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Regulating existing power plants under the U.S. Clean Air Act: Present and Future Consequences of Key Design Choices

In June 2014, the U.S. Environmental Protection Agency (EPA) released its proposed rules to regulate carbon dioxide emissions from existing fossil fuel power plants, triggering considerable debate on the proposal’s design and its environmental and economic consequences. One question not addressed by this debate is this: What if the EPA regulations turn out to be inadequate to address future mitigation goals? That is, what will the landscape for future policies look like if these regulations turn out to be just an interim measure? This analysis in the journal Energy Policy compares potential short- and long-term consequences of several key regulatory design choices, including mass-based versus rate-based standards, tradable versus non-tradable standards, and differentiated versus single standards. It finds that long-term consequences may be significant in terms of the legacy they leave for future policy revisions: tradable standards lead to lower electricity prices and become weaker over time; differentiated tradable standards lead to relatively greater investment in coal retrofits; non-tradable standards lead to relatively greater retirement of coal capacity. It may be the case that key policy choices entail one set of tradeoffs if proposed EPA rules are viewed as relatively permanent and final and another set of tradeoffs if the rules are viewed as an interim solution.

Author(s): Brian Murray, William Pizer, Martin Ross

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Climate & Energy

Clean Air Act

Policy and Design

Environmental Economics

Climate Change Policy

National

Journal Articles

Exploring Biomass Market Participation and Decision Making

Individual biomass producers will play a large role in the emergence of robust and sustainable bioenergy markets. Despite recognition of producer differences, there are few comparative studies of what actually contributes to bioenergy market participation decisions across different producer groups. This policy brief, which draws on research descibed in Exploring the Determinants of Emerging Bioenergy Market Participation, addresses this gap and compiles lessons from the existing body of work on the factors that influence producer decision making. The literature finds that many non-production objectives, structural and social constraints, and market-related attributes can influence bioenergy market participation decisions—in particular, asset specificity, or the market or end-use flexibility of a given feedstock. A quantitative analysis highlights those independent and dependent variables most often found to be significantly associated—information that can improve representation of bioenergy market participation decision making in future modeling efforts. A social network analysis sheds light on the hypothesis that there exists in the literature a differential treatment of feedstock production decision making across feedstock categories, producer groups, and geographic regions. The finding of potential differences is confirmed through QAP regression analysis for two feedstock types (residues and commodities) and one producer type (woodland owners). If producer group- and feedstock-specific differences are indicative of fundamentally different socio-economic conditions in their respective markets, policies targeted to individual markets may be more effective than uniform national policies. Targeted policies could reflect location-specific feedstock production techniques, non-production objectives, and other attributes related to market participation decisions. Furthermore, this analysis revels that a greater number of factors are associated with dedicated feedstock production decisions than with residues or traditional commodity feedstock production decisions. It follows that policies seeking to increase production of dedicated feedstocks should consider a broader array of tools, approaches, or incentives than those seeking to increase production of residues or traditional commodities.

Author: Christopher S. Galik

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Climate & Energy

Bioenergy

Policy and Design

National

Policy Briefs

Environmental and Economic Implications of Regional Bioenergy Policy

The unique generation, landownership, and resource attributes of the southeastern United States make the region a ripe and important test bed for implementation of novel renewable energy policy. This policy brief describes the environmental and economic implications of one policy intervention: a hypothetical region-wide renewable portfolio standard (RPS) with separate biomass targets or “carve-outs.” A study of this intervention shows that over time the dominant contributor to such an RPS would be forest biomass and that existing resource conditions would influence patterns of biomass harvesting, resulting in a spatially and temporally diverse forest carbon response. Net forest carbon storage in the Southeast would be greater with the hypothetical RPS than without it in all but the final years of the modeled time period, but when displaced fossil fuel emissions are accounted for net greenhouse gas (GHG) reductions over the period could be substantial. The methods and findings presented here are also relevant to a broader array of policies that could increase biomass demand from the region, including pellet exports from the United States to the European Union and regulation of greenhouse gases under the Clean Air Act.

