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Keeping the Copenhagen Pledge – Barely

Michael Levi at the Council on Foreign Relations has commented on our new discussion paper “US Status on Climate Change Mitigation” where we find, somewhat surprisingly, that the country is on course to achieve reductions in greenhouse gas emissions commensurate with President Obama’s pledge in Copenhagen. That pledge called for reductions in the range of 17 percent from 2005 levels. With the failure of Congress to adopt comprehensive climate legislation in 2010, the feasibility of the pledge was put in doubt. However, we find that the United States is reaching this goal; currently, the country is on course to achieve reductions of 16.3 percent from 2005 levels in 2020.

Another point we make is that domestic emissions over the next 8 years are probably less than would have occurred if the Waxman-Markey cap-and-trade proposal had become law in 2010. This is due to a number of factors described in the paper (and which we’ll describe here in a future post), including trends in natural gas prices and cuts due to carbon regulations under the Clean Air Act. But the most important of these is the prominent role for offsets that would have been available under cap and trade—cheap offsets would have made relatively expensive domestic emissions cuts less attractive. Levi does a fair job of describing our view and finds grounds to differ.

But there is one issue where we must be emphatic in agreeing with Levi. Focusing on 2020 can be misleading. Even if the US is on course to achieve its goals for 2020 and if emissions reductions here in the U.S. are greater than would have occurred with cap and trade, the climate is not better off than if cap and trade had passed. To achieve the kind of emissions reductions that are called for beyond 2020 requires a price on carbon because that would help achieve emissions reductions in a cost effective way across the economy and provide the incentive for innovation that will be necessary to achieve long run emissions reduction goals. Our simple main point is just this: so far the U.S. has not lost ground with respect to mitigation goals compared to the president’s pledge in Copenhagen.

That doesn’t mean that passing cap-and-trade would have been a mistake, or that we can afford to continue indefinitely without a real carbon price. But it is an interesting and surprising result that gives some insight into the complex interactions between energy trends, emissions, and policy—interactions we will have to keep in mind for future policy decisions.

UPDATE (ed.): Brad Plumer at the Washington Post summarizes the paper’s findings and some critiques here.

About Dallas Burtraw

Dallas Burtraw is one of the nation’s foremost experts on environmental regulation in the electricity sector. For two decades, he has worked on creating a more efficient and politically rational method for controlling air pollution. He also studies electricity restructuring, competition, and economic deregulation. He is particularly interested in incentive-based approaches for environmental regulation, the most notable of which is a tradable permit system, and recently has studied ways to introduce greater cost-effectiveness into regulation under the Clean Air Act.

Views expressed above are those of the author. Resources for the Future does not take institutional positions on legislative or policy questions. All information contained on Common Resources is intended for informational and educational purposes and may only be used for these purposes. Please see RFF's Terms of Use for further information.

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8 Responses to “Keeping the Copenhagen Pledge – Barely”
  1. Michael Wara says:

    Dallas,

    I agree with Levi regarding the political nature of the stationary source standards and would emphasize the fact that so far, all we have are draft federal performance standards that cover new power plants only (not existing, not major modifications).

    It’s also important to point out that the preconstruction requirements that have been put in place (new source review) are administered by the states with substantial discretion. What this really means is that “Best Available Control Technology” is in the eye of the beholder and in this case, that person is a state air regulator. Perhaps its not surprising then that in a survey of these permits that my seminar students conducted this spring, we found tremendous variability in what power plants were in fact being required to do – all the way from nothing to modest efficiency improvements. The EPA has VERY limited authority to second guess these state decisions under the CAA. We came away from the exercise not expecting much from NSR of CO2 for power plants.

    To the extent that your analysis relies on substantial cuts in power plant emissions driven by reductions at existing plants, I worry that it may overestimate what the CAA will in fact deliver. After all, as you well know, the failure of NSR and NSPS to drive reductions in other pollutants was an important motivation for the 1990 CAA amendments as well as the more recent efforts at introducing market based incentives into power plant regulation (NOx SIP call, CAIR, CSAPR).

