Nicholas Institute for Environmental Policy Solutions
The proposed Clean Power Plan gives U.S. states flexibility in how they attain state-level carbon dioxide emissions rate goals from existing power plants. This analysis explores the potential impact of the proposed CPP on Southeast states across a range of compliance options relative to a baseline without the CPP. The analysis presents modeling results from the Dynamic Integrated Economy/Energy/Emissions Model for eight primary compliance scenarios involving rate-based or mass-based compliance, unilateral state action or regional cooperation, and inclusion or non-inclusion of natural gas combined cycle (NGCC) units as regulated entities under the CPP.
Regarding electricity sector adjustments, the modeling shows that a rate-based approach initially decreases coal generation, encourages use of existing and construction of new NGCC units, and incentivizes renewable generation, although use of renewables is not cost-effective in the Southeast under baseline cost assumptions. By comparison, a mass-based approach initially increases coal generation and removes incentives for use of existing NGCC units while significantly increasing new NGCC generation. Including new NGCC units under CPP compliance shifts generation from those units to existing NGCC units under mass-based compliance and increases coal generation under rate-based compliance.
Regarding policy costs, the modeling shows that individual state compliance costs vary considerably, that a mass-based approach initially entails half the costs of a rate-based approach, and that both regional rate-based and mass-based approaches create significant net cost savings over unilateral state compliance.