US Near Term Climate Policy:
A Mixed Strategies Approach
Ray Kopp
Senior Fellow, Director, Center for Climate and Electricity Policy
Resources for the Future

Sources of US Emissions

2Composition of US Emissions

3

US Policies and Legal Frameworks toReduce GHG Emissions• Emitting Sectors– Agriculture and forestry– Residential– Commercial– Electricity Generation– Transportation– Industrial

4

US Policies and Legal Frameworks toReduce GHG Emissions• Emitting Sectors• Agriculture and forestry• Residential• Commercial• Electricity Generation• Transportation• Industrial5

US Copenhagen Commitment
17 percent below 2005 levels by 2020

6

US Policies and Frameworks:
Electricity Sector• Legally binding emission reduction goals– Regional Greenhouse gas Initiative (RGGI)• Connecticut, Delaware, Maine, Maryland,
Massachusetts, New Hampshire, New York, RhodeIsland, and Vermont– RGGI allowances sold in December @ $3/ton– California AB32 Goals• Considerably more restrictive than RGGI
• AB32 allowances sold in November @ $11.50/ton

7Electricity Sector
Renewable Portfolio Standard Policies..

Source: www.dsireusa.org

March 2013.

29 states,+Washington DC and 2
territories,haveRenewable Portfolio
Standards(8 states and 2 territories haverenewable portfolio goals).
8Electricity Sector
Net Metering

43 states,July 2013

+ Washington DC& 4 territories,haveadopted a net
metering policy.
Source: www.dsireusa.org

9Electricity Sector
Tax Credits for Renewables
January 2013

DC

Puerto Rico

24 states

Personal tax credit(s) only
Corporate tax credit(s) only
Personal + corporate tax credit(s)Source: www.dsireusa.org

offer tax
credits forrenewables10Electricity Sector

Energy Efficiency Resource Standards.
February 201320 states have
Energy Efficiency
ResourceStandards.
(7 states havegoals).

Source: www.dsireusa.org

11

Electricity Sector
Financial Incentives for Renewable Energy

12Electricity Sector - Summary• Natural gas prices are expected to remain lowand further displace coal
• RPS mandates are beginning to bind and will
accelerate the deployment of renewables• Wind and solar capital costs continue to decline• The US is slowly becoming more energy efficientslowing its demand for electric power. The
amount of electricity used in the average
household has fallen to 2001 levels.
• The US has a reasonably good chance of meeting
its Copenhagen pledge
13

US Transport Sector• Accounts for almost a 1/3 of US CO2 emissions• Has been notoriously fuel inefficient• Government fuel efficiency standards have been in placesince the oil embargoes of the mid-70s, but for politicalreasons were rarely updated to increase efficiency• In 2007 the US Supreme Court issued the most important
US court decision with respect to Climate change in thecase known as Massachusetts v. Environmental Protection
Agency– The Court found that EPA has existing authority under thenation’s 1970 Clean Air Act (CAA) to regulate greenhouse gases.

• In 210 EPA set forth new fuel economy standards for thetransport sector under the CAA to regulate vehicle CO2emissions
14

Projected Fleet-Wide Emissions
2012-2016
20122014

2016

Passenger Cars (grams CO2/m)

263

247

225

Light Trucks (g/m)

346

326

298

Combined Cars & Trucks (g/m)

295

276

250

Passenger Cars (mpg)

33.8

36.0

39.5

Light Trucks (mpg)

25.7

27.3

29.8

Combined Cars & Trucks (mpg)

30.1

32.2

35.5

Source: Office of Transportation and Air Quality, EPA-420-F-10-014, April 201015

Projected Fleet-Wide Emissions
2016-2025

2016

2020

2025

Passenger Cars (g/m)

225

182

143

Light Trucks (g/m)

298

269

203

Combined Cars & Trucks (g/m)

250

213

163

Combined Cars & Trucks (mpg)

