Potential Impacts of the EPA Clean Power Plan

Thu Oct 16 11:10:00 EDT 2014
By Dr. David Harrison, Dr. Anne E. Smith, Dr. Paul Bernstein, Scott Bloomberg, Andrew Stuntz, and Dr. Sugandha Tuladhar et. al.

In a report released on 16 October 2014, a NERA team led by Environmental Economics Practice Co-Chairs Dr. David Harrison and Dr. Anne E. Smith evaluates the potential energy market impacts and energy costs of the US Environmental Protection Agency's (EPA) Clean Power Plan (CPP) to reduce carbon dioxide emissions from existing power plants. EPA proposed the CPP in June 2014 as a nationwide regulation, to be implemented by the states, under Section 111(d) of the Clean Air Act.

The CPP sets state-specific carbon dioxide emission rate targets based upon EPA's calculation of the rates that EPA believes could be achieved in each state by implementing four types of changes, referred to as Building Blocks. The Building Blocks include EPA assumptions related to potential increases in the efficiency of existing units, re-dispatch to increase the utilization of existing natural gas combined cycle power plants, increases in generation from renewable and new nuclear units, and increases in end-use energy efficiency. Using NERA's proprietary NewERA Model, baseline conditions based primarily on US government information and updated inputs for some Building Blocks, the NERA team modeled the likely effects of state-by-state compliance with the CPP proposal. This report presents NERA's analysis of the potential energy market impacts and energy costs of the CPP, focusing on results over the period from 2017 through 2031. Results are prepared for two scenarios representing different assumptions on the Building Blocks that would be available to the states to demonstrate compliance. The report finds that the EPA CPP proposal would result in major changes in the US energy system and large overall energy system costs.