Citation:
Abstract:
Excerpt from the Executive Summary
Acting under its existing authorities under the Clean Air Act (CAA), the U.S. Environmental Protection Agency (EPA) has been developing proposals designed to reduce carbon dioxide (CO2) emissions from new and existing fossil-fuel power plants in the United States.
Power production is the nation’s largest source of carbon emissions, contributing 37 percent of all CO2 emissions in the U.S. This will be the first time that federal policy will broadly address CO2 emissions from the power sector, and EPA’s new policies will affect over half of the nation’s existing generating capacity.
EPA and the electric sector have a long track record of successful market-based, regional emission-allowance-trading programs, which can serve as a template for the regulation of CO2 emissions.
Such programs – for example, the Acid Rain sulfur dioxide (SO2) trading Program, the “NOx SIP Call,” and the Regional Greenhouse Gas Initiative (RGGI) – provide price signals to power plant owners so that they can make their own choices about their lowest-cost path to compliance. These programs have proven to allow for environmental improvements at much lower cost to both power plant owners and electricity consumers.
There is a natural fit between market-based emission-control programs and competitive wholesale power markets.
Most of the power plants covered by EPA’s Clean Power Plan operate in competitive wholesale electric markets administered by an Independent System Operator (ISO) or Regional Transmission Organization (RTO) (collectively “RTO”). These regions span more than two-thirds of the states, encompass 70 percent of the nation’s generating capacity, and serve the electricity needs of twothirds of the American people.