On February 9th, 2016, the U.S. Supreme Court issued a stay on the implementation of the U.S. EPA’s Clean Power Plan (CPP). Hearings on the case will be held during the summer with a potential decision likely by end of the year. Future blog entries will discuss the political and legal aspects of the case. The purpose here is to discuss the impact of the CPP nationwide if it were ultimately implemented.
The EPA’s website says the CPP is “a historic and important step in reducing carbon pollution from power plants that takes real action [emphasis added] on climate change.” The key step in determining the veracity of this claim is figuring out what “real action” means. Appealing to the logic of the scientific method is the best way to generate fact-based conclusions.
Scientists like experiments, and scientific progress often comes from experimental results. For instance, start with two petri dishes: one labeled “control” and the other labeled “treatment”. Add bacteria to the treatment dish and watch the bacteria colony grow, while the control dish remains dormant. This simple experiment demonstrates the basic logic of the scientific method; keeping all else equal, observe the effect of changing one variable between the control and treatment scenarios. The same logic can be applied to determining the CPP’s real effect.
To start, EPA summarizes the CPP’s impact as follows: “When the Clean Power Plan is fully in place in 2030, carbon pollution from the power sector will be 32 percent below 2005 levels, securing progress and making sure it continues.” The problem with this characterization is that it only presents the “treatment” scenario; that is, EPA states what would happen with CPP implementation. Indeed, the logic of the scientific method requires us to look at the difference between the treatment (“with CPP”) and control (“without CPP”) scenarios when determining the impact. Therefore, what would be the emission levels in the “control” scenario without CPP implementation?
Fortunately, EPA conducted a Regulatory Impact Analysis (RIA) that provides the information necessary to implement our “scientific method”-based analysis. Below is Table ES-4 from the RIA that provides CO2 emission projections for a base case without CPP implementation and two policies cases under CPP implementation. The two policy cases are labeled “rate-based” and “mass-based”, respectively, but for this analysis the distinction is not important. Consider the base case the “control” scenario and the policy cases the “treatment” scenario.
The Table ES-4 reports projections emission projections out to 2030 for the base case (or business as usual) and policy cases. By 2030, the policy cases both achieve a 32 percent reduction from the 2005, just as EPA claims (see the last column of the table). However, the base case without CPP implementation projects an emissions reduction of 17 percent by 2030 relative to the 2005 baseline. This is mainly due to the falling price of natural gas generation relative to coal generation, where the former is significantly less carbon intensive than the latter. But, importantly, this change in the generation mix is independent of CPP implementation and thus included in the control scenario (i.e., base case). Therefore, the difference between the control and treatment scenarios is only 15 percent, not 32 percent! That is, implementing the CPP, all else equal, leads to a 15 percent difference between in the emission level from existing power plants by 2030.
As litigation surrounding the CPP proceeds during the summer, it is important to remember what is really at stake: 15 percent. While that 15 percent reduction in U.S. power plant emissions might seem small, it actually represents over 400 million short tons of CO2 reductions, which is equivalent to all 2011 carbon emissions from Spain.
CE3 Blog by Daniel H. Karney, Department of Economics, Ohio University.