The proposal relies on authority given EPA by Congress decades ago in Section 111(d) of the Clean Air Act (CAA). This section has been little used—the last use was in 1996—and never interpreted by the courts, so a number of questions have arisen regarding the extent of EPA’s authority and the mechanisms of implementation. EPA tends to refer to the regulations as “guideline documents”—although that term is not used in the statute—perhaps to indicate that the section is intended to give primary authority to the states. The proposed guideline document would set interim (2020s averages) and final (2030) emission rate goals for each state based on four “building blocks”—broad categories that describe different reduction measures; in general, however, the policies to be adopted to reach these goals would be determined by the states, not EPA.
EPA faced a number of issues in developing the proposed regulations:
• What role would there be for existing programs at the state and regional levels, such as the Regional Greenhouse Gas Initiative (RGGI), and for broader greenhouse gas reduction programs such as those implemented pursuant to California’s AB 32?
This report summarizes EPA’s proposal and answers many of these questions. In addition to discussing details of the proposed rule, the report addresses a number of questions regarding the reasons EPA is proposing this rule; EPA’s authority under Section 111 of the CAA; EPA’s previous experience using that authority; the steps the agency must take to finalize the proposed rule; and other background questions.
EXCERPT FROM THE INTRODUCTION
This technical support document (TSD) describes two illustrative calculation-based approaches for translating the Clean Power Plan (CPP) emission rate-based goals to a mass-based equivalent. These approaches should be viewed as two potential ways in which implementing authorities may wish to translate the form of the goal to a mass-based equivalent. The first approach produces mass-based equivalents that apply to existing affected fossil fuel-fired sources only. In light of the fact that the CPP takes comment on the inclusion of new, fossil fuel- fired sources as a component of state plans, the second approach produces mass equivalents that are inclusive of emissions from existing affected and new fossil fuel-fired sources.
On June 2nd, the Obama Administration’s Environmental Protection Agency (EPA) released its long-awaited proposed regulation to reduce carbon dioxide (CO2) emissions from existing sources in the electricity-generating sector. The regulatory (rule) proposal calls for cutting CO2 emissions from the power sector by 30 percent below 2005 levels by 2030. This is potentially significant, because electricity generation is responsible for about 38 percent of U.S. CO2emissions (about 32 percent of U.S. greenhouse gas (GHG) emissions).
On June 18th, EPA published the proposed rule in the Federal Register, initiating a 120-day public comment period. In my previous essay at this blog, I wrote about the fundamentals and the politics of this proposed rule (EPA’s Proposed Greenhouse Gas Regulation: Why are Conservatives Attacking its Market-Based Options?). Today I take a look at the economics.