35.5

41.7

54.5

Source: Office of Transportation and Air Quality, EPA-420-F-10-014, April 201016

US Emissions Post 2020
• The legal authorities, policies and programs already inplace will continue to drive down emissions• Federal CO2 pricing policies (e.g., cap and trade or CO2tax) may re-emerge, but are not likely in the near term
• In the near term US domestic climate policy will be
driven by continued state-level programs and the CAA• The pattern of CO2 regulation under the Act fortransport (termed – mobile sources) is clear to 2025
• EPA is now beginning the process of CO2 regulation for
stationery sources – power plants, refineries, factories,etc.
17

Stationery Source Regulations:Electricity Generation• Regulatory structure – performance standard• Much like the mobile source regulation (grams of CO2per mile) the standard for electricity generation will betons of CO2 per megawatt hour of generation• Standards are set for new sources (New Source
Performance Standards - NSPS) and for existing sources(ESPS)• The NSPS have been proposed and for all practical
purposes the regulations prohibit new coal firedgeneration– Since little new coal generation was planned, theseregulations have little impact on the electric utilities
18Electricity Generation- ESPS
• The ESPS regulations for electric utilities are due
to be proposed in mid 2014
– These regulations will likely be transformative for thesector• Once the performance standards are proposed
states have the obligation to develop plans toimplement the regulations• It is expected EPA will give states a great deal offlexibility in designing the implementation plans
19Types of State Implementation Plans (SIPs)• Tradeable performance standards – within state andcross-state.
• Performance standard to mass standard conversion– Enables states like CA and RGGI to use their existing cap
and trade program structures– Enables other states to join CA or the RGGI programs orcreate new programs• Mass standard to tax– Enables states to develop CO2 tax regimes• Many other variants are possible• Major unanswered question– How stringent will the performance standard be?
20

Other Sources After Electricity Generation• Large industrial/commercial/institutionalboilers• Pulp and paper• Cement• Iron and steel• Refineries• Nitric acid plants• Landfills
21

Post 2020
• Can the US pledge to reduce emissions 83
percent by midcentury as contained in therejected cap & trade legislation of 2009?
– technically possible.

• Will the US UNFCCC 2015 pledge be based inpart on the 83% reduction by 2050 containedin the rejected legislation?
– Unlikely

22

US Commitment 2015-2035
EIA Emissions Forecast (million metric tons CO2)
6000.00

5,606

5000.00

4000.00
Electricity
Transportation

3000.00

Industrial
Commercial
Residential

2000.00

1000.00

0.00
2010

2015

2020

2025

2030

2035
23

2015-2035 Commitment
With Electricity Sector Controls (SCC @ $43/ton in 2015)
6000.00

5000.00

4,413
4000.00
Electricity
Transportation

3000.00

Industrial
Commercial
Residential

2000.00

1000.00

0.00
2010

2015

2020

2025

2030

2035
24

2015-2035 Commitment
With Electricity Sector Controls (SCC @ $66/ton in 2015)
6000.00

5000.00

3,889
4000.00

Electricity
Transportation

3000.00

Industrial
Commercial
2000.00

Residential

1000.00

0.00
2010

2015

2020

2025

2030

2035

25

2015-2035 Commitment
With Electricity Sector Controls (SCC @ $66/ton) and 1%
Industrial Sector Emission Improvement
6000.00

5000.00

3,715
4000.00
Electricity
Transportation
3000.00

Industrial

Commercial
Residential

2000.00

1000.00

0.00
2010

2015

2020

2025

2030

2035

26

2015-2035 Commitment
With Electricity Sector Controls (SCC @ $66/ton) and 1% Industrial Sector
Emission Improvement and 1% Fuel Economy Improvement from 2025-2035
6000.00

5000.00

4000.00

3,548

Electricity
Transportation

3000.00

Industrial
Commercial
Residential

2000.00

1000.00

0.00
2010

2015

2020

2025

2030

2035

27

2015-2035 Commitment
Percent Reductions from Baseline in 2035
120%100%

110%
92%

80%

86%

81%
72%

67%

73%

70%

61%
60%

58%

40%
20%
0%

BAU

CAA @ $33

CAA @ $66
1990
2005

CAA + Ind

CAA +Ind + Fuel28