An Economic Assessment of the Supreme Court's Stay of the Clean Power Plan and Implications for the Future

Abstract

The Clean Power Plan is expected to play an important role in reducing US greenhouse gas emissions. On February 9, 2016, responding to appeals from the affected industries and states, the Supreme Court issued a “stay” suspending implementation of the Clean Power Plan until after the judicial review process. Industry groups stated the plan will pose large “irreparable” costs to the coal sector during the period of judicial review. However, modeling suggests that because of prevailing market, technological, and policy trends, the Clean Power Plan will result in near-zero costs beyond current trends until 2025, in part because of the plan’s built-in flexibility. These factors and lessons from option theory suggest the stay is economically unjustifiable based on claims of irreparable economic harm to the coal sector. If implementation of the rule proceeds, current trends imply the stay will have little effect on industry’s ability to follow the current compliance schedule.

Keywords: climate change, Clean Air Act, Clean Power Plan, compliance flexibility, electric power sector, judicial review

JEL Classification: Q54, D92, Q41