RFF Analyzes CES in Response to Senate White Paper Questions

RFF Analyzes CES in Response to Senate White Paper Questions

FOR IMMEDIATE RELEASE: April 13, 2011
CONTACT: Pete Nelson, 202-328-5191, [email protected]; or Ray Kopp, Senior Fellow and Director, Center for Climate and Electricity Policy, 202-328-5059, [email protected]

WASHINGTON – RFF Analyzes CES in Response to Senate White Paper Questions

In response to questions on a Clean Energy Standard (CES) posed by leadership of the Senate Committee on Energy and Natural Resources, experts from Resources for the Future (RFF) submitted key findings from RFF research and modeling:

• Between 2013 and 2035, a CES would achieve cumulative CO2 emissions reductions of roughly 30 percent, or 20 billion tons, relative to a baseline. This is 41 percent of the needed CO2 reductions to meet the U.S. pledge as part of the United Nations Climate Change Conferences in Copenhagen and Cancun.
  
  
• A CES policy leads to retirements of existing coal-fired (and some older gas-fired) capacities.
  
  
• Nuclear capacity expansion is the economically preferred approach to meeting the 2035 standard with or without existing nuclear and hydro crediting. If new nuclear deployment is constrained, coal gasification plants with carbon capture and sequestration take up the slack. When all of these are constrained, wind becomes the preferred approach.
  
  
• Effects on electricity price vary by region. Regions with existing high electricity prices would tend to see price reductions from a clean energy standard (or only small price increases). Those experiencing the largest price increases would still enjoy relatively low prices. Under a clean energy standard, western states are generally net suppliers of credits while eastern states are net purchasers.
  
  
• The economic efficiency and environmental efficacy of a CES could be improved if it were cast in the mold of a feebate policy that focuses on CO2 emission rate intensity.
  
  
• Interim targets are less important in a policy allowing for credit banking. Banking creates a situation where credit prices rise at the rate of interest. In the absence of credit banking, prices are relatively low in the early years (below $5/MWh), but then rise rather dramatically after 2015 to above $60/MWh. Low Alternative Compliance Payments will therefore bind beyond 2020.

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Founded in 1952, Resources for the Future is an independent and nonpartisan institution devoted to research and publishing about critical issues in environmental and natural resource policy.

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