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The Clean Power Plan and Electricity Demand: Considering Load Growth in a Carbon-Constrained Economy

Release of the Clean Power Plan (CPP) marks a significant moment in U.S. climate policy, but a host of economic, technological, and regulatory factors are also driving significant change in the electricity sector, complicating state regulatory decision making. Ensuring access to reliable and affordable electricity while protecting public health is a central goal of state regulation of electric utilities. Thus, expectations about the future of the electricity sector in general, and the future of electricity demand and emissions trajectories in particular, will likely play an important role in state CPP decisions. This policy brief discusses load growth—rising electricity demand—in the context of CPP design choices and demonstrates that it may occur under either a rate-based or mass-based approach. Following a brief overview of the Clean Power Plan and state choices, including rate-based and mass-based performance standards, it summarizes recent trends in load growth and carbon dioxide emissions in the U.S. electricity sector, showing how electricity demand growth in the United States has been low for more than a decade while the carbon intensity of electricity generation has declined. It then explores how both rate-based and mass-based plans can accommodate load growth and future emissions. Although no CPP approach limits electricity generation growth to meet new demand, rate-based approaches and mass-based approaches that cover only existing sources also allow emissions from new sources to increase. Mass-based plans that cover new sources would not limit electricity generation growth, but they would limit emissions from all covered sources.

Authors: Sarah Adair, Christina Reichert, Julie DeMeester, and David Hoppock
 

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Incremental Climate Policy via the Clean Air Act

The Nicholas Institute for Environmental Policy Solutions' Jonas Monast and Christina Reichert write in the American Bar Association's publication Trends that tegulators implement climate policy based on the law Congress enacts, not the law they may wish Congress would enact. For the Obama Administration, that law is the existing Clean Air Act. More Clean Air Act-based climate policy is on its way. In October 2015, the White House announced forthcoming regulations limiting emissions of climate-forcing hydroflurocarbons, and the Clean Power Plan potentially sets the state for carbon dioxide limits for existing facilities and other sectors. Step-by-step, the U.S. Environmental Protection Agency is developing a broad strategy to reduce the nation's greenhouse gas emissions using existing statutory authority.

Authors: Jonas Monast and Christina Reichert

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Why Have Greenhouse Emissions in RGGI States Declined? An Econometric Attribution to Economic, Energy Market, and Policy Factors

The Regional Greenhouse Gas Initiative (RGGI) is a consortium of northeastern U.S. states that limit carbon dioxide emissions from electricity generation through a regional emissions trading program. Since RGGI started in 2009, regional emissions have sharply dropped. This analysis uses econometric models to quantify the emissions reductions due to RGGI and those due to other factors such as the recession, complementary environmental programs, and lowered natural gas prices. It shows that without RGGI, emissions would have been 24 percent higher. The program accounts for about half of the region’s post-2009 emissions reductions, which are far greater than those achieved in the rest of the United States.

Authors: Brian C. Murray and Peter T. Maniloff

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Environmental Justice Roundtable Report

This report from the Nicholas Institute for Environmental Policy Solutions and the Kenan Institute for Ethics summarizes discussion from a roundtable with experts from Duke University, the University of North Carolina at Chapel Hill, and North Carolina State University and Research Triangle Institute that explored the multiple starting points for environmental justice research in the Triangle area.

Editor (s): Kay Jowers and Suzanne Katzenstein

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Enhancing Compliance Flexibility under the Clean Power Plan: A Common Elements Approach to Capturing Low-Cost Emissions Reductions

As states and stakeholders evaluate compliance options under the U.S. Environmental Protection Agency’s proposed Clean Power Plan, many recognize the potential economic benefits of market-based strategies. In some states, however, market approaches trigger administrative and political hurdles. A new policy brief by the Nicholas Institute for Environmental Policy Solutions offers a compliance pathway that allows states to realize the advantages of multistate and market-based solutions without mandating either strategy. With the common elements approach, states develop individual-state plans to achieve their unique emissions targets and give power plant owners the option to participate in cross-state emissions markets. Power plant owners can transfer low-cost emissions reductions between states whose compliance plans share common elements--credits defined the same way and mechanisms to protect against double counting. The common elements approach offers the following benefits: (1) allows cross-state credit transfers without states negotiating a formal regional trading scheme, (2) leaves compliance choices to power companies, (3) builds on existing state and federal trading programs, and (4) maintains the traditional roles of state energy and environmental regulators.

