How the Clean Power Plan Can Accelerate Renewable Energy and Efficiency

March 24, 2016 | 9:22 am
Jeff Deyette
Director of State Policy and Analysis

Momentum toward a clean energy economy is gaining steam all across the United States. New wind and solar development outpaced fossil fuels in 2015 for the second straight year, and both technologies are on track to reach new heights this year. Meanwhile, power generation at U.S. coal plants in 2015 was at its lowest levels than any year since 1984. Now, a new UCS analysis highlights how the Clean Power Plan can help states accelerate this transition to an affordable and low-carbon economy.

The Clean Power Plan (CPP) presents a historic opportunity to reduce global warming pollution from U.S. power plants. The plan sets state-specific targets for cutting power plant carbon pollution, leading to a nationwide reduction of approximately 32 percent below 2005 levels by 2030, according to the EPA.

The Union of Concerned Scientists examined the likely economic and environmental impacts of achieving the emission reductions required by the CPP. In particular, we modeled each state’s compliance with its respective mass-based targets, including old and new power plants (to limit the potential for emissions “leakage”), and we allowed for nationwide trading of carbon allowances (see the methodology for more details). We found that this course toward a clean energy future, which we call our “CPP National Trading Case,” would not only help diversify our nation’s electricity mix and cut global warming emissions but also deliver significant economic and public health benefits across the country.

Eight key takeaways from the new analysis

  1. The CPP helps speed up the shift toward a cleaner, more diversified mix of low-carbon power sources. Under the CPP National Trading Case, renewable energy accounts for 21 percent of the power supply in 2030, while savings from energy efficiency investments are equivalent to 7 percent of total electricity sales in that year (see figure 1). Compared with a Reference Case (e.g. no Clean Power Plan) projection, generation from coal and natural gas plants is 22 percent and 2 percent lower, respectively, in 2030. To provide for the increased renewable energy generation under the CPP, the United States adds more than 200 gigawatts of wind, solar, and geothermal capacity above current levels by 2030. This deployment represents nearly $189 billion in cumulative renewable energy investments in the United States. In addition, more than $64 billion in energy efficiency improvements are made in homes, businesses, and industries by 2030.

    Figure 1. The Clean Power Plan Diversifies Our Nation’s Electricity Mix. The Clean Power Plan helps accelerate our nation’s transition toward a more diversified portfolio of cleaner energy sources.

    Figure 1. The Clean Power Plan helps accelerate our nation’s transition toward a more diversified portfolio of cleaner energy sources.

  2. The clean energy growth spurred by the CPP makes economic sense for consumers. While average electricity bills for a typical household that are modestly (3.2 percent or $2.50 per month) higher than the Reference Case in 2022, they would see small net savings of 1.1 percent, or $0.81 per month by 2030. Diversifying the power supply with more renewable energy and efficiency also limits the consumer impacts from increases in fossil fuel prices.
  3. Auctioning of carbon allowances would generate significant revenues that can be used for public benefit in all states. By setting a carbon cap and issuing allowances equal to state CPP targets, auctioning those allowances, and participating in an interstate carbon trading program, states can generate a combined average annual revenue of $17.8 billion from 2022 to 2030 under the CPP National Trading Case (see map).
    Figure 2. State-by-State Average Annual Carbon Revenues from Auctioning Allowances under the CPP National Trading Case, 2022–2030

    Figure 2. State-by-State Average Annual Carbon Revenues from Auctioning Allowances under the CPP National Trading Case, 2022–2030

    These revenues could then be used to offset higher near-term consumer electricity bills or be reinvested for public benefit. Investment options could include: assistance to communities of color and low-income communities that are disproportionately burdened by pollution from coal power plants; worker training and other economic-transition support; additional deployment of renewables and efficiency sources; power-grid infrastructure improvements; or making buildings and infrastructure more climate-resilient.

  4. The CPP provides health and economic benefits—worth some $103 billion cumulatively through 2030. In addition to cutting CO2 from power plants by 38 percent below 2005 levels by 2030, the CPP National Trading Case would also cut NOx emissions by nearly 26 percent and SO2 emissions by 24 percent in 2030. Using the same methodology applied by the EPA in its CPP impact assessment, the monetary savings from reducing these pollutants under the CPP National Trading Case is estimated at $14.8 billion on average each year from 2015 to 2030.
  5. Newly extended federal tax credits for wind and solar can work together with the CPP to generate even greater near-term consumer, economic, and health benefits. It’s important to note that the benefits presented from this analysis due not include the effects of the five-year federal production and investment tax credits extension for wind and solar passed in December (which were not considered in this analysis due to timing constraints). However, other recent analyses have shown that the tax credits extension could spur record-setting growth in renewable energy and provide a bridge for states to meet their CPP emission reduction targets.
  6. Interstate trading of carbon allowances lowers costs and increases retirements of inefficient coal plants. Our analysis shows that interstate trading would lower cumulative compliance costs under the CPP by $9.8 billion through 2030, compared to a scenario with no interstate allowance trading. Additionally, the CPP National Trading Case results in increased retirements of inefficient polluting coal plants and greater use of cleaner energy sources and, in some cases, the nation’s more efficient coal plants. Between 2015 and 2030, an addition 5 GW of coal plant capacity are retired under the CPP National Trading Case compared with a no interstate trading case.
  7. Additional measures are needed to ensure an equitable and just transition to the clean energy economy. Communities of color and low-income communities bear a disproportionate burden of pollution from coal-fired power plants. To ensure that all Americans benefit from the transition away from coal, state compliance plans should include specific provisions for meaningfully engaging with residents in these communities and conducting an environmental justice analysis to evaluate localized impacts of the plans. States should also address transition assistance for coal-dependent communities and adopt measures to minimize the potential for concentrating fossil fuel generation in overburdened communities and creating co-pollutant “hot spots.”
  8. States should continue to pursue plans to comply with the CPP and invest in renewable energy and energy efficiency despite the recent Supreme Court’s stay. The recent Supreme Court stay on the CPP does not change the underlying economic and public health benefits from a shift to renewables and efficiency, nor does it change the urgent need to cut carbon emissions to limit climate change. The clean energy transition has strong momentum and it is good for all Americans to continue building on that.