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How the EPA Can Set a Strong, Flexible Power Plant Carbon Standard

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A draft of the EPA’s carbon standards for existing power plants is due on June 1, 2014. There’s been a general call for flexibility in the design of these standards, which the EPA has committed to. Great River Energy Cooperative, Minnesota’s second-largest electric power supplier, recently proposed a regional carbon cap accompanied by a fee as one possible way to meet the upcoming standards. It’s a positive step, showing leadership and highlighting the importance of diverse regional approaches for getting significant, cost-effective reductions in carbon emissions.

State, regional, and local entities taking the lead

Great River Energy’s proposal for a carbon cap is the latest example of policy innovation from state, regional, and local entities. The RGGI states and California have also put forth their views on how state and regional cap-and-trade programs can provide a pathway for complying with power plant carbon standards. Renewable energy standards and efficiency standards could also be options.

These examples show the importance of setting a clear, ambitious emissions reduction goal and the role that renewable energy and energy efficiency can play in helping us get there. A can-do attitude is exactly what we need to address our climate and energy challenges, while maintaining access to reliable, affordable power.

The role of regional transmission organizations

The Great River Energy proposal specifically discusses a carbon cap set at the ISO level, MISO (the Midwest System Operator) in this case. Independent System Operators (ISOs) and Regional Transmission Operators (RTOs) help manage the electricity grid around the country.

As my colleague, Mike Jacobs, just blogged, a recent report from PJM shows how that grid can get to a 40 percent reduction in CO2 emissions by raising its share of renewable energy to 30 percent of electricity supplied. This kind of RTO/ISO approach makes sense because it directly syncs up with how electricity supply and demand are balanced and how grid reliability is maintained.

Using flexibility to get to a strong carbon standard

The EPA has launched a broad effort to engage with numerous stakeholders prior to proposing carbon standards for existing power plants under section 111(d) of the Clean Air Act. States will play a key role in implementing it through designing their own state implementation plans (SIPs) and the agency has clearly communicated its willingness to allow significant flexibility for states.

The policy design details are important of course – for example, the stringency of the emissions reduction goal, how the policy will be implemented, how to create incentives for renewable energy and energy efficiency as compliance mechanisms, and how revenues from a carbon price are used.

As long as the standard is a strong one, driving significant emissions reductions and putting us on a path to meeting climate and clean energy goals, let a thousand flowers bloom!

Posted in: Energy, Fossil Fuels, Global Warming Tags: , , ,

About the author: Rachel Cleetus is an expert on the design and economic evaluation of climate and energy policies, as well as the costs of climate change. She holds a Ph.D. in economics. See Rachel's full bio.

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