Study: Little Risk of Asset Stranding from EPA’s June 2 Clean Air Act Regulation
May 29, 2014
Next week, Environmental Protection Agency chief Gina McCarthy is expected to announce new Clean Air Act regulation that will cut carbon pollution from the nation’s existing power plants. In two studies scheduled for release in June, Climate Policy Initiative (CPI) shows that the President’s plans should pose little risk for the U.S. economy or energy system, and actually may present significant opportunities.
Using a model that assumes coal-fired power plants currently fitted with pollution controls phase out within 60 years and plants without controls phase out earlier, CPI finds that the coal-fired power sector only risks $28 billion of lost value. This means that if the U.S. stays on track to retire existing coal-fired plants at the end of their planned, useful lives, the country will come very close to its climate targets without significant loss in value to the coal-fired power sector.
However, CPI analysis shows that the Clean Air Act regulation should aim to keep the “right” coal-fired plants functional in order to achieve the greatest level of emissions reductions system-wide. Because these plants can generate power at lower levels when the system is most at need, they can offer the grid flexibility required as more renewable energy enters into the system.
“Regulating existing power plants—especially coal-fired power plants—in the right way offers the U.S. an opportunity to help usher in a low-carbon electricity system,” said David Nelson, senior director and primary author of the CPI reports. “Federal and state regulators can harness this pollution regulation to set the stage for a low-cost, low-carbon shift.”
Climate Policy Initiative (CPI) is a team of analysts and advisors that works to improve the most important energy and land use policies around the world, with a particular focus on finance. CPI works in places that provide the most potential for policy impact including Brazil, China, Europe, India, Indonesia, and the United States.
This press advisory was modified June 1, 2014 to reflect the fact that EPA chief Gina McCarthy will be making the announcement without President Obama.