EPA's Clean Power Plan Will Affect State And Regional Carbon Markets

New report suggests ways EPA and states can work together to cut emissions

San Francisco /PRNewswire/ - The Environmental Protection Agency's Clean Power Plan to reduce greenhouse gas emissions from power plants could help — or hinder — state and regional efforts to put a price on carbon. That's the conclusion of a new report from the nonpartisan nonprofit research groups Next 10 and Resources for the Future, as well as the University of California–Davis Policy Institute.

These organizations convened dozens of leaders from state and federal governments, nonprofits, and academia for a workshop, and the report, State and Regional Comprehensive Carbon Pricing and Greenhouse Gas Regulation in the Power Sector under EPA's Clean Power Plan, summarizes their findings. The workshop's goal: to figure out what the EPA's proposed rule to reduce carbon emissions in the electricity sector will mean for comprehensive carbon pricing efforts among California, Washington, Oregon, andBritish Columbia, as envisioned by the Pacific Coast Climate Alliance. 

"Most of the country is facing limits on greenhouse gas emissions from existing power plants for the first time, due to the EPA's Clean Power Plan," said F. Noel Perry, businessman and founder of Next 10. "The Clean Power Plan could facilitate state and regional efforts to develop comprehensive climate policies including carbon pricing. However, lack of foresight and certain regulatory frameworks could actually limit what states and regions can achieve—thoughtful implementation and coordination are key."  

Conference attendees agreed that there are things both the EPA and the states can do to make the process go smoothly and work effectively. One of the key themes that emerged is the need for greater regulatory clarity as the EPA works to finalize the Clean Power Plan rules. The report summarizes a workshop held in November in Davis, California, and addresses a process that is ongoing as states begin planning for compliance. Final rules from the federal government could be issued in August.

"On issues including how new fossil sources of generation will be treated, how future megawatt hours of generation should be calculated, and the best approach to translating carbon-intensity numbers into mass of emissions totals, participants are hoping for greater regulatory certainty as the Clean Power Plan is finalized," said report author Dallas Burtraw, senior fellow at Resources for the Future.

Another key theme is the importance of multistate cooperation.

"By working together, states can most effectively meet the short-term requirements of the Clean Power Plan, while staying on a path to long-term comprehensive carbon pricing," said Burtraw. "Exactly what that collaboration might look like, and what incentives EPA might offer for states to cooperate in various ways, are issues still to be determined."

"Multi-state cooperation is also attractive because it brings down costs to business as well as consumers, serves to prevent the reshuffling of electricity generation to states with higher emissions limits, increases the reliability of the grid and simplifies compliance," said James Bushnell professor of economics at the University of California, Davis who facilitated the workshop and co-authored the report.

The Clean Power Plan places planning responsibility with the states, many of which have limited experience and resources on this front. Workshop participants agreed that help from academia, think tanks, businesses, nongovernmental organizations, advocates and the EPA could play an important role in supporting state efforts.

The EPA designed the Clean Power Plan to cut carbon pollution from the power sector – the largest source of greenhouse gas emissions in the United States — by 30 percent from 2005 levels. The proposal is also expected to cut air pollution that leads to soot and smog by over 25 percent.

Earlier this month, a federal court dismissed a lawsuit brought by coal companies and more than a dozen states seeking to block the measure. Meantime, several Southeast and Midwest states are considering laws to require state legislatures have approval or review powers over plans to cut carbon emissions before those plans are submitted to the Environmental Protection Agency.

About Next 10

Next 10 is an independent, nonpartisan organization that educates, engages and empowers Californians to improve the state's future. With a focus on the intersection between the economy, the environment, and quality of life, Next 10 employs research from leading experts on complex state issues and creates a portfolio of nonpartisan educational materials to foster a deeper understanding of the critical issues affecting our state.