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Will We Always Have Paris? CO2 Reduction without the Clean Power Plan Jeffrey J. Anderson,*,† David Rode,‡ Haibo Zhai,† and Paul Fischbeck†,‡ †
Department of Engineering & Public Policy, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, Pennsylvania 15213, United States ‡ Department of Social & Decision Sciences, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, Pennsylvania 15213, United States Before considering the future, it is worth examining just how far we’ve already come without any federal CO2 regulation (for existing power plants) in the U.S. Figure 1 illustrates historical
Figure 1. Historical and projected CO2 emissions from the U.S. power sector in relation to natural gas prices (as delivered to electric generators). Projected emissions and gas prices are national averages based on scenarios in the AEO 2017 for the reference case and the high oil and gas resource and technology case.
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n 2009, the United States pledged at the United Nations Climate Change Conference in Copenhagen to reduce overall greenhouse gas emissions by as much as 83% by 2050 and by 17% as early as 2020. This pledge was made in the context of a line of legislative and regulatory attempts at CO2 regulation in the U.S., culminating with the U.S. Environmental Protection Agency’s Clean Power Plan (CPP) in 2015. The CPP would have led to a 32% reduction (from the 2005 level) in CO2 emissions from fossil fuel power plants by 2030a reduction intended to provide between one-third and one-half of the U.S.’s total intermediate-term Paris Agreement commitment.1 But, as so often happens, the political winds blew differently, and the succeeding Trump administration began the process of undoing the CPP and withdrawing from the Paris Agreement.2 Amidst this reversal of federal policy objectives, several municipalities, states, and companies have indicated their intent to comply with the Paris Agreement, even if it is no longer mandated by federal policy. Is a middle ground possible? Is there a way to move toward Paris without the Clean Power Plan? Our work in this area suggests that yes, there is a path to Paris.3 Specifically, we used data from the U.S. Energy Information Administration’s 2017 Annual Energy Outlook4 (AEO) to examine projected power sector CO2 emissions under different natural gas price scenarios to determine if the 2020, 2025, and 2030 emissions targets set in the CPP can still be met in its absence. © XXXX American Chemical Society
CO2 emissions and natural gas prices from 2005 through 2017 (estimated). During that period, emissions have declined from nearly 2.7 billion tons to approximately 1.9 billion tons (∼30%), while revealing a strong link to natural gas prices. To be sure, while other factors (such as renewable energy incentives) also had an impact, the clearest means by which to reduce CO2 emissions has been to reduce the cost of generating electricity with less CO2-emitting fuels (i.e., substituting natural gas for coal). So successful have market forces been under the existing regulatory framework to date that estimated 2017 CO2 emission levels are already at the CPP’s 2025 target (albeit without accounting for electricity demand growth between 2017 and 2025), well exceeding the AEO’s own Reference Case projections for 2025. But the extent to which the power sector has been able to rely solely on market forces to accomplish the shorter-term Parisrelated targets appears to be limited without further reductions in natural gas prices. Indeed, as Figure 1 illustrates, even the AEO’s low natural gas price scenario fails to achieve compliance with the CPP’s 2030 goals. Absent further significant declines in natural Received: January 22, 2018
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DOI: 10.1021/acs.est.8b00407 Environ. Sci. Technol. XXXX, XXX, XXX−XXX
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Environmental Science & Technology
(2) Executive Office of the President. Promoting Energy Independence and Economic Growth. Fed Regist. 2017, 82, 16093− 16097. (3) Anderson, J.; Rode, D.; Zhai, H.; Fischbeck, P. Carbon Dioxide Reduction in the U.S. Electric Power Sector without the Clean Power Plant: Is there a path to Paris Agreement Compliance?, Working Paper CEIC17-04; Carnegie Mellon Electricity Industry Center: Pittsburgh, PA, 2017. (4) Annual Energy Outlook 2017 with Projections to 2050; Energy Information Administration, Department of Energy, U.S. Government Printing Office: Washington, DC, 2017.
gas prices, repeating the CO2 reduction brought about by the boom in domestic natural gas production and concomitant decline in prices may be difficult. While achieving the CPP’s 2020 target appears to have been achieved ahead of schedule without the need for the actual CPP itself, our analysis suggests that meeting the 2025 target in the absence of the CPP would require natural gas prices to remain below $3.40/MMBtu in 2010 dollars (as a point of reference, current CME Henry Hub futures prices for 2025 average approximately $3/MMBtu in nominal dollars, but are not delivered prices). But what if natural gas prices increase, and what about beyond 2025? A key takeaway of our research is that many paths to compliance are possible.3 Maintaining fuel switching from coal to natural gas is important, so policies that encourage low natural gas prices are beneficial. Similarly, policies that encourage renewable energy production are also critical. Indeed, one of the biggest challenges to meeting the CPP’s 2030 targets (without the CPP) is the expiration of renewable energy tax credits (the production and investment credits) prior to that deadline, raising the effective cost of renewable energy. The effective cost of wind is going up just as the U.S. needs significantly more of it to get from 2025 to 2030. If the CPP disappears, it becomes essential for many of the existing regulatory and tax inducements to be retained, and perhaps enhanced. But, in many cases, these actions can be accomplished with a light touch. Whatever political opposition the CPP engendered, actions such as retaining tax credits for renewable energy are more politically feasible. Used efficiently, compliance with the 2025 and 2030 targets remains possible. A regulatory and legislative focus on maintaining the glidepath enabled by market forces appears to sustain the transition period to the intermediate term. The implications for meeting longer-term and deeper decarbonization goals, however, will rely more on proactive regulatory activitybut activity that remains mindful of the role of market forces and open to a diversified approach to achieving compliance, including replacing coalfired generators with natural gas and renewable generators (both through maintaining low costs for low/zero CO2-emitting sources and through retirement of older coal-fired generators), moderating growth in electricity demand by improving energy efficiency, and encouraging repowering and retrofitting options as a means of smoothing the path to compliance. Even without the CPP, the U.S. power sector can meet the short-term goals of the Paris Agreement and put the country on the path to meeting the long-term goals, but doing so in the face of an uncertain future will require detailed analysis and a willingness to keep existing strategies that work in play to preserve their option value and avoid lock-in. We canstill have Paris.
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AUTHOR INFORMATION
Corresponding Author
*E-mail:
[email protected]. Phone: 503-956-4667. Notes
The authors declare no competing financial interest.
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REFERENCES
(1) Ramseur, J. L. U.S. Carbon Dioxide Emissions Trends and Projections: Role of the Clean Power Plan and Other Factors, CRS Report No. R44451; Congressional Research Service: Washington, DC, 2017; https://fas.org/sgp/crs/misc/R44451.pdf (accessed January 15, 2018). B
DOI: 10.1021/acs.est.8b00407 Environ. Sci. Technol. XXXX, XXX, XXX−XXX
