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Carbon Standards Re-Examined

04/27/2020 | Harvard Chan C-CHANGE

Download our Amicus Brief (PDF)

Download our Working Paper (PDF)

An Analysis of Potential Emissions Outcomes for the Affordable Clean Energy Rule and the Clean Power Plan

What: Researchers from the Harvard T.H. Chan School of Public Health, Syracuse University, Boston University School of Public Health, and Resources for the Future evaluated the cost-benefit analysis for the U.S. EPA’s Affordable Clean Energy (ACE) rule, known as a Regulatory Impact Analysis (RIA), to determine whether it incorporates the best available information and the predictions are fully supported. The results are summarized in their new working paper, Carbon Standards Re-Examined: An Analysis of Potential Emissions Outcomes for the Affordable Clean Energy Rule and the Clean Power Plan.

Context: On June 19, 2019, the EPA repealed the Obama-era Clean Power Plan (CPP) and finalized the ACE rule. The intent of the ACE rule is to establish the Best System of Emission Reduction for carbon pollution from coal-fired power plants, a requirement under the Clean Air Act. The research team evaluated the EPA’s RIA by undertaking new energy modeling and conducting side-by-side comparisons of EPA’s findings and assumptions with those of other scenarios.

Key Take-Aways:

The results from this new analysis show that even the minor carbon reductions from power plants that are estimated for the ACE rule would not hold-up under different market conditions and the health effects are larger in some states compared to no policy than EPA has projected.

The analysis underscores that the EPA’s RIA should have (1) incorporated relevant policies that have been adopted or announced by the Agency as pending, (2) modeled the impacts of the full set of heat rate improvement technologies EPA considers the Best System of Emission Reduction (BSER), and (3) evaluated the ACE rule under less favorable market conditions.

Why It Matters:

  • For the Rule – By not accounting for potential changes in market conditions and the impact on carbon emissions and by underestimating the magnitude of emissions rebound as power plants become more efficient[i], the EPA may have overestimated the net economic benefits of the ACE rule, calling into question whether its benefits truly outweigh its costs.
  • For Health – Underestimating emissions rebound means that the ACE rule may result in more cases of respiratory illness, heart attacks, worsening asthma, and premature death in some states from exposure to higher fine particulate matter and ozone than the EPA has estimated. The specific effect of underestimating emissions rebound on the benefits calculation for the ACE rule depends on how large the actual emissions rebound is likely to be and where it would occur. This analysis is not included in the RIA.
  • For States – In some states, the emissions rebound expected from the ACE rule would shift the burden of curbing carbon dioxide emissions to the states and could undercut their ability to meet their greenhouse gas reduction goals. Emissions rebound may also impact the ability of some states to meet and maintain federal air quality standards.
  • For Energy Consumers – In states with regulated energy markets, older coal-fired power plants which otherwise would not warrant additional investment may be required by the state to install equipment to improve a plant’s heat rate. The cost of these investments could be borne by the energy consumers, potentially resulting in higher consumer costs, increased levels of pollution and adverse health impacts.
  • For the Nation – Carbon dioxide emissions in the U.S. increased approximately 3.5% in 2018. Our analysis suggests that ACE could drive emissions higher by overly relying on market forces and failing to lock-in emissions reductions, making it even more challenging for the U.S. to meet its previous commitments under the Paris climate agreement and to achieve emissions reductions needed by 2030 to avoid the worst impacts of climate change.

The Details:

  • The EPA underestimated the potential magnitude of increases in carbon dioxide, sulfur dioxide, and nitrogen oxide emissions at the state level that are associated with greater coal-fired power plant utilization that could result from the ACE rule:
    • By failing to consider two of their “most impactful” BSER technologies in the RIA analysis in response to industry comments, the RIA likely underestimated the heat rate improvements and associated rebound in emissions that would occur as a result of the ACE rule.
    • By removing their proposed changes to New Source Review[ii] from the RIA, the EPA also failed to account for the potential of even higher emissions rebound from the ACE rule. NSR reform creates more opportunities for increased pollution from added investments in heat rate improvements. The RIA also does not consider the impacts of the federal tax credit for carbon capture technology on emissions outcomes
  • The 2015 Clean Power Plan, accounted for business as usual reductions when it established the federal guideline, locking in the large carbon dioxide emissions reductions that were projected to occur so that they would be durable regardless of changing market conditions, and then added another 17% emission reduction on top of business as usual.
  • The ACE rule did not establish a federal guideline for emissions. Therefore, it does not lock in any business as usual emission reductions that are attributable to current market trends and only adds, by the EPA’s analysis, an additional 0.7% reduction in carbon emissions. The EPA takes these projected market-driven pollution reductions as a given in the RIA. They fail to account for any emission increases that the ACE rule itself may promote, or that the roll back of the CPP would enable, should electricity demand, natural gas prices, or renewable energy costs increase more than the market currently projects.
  • By design, an updated Clean Power Plan would have a significantly lower emissions cap and achieve much larger emissions reductions than the EPA estimated in the RIA, dwarfing the emissions reductions the ACE rule could achieve.

[i] Emissions Rebound is a term that refers to the increased utilization of electric generating units (EGU’s) that occurs when investments improve the efficiency of those units (called heat rate improvements in the ACE Rule).  When EGU’s become more efficient it lowers their cost per unit of energy output, making them more cost competitive, leading to increased utilization and higher overall pollution than would otherwise have occurred in the absence of efficient (heat rate) improvements. In other words, emission go up when more polluting EGU’s run more and displace cleaner generation.

[ii] EPA has proposed to change the New Source Review provision of the Clean Air Act to reduce the likelihood that regulatory review would be triggered if physical or operational changes to facilities are proposed that may increase emissions.

Media contact: Liz Purchia, lizpurchia@hsph.harvard.edu, 315-794-6943.

Updated: The original version of this page was published on July 18, 2019 and was updated to include the Amicus Brief on April 27, 2020.

Jonathan Buonocore Sc.D

Jonathan focuses on the health, environmental, and climate impacts of energy, and the benefits of reducing carbon emissions—commonly called “health co-benefits.”

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Kathy Fallon Lambert

Kathy examines how big data and models can be used to quantify the health and environment benefits of actions to mitigate climate change.

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