How Stringent are the EPA’s Proposed Carbon Pollution Standards for New Power Plants?

 

Matthew J. Kotchen and Erin T. Mansur

 

      Review of Environmental Economics and Policy, forthcoming.

      Working Paper, February 2014.

      UCE3 Working Paper-039, April 2012.

      SSRN Working Paper-2046238, April 2012.

Abstract:

 

In the absence of legislation for a national climate policy, regulatory responsibility has fallen to the US Environmental Protection Agency (EPA). On March 27, 2012, the EPA announced a Proposed Carbon Pollution Standard for New Power Plants. This paper analyzes how the proposed emissions target of 1,000 pounds of CO2 per megawatt-hour of gross generation compares with the emission rates of existing and proposed electricity generating units in the United States. No coal-fired units would comply with the annual target without future innovation in carbon capture and storage. While natural gas units designed to meet peak demand are exempt from the rule, we find that few of them would comply on an annual basis: only 10 percent of the simple-cycle gas turbine units that commenced operating in 2006 or later would meet the target. The baseload natural gas units that would be subject to the rule—i.e., combined-cycle gas turbine (CCGT) units—have a significantly higher level of compliance at 90 percent among those first operating since 2006. We also predict the emission rates of CCGT units that are planned for construction through 2017: without changes in response to the CPS, only 81 percent of these units would meet the target because of a trend toward smaller capacity. Finally, we illustrate differences among states regarding the characteristics of recently constructed and planned electricity generating units.