Cleaner and Cheaper: Using the Clean Air Act 

to Sharply Reduce Carbon Pollution from Existing 

Power Plants, Delivering Health, Environmental, 

and Economic Benefits

NRDC issue brief update march 2014

IB: 14-03-a

AUTHORS

Dan Lashof

Starla Yeh

contributing AUTHORS

Dale Bryk

Sheryl Carter

David Doniger

Derek Murrow

Laurie Johnson
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Cleaner and Cheaper: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental, and Economic Benefits

On June 25, 2013, President Obama addressed a sweltering audience of students, 

members of Congress, environmental leaders, business executives, and others to lay 

out an ambitious Climate Action Plan for his second term. Specifically addressing the 

students in the audience, the president said, “I refuse to condemn your generation and future 

generations to a planet that’s beyond fixing.” 

In addition to reaffirming his commitment to address 

climate change, the president outlined specific steps his 

administration would take, using laws already on the books. 

The heart of that plan is to establish the first-ever national 

standards to limit carbon dioxide emissions from power 

plants. Here is how the president described the problem:

Today, about 40 percent of America’s carbon pollution 

comes from our power plants. But here’s the thing: Right 

now, there are no federal limits to the amount of carbon 

pollution that those plants can pump into our air. None. 

Zero. We limit the amount of toxic chemicals like mercury 

and sulfur and arsenic in our air or our water, but power 

plants can still dump unlimited amounts of carbon 

pollution into the air for free. That’s not right, that’s not 

safe, and it needs to stop. 

We agree. Climate and energy experts at the Natural 

Resources Defense Council crafted a groundbreaking 

proposal to do just that, which was originally described in a 

report released in December 2012.1

 This Issue Brief presents 

an updated analysis of that proposal, including a more 

ambitious variant and additional scenarios demonstrating 

that states and power companies have many options for 

achieving big reductions in carbon pollution from power 

plants at a low cost, and with large net benefits for our 

economy, health, and environment. This report describes 

the following cases:

n Reference case, which assumes no new policies and 

is benchmarked to the reference case of the Energy 

Information Administration’s Annual Energy Outlook 

of 2013.

n Moderate, Full Efficiency case, which assumes the same 

emission standards and achievable energy efficiency 

resources as in NRDC’s 2012 analysis.

n Moderate, Constrained Efficiency case, which assumes the 

same emission standards and one-half the achievable 

energy efficiency resources as in NRDC’s 2012 analysis.

n Ambitious, Full Efficiency case, which assumes more 

stringent emission standards and the same achievable 

energy efficiency resources as in NRDC’s 2012 analysis.

n Ambitious, Constrained Efficiency case, which assumes 

more stringent emission standards and one-half the 

achievable energy efficiency resources as in NRDC’s 

2012 analysis.

n Ambitious, Constrained Efficiency, PTC case, which assumes 

more stringent emission standards and one-half the 

achievable energy efficiency resources as in NRDC’s 2012 

analysis, plus an extension of the wind energy production 

tax credit until 2020.

Under the timetable established by the president, the 

Environmental Protection Agency (EPA) will use its existing 

authority under the Clean Air Act to propose a guideline 

for carbon pollution standards by June 1, 2014, covering 

about 1,000 existing power plants across the country. After 

taking public comment on its proposal, the EPA will finalize 

its guideline by June 2015. States will have until July 2016 

to develop and submit to the EPA their plans for achieving 

the emission reductions specified in the guideline. The EPA 

will review and approve state plans that are consistent with 

the guideline. If a state fails to submit a plan or submits 

an inadequate plan, the EPA is required to establish direct 

federal regulations to implement the guideline in that state. 

NRDC’s updated analysis shows one way in which the 

EPA, in partnership with the states, can set carbon pollution 

standards that will cut existing power plant emissions 21 to 

31 percent by 2020 (relative to 2012 levels); this represents 

a reduction of 470 million to 700 million tons relative 

to business as usual. The proposed approach will drive 

investment in cost-effective energy efficiency and new 

renewable electricity generation facilities, substantially 

lowering the cost of compliance, lowering electricity bills, 

and creating thousands of jobs across the country. Further, 

NRDC’s analysis shows that the benefits—in saved lives, 

reduced illness, and climate change avoided—far outweigh 

the costs, by as much as $21 billion to $53 billion in 2020. 

There is more than one way to achieve these benefits. The 

EPA has already emphasized that regardless of the specific 

approach it uses as the basis of its guideline, states will be 

able to tailor their implementation plans to reflect their own 

circumstances and policy preferences, provided they achieve 

emission reductions equivalent to, or greater than, those 

resulting from the federal template. For example, states that 

participate in the Regional Greenhouse Gas Initiative will 

be able to use this policy framework (perhaps with some 

adjustments to their emission limits), and other states could 

join or adopt similar mass-based standards. 

Having endured a year in which climate change 

contributed to record drought, widespread wildfires, and 

extreme heat waves, which cost many lives and billions of 

dollars, we can’t afford to wait any longer to act. For the 
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Cleaner and Cheaper: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental, and Economic Benefits

health and welfare of Americans, for the nation’s economy, 

and for the stability of our climate, now is the time to reduce 

carbon pollution from America’s power plants, dramatically 

increase the energy efficiency of our economy and reduce the 

threat of climate change.

