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Economists: EPA CO2 Plan May Be Too Weak

On one hand, the Obama administration’s plan to slash carbon dioxide emissions from coal-fired power plants may have been the move the Chinese needed to see from the U.S. in order to agree to the climate pact the two countries struck this week.

On the other, the Clean Power Plan may not have what it takes to cut the CO2 emissions it’s setting out to slash.

Urban air pollution and greenhouse gas emissions.
Credit: United Nations/flickr

That’s the conclusion of 13 economists from the University of Chicago, Stanford University, Yale, Harvard, MIT, and the University of California-Berkeley and Davis in an analysis of the Clean Power Plan published Thursday in the journal Science.

The Clean Power Plan, proposed by the U.S. Environmental Protection Agency in June, aims to cut CO2 emissions from existing fossil fuel-fired power plants by 30 percent below 2005 levels by 2030.

One of the weaknesses of the plan is that it doesn’t set specific CO2 emissions caps for each state, instead requiring each state to reduce its emissions intensity, a measure of how many emissions are generated relative to electricity produced.

“The problem with emissions intensity goals — what the planet cares about are emissions, not emission divided by electricity,” economist Michael Greenstone of the University of Chicago and analysis co-author told Climate Central.

The analysis recommends that the EPA adopt specific emissions caps for each state, helping to ensure the effectiveness of states' actions to reduce emissions..

One of the plan’s virtues is the flexibility it provides states to meet their emissions reductions goals. Each state can take whatever steps it deems necessary — shut coal-fired power plants, use more natural gas to produce power, adopt high-efficiency building standards, etc. — to reduce emissions.

One of the best ways to achieve that may be for states to join with surrounding states to create a regional carbon trading programs, similar to an existing program in California and another in the Northeast called the Regional Greenhouse Gas Initiative.

If two neighboring states choose to cap their emissions, they will both gain by allowing emissions trades across their borders, Matthew Kotchen, an economist at the Yale School of Forestry and Environmental Studies and an analysis co-author, told Climate Central.

Regional cap-and-trade programs are the least expensive way to comply with the Clean Power Plan, but it’s entirely up to the states whether to go it alone or join with other states in trading carbon, he said.

Kyle Aarons, senior fellow at the Center for Climate and Energy Solutions and unaffiliated with the analysis, said the success of the Northeastern carbon-trading program provides incentive for other states to take a similar approach.

“RGGI and California have been demonstrating how emissions caps can be used to reduce carbon pollution in a cost-effecive way," he said.

Even if states and the EPA do not adopt these recommendations, the Clean Power Plan is a powerful symbol that the U.S. is taking CO2 emissions cuts seriously, Greenstone said.

“I don’t think that the agreement with China would have happened without the U.S. taking a consequential act through the Clean Power Plan,” he said.

Barring legal challenges, the EPA is expected to finalize the plan in 2015.

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