Report

The Roles of Energy Markets and Environmental Regulation in Reducing Coal-Fired Plant Profits and Electricity Sector Emissions

Oct 23, 2017 | Joshua Linn, Kristen McCormack

Summary

Market forces explain much of the US electricity sector NOx emissions reductions and nearly all coal plant retirements.

Key Findings

  • Causes of recent US coal plant retirements have been highly controversial.
  • We use a new, highly detailed model of the US electricity sector to analyze regulations of nitrogen oxides, which harm human health and the environment.
  • Weakening regulation would have little benefit for coal plants, and would raise emissions.

Abstract

Between 2005 and 2015, US electricity sector emissions of nitrogen oxides, which harm human health and the environment, declined by two-thirds, and many coal-fired power plants became unprofitable and retired. Intense public controversy has focused on these changes, but the literature has not identified their underlying cause. Using a new electricity sector model that accurately reproduces unit operation, emissions, and retirement, we find that electricity consumption and gas prices account for nearly all the coal plant profitability decline and resulting retirements. Nitrogen oxides regulations explain most of the emissions reductions but had little effect on coal plant profitability and retirement.