States Have the Tools to Succeed Under the Clean Power Plan

Written by: Rebecca Stanfield, Deputy Director for Policy, Midwest Program, Natural Resource Defense Council 

Rebecca Stanfield

Rebecca Stanfield

On August 3, the U.S. EPA finalized the Clean Power Plan, setting first-ever limits on carbon dioxide pollution from existing power plants. Under these rules, the first reductions in emissions must take place by 2022, and by 2030, the total amount of carbon pollution emitted from these plants must be 32 percent below 2005 levels.

The Clean Power Plan is the most significant action the U.S. has taken to combat climate change, and implementation of it will improve public health, create new jobs building clean energy projects.  With emphasis on energy efficiency, the plan will also lower electric bills.  EPA estimates climate and health benefits of $34 billion to $54 billion in 2030, far exceeding the $8.4 billion cost of the plan. And, thanks to expected investments in ways to use energy smarter, households will save at least $85 on their annual electric bills by 2030 for total consumer savings of $155 billion from 2020-2030.

Now the action shifts to the states to develop plans to attain these goals.  As Governors, environmental agencies and other state policymakers begin this work, here are two pieces of encouraging news that will help them succeed.

  1. The nation’s first carbon market has been an economic and environmental home run.

According to a recent report from the Analysis Group, the nation’s first carbon market – the Regional Greenhouse Gas Initiative (RGGI) – was a huge success in its first three years of operation.  RGGI states – Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont – have reduced carbon pollution by one-third, while saving consumers $1.5 billion on their utility bills, creating over 22,000 additional jobs, and bringing $2.9 billion in additional economic benefit to the region since it began in 2008.

The success is driven in large part by the fact that RGGI states have relied heavily on energy efficiency and renewable energy to achieve its emission reductions.  Specifically, most RGGI states have strong energy efficiency and renewable energy standards on the books, and have reinvested revenues from carbon allowance auctions to achieve even more energy savings and renewable energy deployment.

RGGI states are national leaders in energy efficiency – the nation’s top three performing states (achieving savings from smarter energy use that are greater than 2 percent of their utilities’ total sales) are all in RGGI. Between 2012 and 2014, energy efficiency investments, driven both by state policies and the reinvestment of RGGI proceeds, helped reduce customer electricity bills by $341 million and natural gas bills by $118 million.

Similarly, renewable energy as a percent of total electricity generated has doubled in RGGI states since RGGI began, spurred by renewable portfolio standards (RPS) and expanded clean energy financing programs for municipalities, public institutions, and interested residences and businesses. The growth in in-state renewable energy development has helped the RGGI states reduce out-of-state fossil fuel purchases by $1.27 billion over the last three years.

The takeaways here are that RGGI states are thriving because they are tackling power sector carbon emissions with energy efficiency and renewable energy including wind and solar power, and that both a market for carbon and complementary state clean energy portfolio standards are needed to achieve those results.

  1. EPA is offering an early action option that will help states hit a grand slam.

The final Clean Power Plan includes a new element called the Clean Energy Incentive Program.  This program will award extra emission reduction credits for new wind or solar energy projects as well as for efficiency programs for low income communities.  The project would need to be generating clean power or saving energy in 2020 or 2021, the two years immediately preceding the first Clean Power Plan compliance year.

Here’s how it works.  A solar or wind project built after the state submits its final plan would be eligible to earn credits for zero-carbon megawatt-hours it generates in 2020 and 2021, and could sell those credits into the carbon emission regime in 2022-2029.  Even better, a low-income energy efficiency investment can earn two credits for every megawatt-hour of electricity saved in 2020-2021.  The credits could be in the form of carbon emission allowances, if the state has chosen to adopt a mass-based cap on emissions.  Alternatively, if the state has chosen to adopt a rate-based (tons/mwh) emission limit, the credit for early action would be in the form of an Emission Reduction Credit (ERC).

The goal of the program is to accelerate the benefits of clean energy, including public health benefits of cleaner air, job creation, and electric bill reduction for communities who most need efficiency improvements.

EPA is still taking comment on many elements of this new program, including the size of the program.

Conclusion:

The lessons from RGGI, and the new Clean Energy Incentive Program are two reasons for states to lean heavily on energy efficiency, wind and solar power to comply with the Clean Power Plan, and they are two reasons to be encouraged that compliance will lead to a triple play of health benefits, lower electricity bills and job creation.

Amanda Levin, MAP Fellow, Natural Resource Defense Council contributed to this article.