How Stringent is the EPA’s Proposed Carbon Pollution Standard for New Power Plants?
Matthew J. Kotchen
Yale University; National Bureau of Economic Research (NBER)
Erin T. Mansur
Tuck School of Business at Dartmouth; National Bureau of Economic Research (NBER)
April 25, 2012
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 US. We find that no coal 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 between 2006 and 2010 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. The EPA reports that 95 percent of these units first operating between 2006 and 2010 would meet the target, and we find a similar percentage when looking at predicted emissions based on power plant heat rates. Yet we find a lower number at 84 percent based on actual emissions and self-reported generation. We also predict the emission rates of CCGT units that are planned for construction through 2017: only 71 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.
Number of Pages in PDF File: 16
Keywords: climate change regulation, electricity industry, new source performance standards
JEL Classification: Q4, L94
Date posted: April 25, 2012 ; Last revised: May 12, 2012