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Economic Implications of Recent and Anticipated EPA Regulations Affecting the Electricity Sector

31 October 2012
By Dr. David Harrison, Dr. Anne E. Smith, Scott Bloomberg, Andrew Foss, Andrew Locke, Sebastian Mankowski, Meredith McPhail, Reshma Patel, and Dr. Sugandha Tuladhar

In this report prepared for the American Coalition for Clean Coal Electricity, a NERA team led by Senior Vice Presidents and Environment Group Co-Heads Dr. David Harrison and Dr. Anne E. Smith evaluates the potential energy and economic impacts of seven major recent and anticipated US Environmental Protection Agency (EPA) regulations affecting the electricity sector. The report focuses on the potential cumulative implications of these seven regulations on electricity markets, other energy markets, and the US economy over the period from 2013 through 2034.

The regulations include a major air regulation specifically affecting electric generation emissions -- the Mercury and Air Toxics Standards (MATS) Rule -- and several air regulations that will affect emissions in the electricity generating sector as well as other sectors. These regulations are the Regional Haze Rule (RHR) and potential revisions of national ambient air quality standards (NAAQS) for two ambient pollutants -- ozone and fine particulate matter (PM2.5) -- as well as the recent revision of the NAAQS for sulfur dioxide (SO2). Two non-air EPA regulations affecting electricity generators are also evaluated in this analysis -- regulation of coal combustion residuals (CCR) under the Resource Conservation and Recovery Act (RCRA) and regulation of cooling water intake under Section 316(b) of the Clean Water Act. Although all the regulations addressed in this analysis affect the electricity generating sector, some also affect other sectors, and the NERA team includes those additional compliance costs in its assessment of their energy and US economic impacts.

The authors use NERA's integrated NewERA model to develop estimates of the effects of these policies in two major areas: (1) electricity and other energy market impacts, which include the potential effects on electricity sector compliance costs as well as on electricity and other energy prices; and (2) economic impacts, which include effects on US economic activity as measured by GDP and personal income.