Author(s): Jonas Monast, Tim Profeta, Jeremy Tarr, and Brian Murray

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Completing the Energy Innovation Cycle: The View from the Public Utility Commission

Achieving a widespread adoption of innovative electricity generation technologies involves a complex system of research, development, demonstration, and deployment, with each phase then informing future developments. Despite a number of non-regulatory programs at the federal level to support this process, the innovation premium—the increased cost and technology risk often associated with innovative generation technologies—creates hurdles in the state public utility commission (PUC) process. This article in the Hastings Law Journal examines how and why innovative energy technologies face challenges in the PUC process, focusing on case studies where PUCs have approved or denied utility proposals to deploy high cost, first-generation energy technologies. It concludes with an outline of possible strategies to address PUC concerns by allocating the innovation premium beyond a single utility's ratepayers.

Author(s): Jonas Monast and Sarah Adair 

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New Source Review and Coal Plant Efficiency Gains: How New and Forthcoming Air Regulations Affect Outcomes

Forthcoming carbon dioxide regulations for existing power plants in the United States have heightened interest in thermal efficiency gains for coal-fired power plants. Plant modifications to improve thermal efficiency can trigger New Source Review (NSR), a Clean Air Act requirement to adopt state-of-the-art pollution controls. This article in the journal Energy Policy explores whether existing coal plants would likely face additional pollution control requirements if they undertake modifications that trigger NSR. Despite emissions controls that are or will be installed under the Mercury and Air Toxics Standards and Clean Air Interstate Rule or its replacement, 80% of coal units (76% of capacity) that are expected to remain in operation are not projected to meet the minimum NSR requirements for at least one pollutant: nitrogen oxides or sulfur dioxide. This is an important consideration for the U.S. Environmental Protection Agency and state policymakers as they determine the extent to which carbon dioxide regulation will rely on unit-by-unit thermal efficiency gains versus potential flexible compliance strategies such as averaging, trading, energy efficiency, and renewable energy. NSR would likely delay and add cost to thermal efficiency projects at a majority of coal units, including projects undertaken to comply with forthcoming carbon dioxide regulation.

Author(s): Sarah Adair, David Hoppock, and Jonas Monast

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Carbon Market Lessons and Global Policy Outlook

Although markets for trading carbon emission credits to reduce greenhouse gas emissions have stalled in United States federal policy-making, carbon markets are emerging at the state level within the U.S. and around the world, teaching us more about what does and doesn't work. Authors discuss in a Policy Forum piece in Science key lessons from a decade of experience with carbon markets.

Author(s): Richard Newell, William Pizer, Daniel Raimi

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Greenhouse Gas Mitigation Opportunities in California Agriculture: Science and Economics Summary

California Assembly Bill 32 requires effective statewide greenhouse gas (GHG) reduction strategies. This report summarizes the results of six studies--developed to inform California policy--that review the latest science and economics of GHG mitigation opportunities in California's agricultural sector. Specifically, the report examines the potential for annual GHG reductions in cropland, rangeland, and manure management systems and through emissions-targeted optimization of feed for dairy animals. Among the examined practices, dairy manure management appears to provide the largest emissions reduction opportunity at the lowest cost per ton, but economic and other hurdles must be overcome to realize it. Other mitigation activities could yield relatively large per-acre reductions but on relatively small acreage. Yet other activities could be widely implemented, but their potential effectiveness is uncertain. More data on the GHG reduction potential and costs of management practices in California agriculture and a better understanding of adoption barriers are needed.

Author(s): Tibor Vegh, Lydia Olander, Brian Murray

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Greenhouse Gas Mitigation Opportunities for California Agriculture: Outlook for California Agriculture to 2030

California agriculture is diverse and complex, producing several dozen major crop and livestock commodities using the state’s great spatial variation of natural and climate resources and well-developed infrastructure of input delivery systems, processing systems, and marketing services. What, where, and how these commodities are produced reflect biophysical, economic, and policy drivers, all of which have and will continue to change. This report examines the statewide greenhouse gas (GHG) emissions and emissions mitigation potential of alternative futures for California agriculture through 2030. It finds that the dairy industry in California has by far the largest GHG emissions of all the state’s agricultural production systems but that the industry’s growth trajectory is uncertain. Three potential growth scenarios suggest that baseline dairy emissions could decrease by as much as 20% or increase by as much as 40% (almost one-quarter of the entire agricultural sector’s current emissions). This variation in baseline emissions projections may be as large as or larger than the industry’s emissions mitigation potential.

Author(s): Daniel A. Sumner 

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