Authors: Christopher Galik, Robert C. Abt, Gregory Latta, and Tibor Vegh

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Climate & Energy

Bioenergy

Policy and Design

Southeast Climate

Environmental Economics

Energy Sector

Modeling

Policy Briefs

Exploring the Determinants of Emerging Bioenergy Market Participation

Individual biomass producers will play a strong role in the emergence of robust and sustainable bioenergy markets. Substantial, but fragmented research on what drives their participation exists. Through narrative review and network analysis, a new review of the bioenergy market participation literature in the journal Renewable and Sustainable Energy Reviews generates both an increased appreciation of how bioenergy market participation is assessed in existing research and how social network analysis may be further employed as a tool for literature review. The analysis reaches two central conclusions: 1) A variety of non-production objectives, structural and social constraints, and market-related attributes influence bioenergy market participation decisions, and 2) Assessment of these factors varies significantly across the literature for both user group and feedstock type. These findings collectively suggest that there may not be a single agreed-upon methodology for assessing bioenergy market participation. Furthermore, if the user group- and feedstock-specific differences found across the literature are indicative of fundamentally different socio-economic conditions in their respective markets, then policies specific to individual markets may be more effective in encouraging participation than uniform national policy initiatives. 

Author(s): Christopher S. Galik

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Climate & Energy

Bioenergy

Environmental Economics

National

Journal Articles

Enhancing Compliance Flexibility under the Clean Power Plan: A Common Elements Approach to Capturing Low-Cost Emissions Reductions

As states and stakeholders evaluate compliance options under the U.S. Environmental Protection Agency’s proposed Clean Power Plan, many recognize the potential economic benefits of market-based strategies. In some states, however, market approaches trigger administrative and political hurdles. A new policy brief by the Nicholas Institute for Environmental Policy Solutions offers a compliance pathway that allows states to realize the advantages of multistate and market-based solutions without mandating either strategy. With the common elements approach, states develop individual-state plans to achieve their unique emissions targets and give power plant owners the option to participate in cross-state emissions markets. Power plant owners can transfer low-cost emissions reductions between states whose compliance plans share common elements--credits defined the same way and mechanisms to protect against double counting. The common elements approach offers the following benefits: (1) allows cross-state credit transfers without states negotiating a formal regional trading scheme, (2) leaves compliance choices to power companies, (3) builds on existing state and federal trading programs, and (4) maintains the traditional roles of state energy and environmental regulators.

Author(s): Jonas Monast, Tim Profeta, Jeremy Tarr, and Brian Murray

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Climate & Energy

Clean Air Act

Policy and Design

State Utility Regulation

State Policy

Policy Briefs

Vulnerability and Adaptation of U.S. Shellfisheries to Ocean Acidification

Ocean acidification is a global, long-term problem whose ultimate solution requires carbon dioxide reduction at a scope and scale that will take decades to accomplish successfully. A new perspective published in Nature Climate Change offers the first nationwide look at the vulnerability of our country’s $1 billion shellfish industry to the global, long-term problem of our oceans becoming more acidic due to the absorption of increasing amounts of carbon dioxide from the atmosphere. 

Author(s): Julia A. EkstromLisa SuatoniSarah R. CooleyLinwood H. PendletonGeorge G. WaldbusserJosh E. CinnerJessica RitterChris LangdonRuben van HooidonkDwight GledhillKatharine WellmanMichael W. BeckLuke M. Brander, Dan RittschofCarolyn DohertyPeter E. T. Edwards, and Rosimeiry Portela

