Regulating existing power plants under the U.S. Clean Air Act: Present and future consequences of key design choices |
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| Affiliation: | 1. Nicholas Institute for Environmental Policy Solutions, Duke University, 2117 Campus Drive, Box 90335, Durham, NC 27708, USA;2. Sanford School of Public Policy and Nicholas Institute for Environmental Policy Solutions, Duke University, 2117 Campus Drive, Box 90335, Durham, NC 27708, USA;1. KTH Royal Institute of Technology, Department of Energy Technology, Energy and Climate Studies, SE-100 44 Stockholm, Sweden;2. Energy, Materials, and Environment Laboratory, Department of Chemical Engineering, Universidad de La Sabana, Campus Universitario, Puente del Común, Km. 7 Autopista Norte, Bogotá, Colombia;1. Tsinghua University, Beijing, China;2. Guangdong Power Grid Corporation, Guangzhou, China;1. FiME (Finance for Energy Market Research Centre), France and CABREE (Centre for Applied Business Research in Energy and the Environment), Canada;2. LEDA-CGEMP, Université Paris Dauphine and Ecole Polytechnique, France;3. EDF R&D, France;1. Centre for Environmental and Resource Economics, Umeå University, SE-901 87 Umeå, Sweden;2. National Institute of Economic Research, Box 3116, SE-10362 Stockholm, Sweden |
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| Abstract: | In June 2014, the U.S. EPA released its proposed rules to regulate carbon dioxide emissions from existing fossil fuel power plants, triggering considerable debate on the proposal’s design and its environmental and economic consequences. One question not addressed by this debate is this: What if the EPA regulations turn out to be inadequate to address future mitigation goals? That is, what will the landscape for future policies look like if these regulations turn out to be just an interim measure? This analysis compares potential short- and long-term consequences of several key regulatory design choices, including mass-based versus rate-based standards, tradable versus non-tradable standards, and differentiated versus single standards. It finds that long-term consequences may be significant in terms of the legacy they leave for future policy revisions: tradable standards lead to lower electricity prices and become weaker over time; differentiated tradable standards lead to relatively greater investment in coal retrofits; non-tradable standards lead to relatively greater retirement of coal capacity. It may be the case that key policy choices entail one set of trade-offs if proposed EPA rules are viewed as relatively permanent and final and another set of tradeoffs if the rules are viewed as an interim solution. |
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| Keywords: | Electricity generation EPA CAA Section 111(d) Carbon dioxide emissions Emissions rates |
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