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Meeting EPA carbon emission goals

Hydrocarbon Engineering,

On 18 June, the US Environmental Protection Agency (EPA) published a set of proposed new regulations to govern carbon dioxide emissions from existing power plants or electric utility, electricity generating units (EGUs).

Proposed EPA guidelines

The new proposed guidelines contain no specific emission requirements for individual EGUs. Instead the EPA establishes goals for average emissions per MWH of electricity production in individual US states, designed to achieve by a 30% reduction of total US carbon dioxide emissions relative to 2005. States are free to choose which climate change measures they utilize to achieve the federally mandated emission goals.

The goals have been set by the EPA as the result of an analysis of the potential reduction in emissions that can be achieved in each state at reasonable cost. The analysis is based on reduction possible four ‘building blocks’:

  • An increase in the energy efficiency of existing coal plants.
  • Switching electricity production from inefficient, high CO2 emitting coal plants to more efficient, low CO2 emitting natural gas cycle plants.
  • Switching electricity production from fossil fuel plants to new no-carbon plants, including wind, solar, hydro, and nuclear plants under construction.
  • Reductions in electricity through demand management policy measures.

What are the options?

According to the Brookings Institution, policies for achieving state goals include market oriented measures such as cap and trade and mandatory renewable portfolio standards (RPS). They also include renewable incentives such as tax breaks and subsidized financing, and demand side management incentives.

Cap and trade

Nine north eastern states have established a joint cap and trade market as part of the regional greenhouse gas initiative (RGGI). California has also established a cap and trade market. In both markets, the states mandate a cap on CO2 emissions year by year and auction allowances each year in amounts no greater than the amount of the cap. Revenues from the sale of allowances are used by the states to subsidise renewable energy research and low carbon electricity production. Each fossil fuel fired EGU must purchase enough allowances to cover its CO2 emissions.

Renewable portfolio standards

Mandatory renewable portfolio standards, which require electricity distributors to supply a minimum percentage of electricity from renewable sources, have been adopted by 29 US states and the District of Columbia. For example, California has mandated that 33% of electricity sold in the state should come from qualified renewable energy sources by 2020. Interim percentages are established each year taking account of this goal.

Distributors of electricity in the state are required to demonstrate each year that they have sourced the required percentage of their power from eligible renewable sources, either by producing renewable energy themselves or by purchasing renewable energy certificates (RECs) from qualified renewable energy producers who are granted a REC for each MWH of power that they produce.

Renewable incentives and demand side management

Renewable incentives suffer the same weaknesses as RPS. They do not contribute to the use of building blocks one and two and, unless combined with cap and trade, are likely to have relatively little effect in reducing carbon dioxide emissions. Demand side management is likely to be a part of most, if not all, states because this is the only means of utilizing block number four, according to Brookings.

Cap and trade key

Charles Frank of the Brookings Institution insists that RPS is much less effective without cap and trade. According to him, the combination can ensure that increased renewable production will displace inefficient, high emitting coal production rather than low emitting gas or nuclear production. Frank highlights that the RGGI states (except Vermont) seem to have recognized this fact by utilizing both RPS and cap and trade to reduce emissions.

Adapted from a report by Emma McAleavey.

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