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Climate & Energy

Oceans & Coasts

Journal Articles

Implications of Clean Air Act Section 111(d) Compliance for North Carolina

Since the mid-2000s, North Carolina has increased natural gas generation, reduced coal dependence, established a renewable energy and energy-efficiency portfolio standard, and taken other actions that will assist it in meeting new carbon emissions targets under the U.S. Environmental Protection Agency’s proposed Clean Power Plan (CPP) promulgated under Clean Air Act (CAA) section 111(d). The CPP, as proposed, assigns state-specific emissions rate targets for existing fossil-fueled generators—targets adjusted for levels of renewable generation and energy efficiency measures. This analysis examines possible implications of meeting proposed CPP targets in North Carolina. To achieve those targets, North Carolina will increasingly shift from coal-fired to natural gas-fired electricity generation, incurring a modest rise in resource costs but creating a potentially significant revenue stream, which policy makers must decide how to allocate. Although the CPP will likely drive down overall emissions in North Carolina, the reductions are smaller than might be expected because North Carolina has already made headway in meeting its emissions targets and because new natural gas generation that is not covered under the 111(d) mass-based target will likely be a component of compliance. Alternative compliance measures, such as specific zero-carbon (e.g., nuclear and solar) investments and increased energy efficiency, reduce future natural gas dependence and hedge against natural gas price risk, though potentially at a cost higher than market-based compliance.

Authors: Etan Gumerman, David Hoppock, and Dennis Bartlett

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Climate & Energy

Clean Air Act

Policy and Design

Reports

Designing CO2 Performance Standards for a Transitioning Electricity Sector: A Multi-Benefits Framework

A significant transition is under way within the electricity sector due to several market forces, retirement of certain plants, and regulatory pressure. There is notable overlap between available strategies for mitigating electricity sector risks and potential compliance strategies for states under the Clean Power Plan. This overlap presents regulators with an opportunity to pursue strategies that help manage the transition occurring in the electricity sector and achieve greenhouse gas reductions required under the Clean Power Plan, particularly in the areas of end-use energy efficiency and additional renewable power generation.

Authors: Jonas Monast and David Hoppock

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Climate & Energy

Clean Air Act

Policy and Design

Journal Articles

Apples and Oranges: Assessing the Stringency of EPA’s Clean Power Plan

An accurate assessment of the stringency of state emissions goals under EPA’s proposed Clean Power Plan compares state emissions goals to adjusted state emissions rates that incorporate known and reasonably foreseeable measures that will affect CO2 emissions from existing power plants. These adjusted emissions rates may include projections of actual generation and emissions, which may differ from the building block assumptions used in EPA’s Clean Power Plan. In addition, projections in performance levels can reflect the emissions and generation impacts that compliance measures will have on the electricity system. Consideration of these impacts can lead to a more accurate comparison of a state’s projected CO2 performance level to its final emissions goal under the Clean Power Plan and result in state plans that are optimized for the degree of required emission reduction.

Authors: Jeremy M. Tarr and David Hoppock

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Climate & Energy

Clean Air Act

Policy and Design

Journal Articles

Environmental and Economic Effects of a Regional Renewable Portfolio Standard with Biomass Carve-outs

The unique generation, landownership, and resource attributes of the southeastern United States make the region a ripe and important test bed for implementation of novel renewable energy policy interventions. This study evaluates the environmental and economic implications of one such intervention, a hypothetical region-wide renewable portfolio standard (RPS) with biomass carve-outs. It utilizes the Forest and Agriculture Sector Optimization Model with Greenhouse Gases (FASOMGHG) to assess the multi-sector and interregional allocation of increased harvest activity to meet the RPS. It then uses the Sub-Regional Timber Supply (SRTS) model to assess the intraregional allocation of harvests within the southeastern United States. The analysis finds that forest biomass is the dominant contributor to the regional RPS; national data suggest a substantial reallocation of harvests across both time and space. Existing resource conditions influence the regional distribution of land use and harvest changes, resulting in a spatially and temporally diverse forest carbon response. Net forest carbon in the Southeast is greater in the RPS Scenario than in the No RPS Scenario in all but the final years of the model run. Accounting for displaced fossil emissions yields substantial net greenhouse gas (GHG) reductions in all assessed time periods. Beyond the RPS, both research methodology and findings are applicable to a broader suite of domestic and international policies.

Authors: Christopher S. Galik, Robert C. Abt, Gregory S. Latta, and Tibor Vegh

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Climate & Energy

Bioenergy

Policy and Design

Working Papers

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