This paper, by NERA Senior Vice President and Environment Group Head Dr. David Harrison and Vice President Jonathan Falk was developed for TXU as part of an agreement with TXU shareholders to study TXU’s environmental activities related to air emissions and climate change. Conducted in collaboration with Marc Goldsmith and Associates, the study evaluates TXU’s processes for following air emissions and climate change policies and reviews the company’s actions regarding previous major air emissions policies and compliance. The study also evaluates the financial consequences and related risks to TXU of potential future climate change policies, including an assessment of the financial effects of reducing emissions now in anticipation of future requirements.

The paper concludes that TXU uses appropriate processes and procedures as well as appropriate economic methodologies to evaluate environmental policies and compliance alternatives. The authors note that TXU’s efforts have consistently resulted in compliance with air emissions limits, and that absent specific circumstances, TXU’s shareholders would not benefit if the company devoted major financial resources now to reduce carbon dioxide emissions in advance of uncertain future emissions regulations. The authors also note that these results are specific to TXU and to the Texas competitive electricity market and are not necessarily transferable to other companies, other markets, or to the electricity sector as a whole.