Nathan Richardson:
On Monday, President Obama is set to announce proposed regulations limiting emissions from the existing fleet of power plants. These existing source performance standards or ESPS will be the most important part of the administration’s climate policy and, as my colleague Dallas Burtraw likes to point out, the most significant action any President will have taken on climate change. ...
That coverage is good since the rules are important. Anyone interested in energy and climate should be paying attention. But if you’re getting up to speed on this my advice is to wait until next week. Then we’ll actually have something to talk about. But if you can’t resist, below are the five things I’ll be looking for most when the proposal is released. I’ll come back to these on Monday and explain how they turned out.
1) Emissions
Most observers will focus on the rule’s stringency – how much will they cut emissions, and how quickly. ...
2) Flexibility
Traditionally, performance standards are fixed targets that each emitter must meet. That’s better than a technology mandate, but it’s still not a very cost-effective way to cut emissions. Market-based tools like trading and taxes are better. To what extent will the proposal give free rein to states to use such flexible tools, and to trade amongst themselves? ...
3) Coal and Gas
In reality, the flexibility question won’t be resolved by Monday’s proposal, but rather by each state as it decides how to regulate under the program. But EPA can signal what it will accept. And the agency does control the basic structure of the program. Most importantly, it will determine whether coal and gas plants can trade with each other. Allowing such trading is probably the lowest-cost large emissions-cutting opportunity in the U.S. economy today. ...
4) Scope
The standards will cover almost all fossil fuel power plants in the U.S. Assuming EPA allows flexibility and states go along, many if not all of these sources will be able to trade with each other in some way, reducing the cost of emissions cuts. But there may be even cheaper opportunities outside these plants. There is persistent evidence that increasing energy efficiency is cheaper than cutting emissions at power plants or switching to gas. At some point, renewables become cost-effective ...
5) Mass or Rate?
In the proposal, EPA is not actually setting standards, despite what most coverage would lead you to believe. Instead, the agency is setting guidelines for what states must do. ... EPA could set that target in a variety of ways, but the most likely are either a rate (tons of carbon emissions per megawatt-hour generated by plants in the state) or a mass (tons of carbon) – i.e. a cap. ...
Check back on Monday and I’ll review what the proposal actually does on each of these points.
