Models tell us Clean Power Plan will cut emissions at low cost

In the year since the Clean Power Plan was finalized, natural gas prices have dropped and federal tax incentives for renewables have been extended. Both developments make it cheaper to generate lower- emitting electricity.

C2ES compared five economic modeling studies released this spring and summer to get an updated look at the Clean Power Plan’s expected impact on carbon emissions, the U.S. power mix, and electricity prices. Each study included several scenarios and made slightly different assumptions, so we focused on observations found in multiple studies. Three key findings were:

1. The Clean Power Plan reduces total power sector emissions compared to business-as-usual scenarios in every study.

Market forces alone, such as lower costs for renewables and natural gas-fired generation, do not achieve the same reductions, even with federal tax credit extensions for wind and solar. On average, the scenarios project total emissions in 2030 will be 18 percent lower with the Clean Power Plan than what they’d be in a business-as-usual scenario.

2. Renewable energy increases and coal decreases compared to business-as-usual generation levels across all five studies.

In each study, power sector emissions decline under the Clean Power Plan because of changes in the electricity generation mix. The models are clear that the Clean Power Plan will cause an increase in renewables and a decrease in coal. The models are less clear on the impact the rule will have on natural gas and nuclear generation, though they suggest that these technologies will benefit from Clean Power Plan implementation. In all studies, the diversity of power generation is maintained.

3. The Clean Power Plan will have minimal impact on U.S. national average retail electricity rates.

Two of the five studies examined the plan’s likely impact on rates. In most scenarios, rate changes range from a 2 percent decrease to a 5 percent increase, depending on how the Clean Power Plan is implemented in each state. A 5 percent increase translates to $4.65 per month, or about 15 cents a day, for the average household.

The chart shows the projected CO2 emissions in 2030 from the studies we examined for three scenarios: business as usual (BAU), mass-based Clean Power Plan implementation, and rate-based Clean Power Plan implementation. One studied modeled a mixed, or “patchwork” implementation scenario. The five studies are:  MJ Bradley & Associates (MJB)U.S. Energy Information Administration (EIA)Bipartisan Policy Center (BPC)Center for Strategic and International Studies partnering with Rhodium Group (CSIS/Rhg), and the Nicholas Institute for Environmental Policy Solutions, Duke University.

Another key finding is that cumulative carbon dioxide emissions are very similar under rate-based and mass-based compliance plans (See Figure 1). In other words, the choice of implementation approach doesn’t seem to affect the overall reductions — at least, not when every state makes the same choice.

The Clean Power Plan gives each state an emissions target and leaves it up to the state to determine the best path forward. This gives states maximum choice, even though it could lead to fewer reductions than a comprehensive national approach.

Many states are weighing whether to use a mass-based approach, similar to what California and the nine Northeast states in the Regional Greenhouse Gas Initiative use that limits the total amount of carbon emissions, or a rate-based approach that limits emissions per unit of electricity produced.

What’s clear from the models is that if states choose to go different directions, a patchwork of mass- and rate-based implementation, emissions are likely higher than if they all choose a similar path.

From these studies, we can be confident the Clean Power Plan will reduce power sector emissions compared with business as usual. Now it’s up to states to choose how they will implement the plan to best serve the needs of consumers and reduce the emissions that are causing damaging and costly climate impacts to our communities.