    Here’s a suggestion: Could you add a sensitivity analysis that gets at some of these issues? Policy makers do love a point estimate but better to be approximately right than precisely wrong…

    In any case, thanks for the thought provoking study.

    • These are all valid points. You and Levi are correct that there is a lot of uncertainty about emissions reductions from CAA regulation.

      But it’s worth pointing out that past experience with CAA performance standards and NSR is based only on their application to new (and modified) sources. For GHGs, EPA will apply performance standards to existing sources for (almost) the first time. The agency claims it has “no plans” to do this, but promised to issue existing-source standards (“ESPS”) in a 2010 settlement agreement and will be legally required to do so once it finalizes new source standards. Barring congressional action, ESPS are coming.

      As with NSR, states have much of the implementing authority. But unlike NSR (and like the more successful NAAQS-based programs you cite), EPA does have real authority to review state decisions.

      Dallas and I (with others) have worked over the last couple of years to understand what ESPS would mean for the power sector and its emissions. The estimates in this paper of emissions reductions from stationary-source CAA regulation come from that work – specifically, our estimate of what EPA could achieve using a legally-plausible tradable performance standard for the power sector, under what we think are conservative assumptions.

      There’s of course a lot of uncertainty in that estimate – some of it legal, some of it technical (e.g., the availability of efficiency improvements at coal plants). I agree more analysis under different assumptions would be useful – though if you believe existing-source standards will do nothing or will never be implemented, it is easy to simply ignore/exclude those emissions reductions in the paper.

      But I wouldn’t be pessimistic about ESPS based on the limitations of NSR or NSPS. Past experience with CAA programs is of limited value in judging how effective ESPS will be. This is uncharted territory for the CAA.

      Thanks for the comment. Happy to hear further thoughts on the topic, and I’m sure Dallas is open to ideas for improving the paper.

    • Dallas Burtraw says:

      Michael,

      Thank you for writing. Indeed with respect to stationary sources all that exist are draft federal performance standards for new sources so far. As Nathan Richardson points out, when (and if) these are finalized, the EPA will be compelled to begin to develop standards for existing sources. Meanwhile, although the definition of Best Available Control Technology for new sources is a state-driven process, the burden of proof rests on precedent. This summer when California permitted a new more efficient turbine for an NGCC plant for AES in Huntington Beach, that becomes the standard around which interest groups can rally. The BACT process prevents backsliding, in California, and indeed in other states where interest groups can raise the question: why not the same technology standard here as in California. The answer is not predetermined, but the burden of proof shifts. Anyway, the standards are very new. Some states have not yet adopted theirs. So far only 47 permits have been issued, I believe. And, this is not where we get any of the emissions reductions we calculate.

      Our analysis for stationary sources relies almost entirely on anticipated improvement at existing sources, not new sources, and stationary sources account for 40 percent of the improvements we expect. In 2008 the EPA’s technical documents arrived at the estimates we use. We may be overly optimistic, or perhaps not. After talking to many people we conclude that if the EPA implements these regulations in the same manner as they have for many previous pollutants — a business as usual regulatory process building on the technical standards to develop guidelines and soliciting state implementation plans, by 2018-2020 these identified technical measures may be in place. Furthermore they require measures that can be rapidly implemented. They are not apparently ambitious. For example, there is almost no fuel switching involved in EPA’s estimates. If the EPA were to grant greater flexibility by allowing fuel switching as a means of compliance, one might expect that to be joined with greater stringency, and the emissions reductions might be greater than we anticipate. On the other hand, as one might well consider, a new administration might slow walk this process (but they are unlikely to bring it to a complete haul).
      Nonetheless your suggestion is very noteworthy. Development of alternative scenarios would be enlightening. Thanks for writing.
      -Dallas

    • Mike St. Dennis says:

      Thank you for a very interesting study.

      Isn’t it true that a sufficiently strong regulation can always achieve the regulatory objective better than a market-based mechanism, albeit at the cost of some economic efficiency? Is that what’s happening here?

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