Power Plant Thermal Efficiency as a Regulatory Mechanism: Implications for Emission Rates and Levels

35 Pages Posted: 19 Jan 2019

See all articles by James Burnett

James Burnett

College of Charleston - Department of Economics & Finance

L. Lynne Kiesling

Purdue University - Department of Economics

Date Written: December 21, 2018

Abstract

In August 2018, the U.S. Environmental Protection Agency (EPA) proposed a new policy – the Affordable Clean Energy rule – to reduce greenhouse gas (GHG) emissions from existing coal-fired electric generating units and power plants. The new rule establishes emissions guidelines, including heat-rate efficiency improvements, for states when developing plans to limit GHG emissions. Past studies have indicated that thermal efficiency improvements can increase electricity output, leading to a reduction in emissions rates and an increase in emissions levels – a rebound effect that can temper the emissions-reduction benefits of plant-level thermal efficiency. This study adds to the literature by examining data on the relationship of plant-level thermal efficiency on the rate and level of GHG emissions. We explore three different types of GHGs – carbon dioxide, methane, and nitrous oxide. Using a fixed-effects panel data approach, we find that thermal efficiency improvements have only reduced carbon dioxide emissions rates, but (on average) these improvements have led to an increase in the levels of all three pollutants. Based on our findings, the U.S. EPA should consider rebound effects in its policy plans associated with implementing the Affordable Clean Energy rule.

Keywords: greenhouse gas emissions, thermal efficiency, electricity policy, regulation, electric utilities

JEL Classification: L51, L94, Q40, Q53, Q58

Suggested Citation

Burnett, James and Kiesling, L. Lynne, Power Plant Thermal Efficiency as a Regulatory Mechanism: Implications for Emission Rates and Levels (December 21, 2018). Available at SSRN: https://ssrn.com/abstract=3312952 or http://dx.doi.org/10.2139/ssrn.3312952

James Burnett

College of Charleston - Department of Economics & Finance ( email )

5 Liberty Street
Charleston, SC 29401
United States

L. Lynne Kiesling (Contact Author)

Purdue University - Department of Economics ( email )

West Lafayette, IN 47907-1310
United States

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