Energy Study Finds States Are Prepared to Limit Carbon Pollution from Power Plants
New report says states have the tools they need to cut emissions and boost the economy; consumers can be protected financially as well as environmentally
Date:July 14, 2014
Boston -- States are well positioned to implement the Environmental Protection Agency's (EPA) Clean Power Plan, according to a new report from Analysis Group's electric industry and economic experts. The report, EPA's Clean Power Plan: States' Tools for Reducing Costs and Increasing Benefits to Consumers, is based on a careful analysis of states that already have experience regulating carbon pollution. It finds that those states' economies have seen net increases in economic output and jobs.
"Several states have already put a price on carbon dioxide pollution, and their economies are doing fine. The bottom line: the economy can handle -- and actually benefit from -- these rules," said Analysis Group Senior Advisor Susan Tierney. "Those states have shown they already have the tools available to cut CO2 emissions while generating macroeconomic benefits and protecting consumers from dramatic hikes in their energy bills," explained Dr. Tierney.
The EPA's proposed Clean Power Plan would regulate carbon emissions from existing fossil-fueled power plants using EPA's existing authority under the Clean Air Act. The draft rules, due to be finalized next year, allow a variety of market-based and other approaches states can choose from to cut greenhouse gas emissions from power plants.
The Analysis Group team, led by Dr. Tierney and Vice Presidents Paul Hibbard and Andrea Okie, analyzed the carbon-control rules already in place in several states to see what insights they might hold for the success of the national rule. "We found that well-designed programs implementing the Clean Power Plan will not lead to major price impacts or economic disruption," said Mr. Hibbard. "Costs from well-designed CO2-pollution-control programs will be modest in the near term and likely offset by longer-term benefits for all and common protections for low-income customers."
So far, net economic effects on states that already regulate carbon pollution have been positive in terms of both economic output and jobs, and the same can be expected if states comply thoughtfully with the Clean Power Plan. States that work together to form carbon markets or other collaborative initiatives have the potential to experience greater benefits than they would by trying to meet the new standards by themselves.
"Experience shows that states that work together on market-based compliance initiatives -- like RGGI in the Northeast -- can provide net economic benefits in terms of jobs and economic output," said Mr. Hibbard. "And RGGI shows that each state can have control over its own program design, so that combined efforts don't step on states' rights."
Multistate market-based programs to control CO2 emissions can also respect the practicalities of electric system operations, and can work for both traditionally regulated and competitive electric markets, the report finds. The report was based on states' existing track records rather than projecting costs and benefits that might be expected under the Clean Power Plan. States' experience so far is that the most economically beneficial way to achieve carbon cuts is investing in energy efficiency.
"One thing is clear: Cost-effective energy-efficiency programs created as part of states' CO2 compliance strategies can help deliver significant benefits to customers and to local economies," explained Dr. Tierney.
The report, funded by the Energy Foundation and the Merck Family Fund, was released today at the summer conference of the National Association of Regulatory Utility Commissioners (NARUC) in Dallas, Texas.
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Analysis Group's more than 500 professionals provide economic, financial, and business strategy consulting to leading law firms, corporations, and government agencies. The firm's 11 offices are located nationally in Boston, Chicago, Dallas, Denver, Los Angeles, Menlo Park, New York, San Francisco, and Washington, D.C.; and internationally in Montreal and Beijing.