UC Davis Policy Institute Issues Report Examining Effects of U.S. EPA’s Clean Power Plan on Western Carbon Pricing, GHG Regulation

Will the federal Clean Power Plan (CPP) facilitate the introduction of comprehensive carbon pricing in Pacific Coast states, or hinder it?

The UC Davis Policy Institute for Energy, Environment and the Economy has issued a report examining how the pending U.S. Environmental Protection Agency’s CPP could impact Western carbon pricing and state and regional greenhouse gas (GHG) reduction strategies. The report summarizes the findings of a workshop hosted last November by the Policy Institute, in conjunction with non-governmental organizations (NGOs) Next 10 and Resources for the Future.

CPP represents a large-scale national effort to reduce carbon emissions through the regulation of GHG emissions from power plants.  (The plan gives states flexibility for meeting a 30% reduction in GHG from 2005 levels at existing power plants by 2030.) The federal plan could have effects on states with preexisting GHG limiting initiatives already in place: California for example, utilizes an emissions cap-and-trade system.

The fall 2014 workshop focused on the interactions between the CPP and preexisting policies – particularly carbon pricing efforts by the Pacific Coast Climate Alliance, comprised of  U.S. states California, Washington, Oregon—and British Columbia. More than 38participants attended the workshop, including regional EPA officials, regulators from Washington, Oregon, California, and Nevada, academics, and NGO representatives.

A report summarizes the findings from the workshop:  “State and Regional Comprehensive Carbon Pricing and Greenhouse Gas Regulation in the Power Sector under EPA’s Clean Power Plan.”

James Bushnell acting director of the UC Davis Policy Institute and co-author of the workshop report stressed the importance of state partnerships. “Multi-state cooperation is attractive because it brings down costs to business as well as consumers, serves to prevent the reshuffling of electricity generation to states with higher emissions limits, increases the reliability of the grid and simplifies compliance,” said Bushnell.

Although a full consensus was not reached during the conference, the attendees agreed that the EPA and Pacific Coast states will need to work together to ensure that the CPP will contribute to, and not impede, the implementation of Western carbon pricing policies. A key theme discussed was the need for regulatory clarity when the CPP rules are finalized, expected in August 2015.

Reflecting the comments of other conference participants, report co-author Dallas Burtraw, senior fellow at Resources for the Future, said he looks forward to “greater regulatory certainty as the [plan] is finalized, on issues including how new fossil sources of generation will be treated, how megawatt hours of generation should be calculated, and the best approach to translating-carbon-intensity numbers into mass of emissions totals.”

The CPP creates coordinated nation-wide efforts to reduce GHG emissions. The plan is designed to cut carbon pollution specifically from the electricity sector and is predicted to cut air pollution by more than 25 percent.

“The Clean Power Plan could facilitate state and regional efforts to develop comprehensive climate policies including carbon pricing,” said F. Noel Perry, businessman and founder of Next 10, in a news release accompanying the report. “However, lack of foresight and certain regulatory frameworks could actually limit what states and regions can achieve—thoughtful implementation and coordination are key.”