The Imperative to Cut 

Carbon Pollution

Unless heat-trapping carbon pollution is sharply reduced, 

negative impacts on the health of our families, communities, 

economy, and planet will only grow. 

Already, climate change is increasing the numbers of 

record heat waves, droughts, and floods, and these extreme 

weather events will become even more powerful and 

frequent, threatening both lives and the global economy. In 

the wake of superstorm Sandy, which devastated swaths of 

the U.S. coastline, states and cities must rebuild for this new 

reality. But simply preparing for more extreme weather is 

not an answer by itself. Future storms will be stronger and 

do even worse damage unless we act now to curb the carbon 

pollution that is driving dangerous climate change. 

To this end, nothing is more important than reducing 

carbon dioxide (CO2

) emissions from the largest industrial 

source of pollution: electricity-generating power plants. In 

the United States these plants emit about 2.2 billion tons 

of CO2

 each year, roughly 40 percent of the nation’s total 

emissions. 

Clean energy technologies are already stemming the 

growth in emissions and creating a bright spot in the nation’s 

economy. Today the wind and solar industries employ more 

people than the coal industry.2,3,4 Efficiency improvements in 

lighting alone will lower our national energy bill by billions of 

dollars every year and reduce demand for fossil power plants 

by 10 percent.5

To be sure, the EPA has taken important first steps by 

setting standards that will cut the carbon pollution from 

new automobiles and trucks nearly in half by 2025, and by 

proposing standards to limit the carbon pollution from new 

power plants. But the EPA has yet to tackle the CO2

 pollution 

from hundreds of existing fossil-fueled power plants in the 

United States. 

The EPA has both the authority and the responsibility to 

reduce pollution from these plants under the Clean Air Act, 

the nation’s bedrock air pollution law adopted in 1970. NRDC 

has proposed an effective and flexible approach to cut carbon 

pollution from existing power plants. This plan: 

n Uses the legal authority established by the Clean Air Act.

n Recognizes differences in starting points among states.

n Charts a path to affordable and effective emission 

reductions by tapping into the ingenuity of the states 

and the private sector.

n January 20th: Start of President Obama’s second term.

n June 25th: President Obama announces Climate Action Plan.

n September 20th: EPA proposes carbon pollution standards for future power plants.

n May 9th: End of public comment period for future power plant proposal.

n June 1st: EPA to propose guideline for carbon pollution standards for existing power plants.

n June-September: Public comment period on existing power plant proposal.

n June 1st: EPA to finalize power plant carbon pollution standards.

n June 30th: States to submit implementation plans for existing power plants to EPA.

n July-December: EPA reviews state plans for compliance with its guideline.

n January 20th: End of President Obama’s second term. 

2013

2014

2015

2016

2017
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Cleaner and Cheaper: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental, and Economic Benefits

n Provides multiple compliance options, including cleaning 

up existing power plants, shifting power generation to 

plants with lower emissions or none at all, and improving 

the efficiency of electricity use. 

Using the same sophisticated, integrated planning model 

used by the industry and the EPA, NRDC calculated the 

pollution reductions that would result from the proposed 

approach—and the costs and benefits of achieving those 

reductions.

The plan would cut CO2 pollution from America’s power 

plants by 21 to 31 percent (relative to 2012 levels) by 2020, 

and 25 to 38 percent by 2025. The reductions are equivalent 

to 470 million to 700 million short tons relative to the 

Reference case in 2020, and 560 million to 860 million short 

tons in 2025. The price tag ranges from no increase over the 

Reference case to about $14.6 billion in 2020, depending on 

the level of ambition and the package of solutions employed. 

But the benefits—in saved lives, reduced illness, and climate 

change avoided —would be $28 billion to $63 billion, far 

exceeding the costs. For Americans’ health and welfare, for 

the nation’s economy, and for the health of the planet, we 

can’t afford not to curb the carbon pollution from existing 

power plants. 

The EPA’s Legal Authority and

Obligation to Reduce Carbon

Pollution

The Clean Air Act has been remarkably successful over its 

40-year history. Most Americans now breathe much cleaner 

air, our cities are no longer enveloped in smoke and smog, 

the nation’s lakes and rivers are recovering from acid 

rain, and the ozone layer that shields us from dangerous 

ultraviolet radiation is healing after the phase-out of CFCs 

and other ozone-destroying chemicals.

The Clean Air Act can also help stem the threat of 

climate change by reducing carbon pollution. In 2007, in 

Massachusetts v. EPA, the U.S. Supreme Court ruled that 

the EPA has the authority and responsibility to curb heattrapping pollutants under the Clean Air Act, rejecting the 

Bush administration’s claim that greenhouse gases are not 

pollutants under that law. In that case, the nation’s highest 

court ruled that if the science shows CO2

 and other heattrapping pollutants endanger public health and welfare, 

then the EPA must set standards to reduce their emissions 

from new cars and trucks. 

In another decision, in American Electric Power v. 

Connecticut, the Supreme Court ruled in 2011 that it is also 

the EPA’s responsibility to curb the carbon pollution from 

the nation’s power plants. The legal authority for power plant 

standards comes from Section 111 of the Clean Air Act, which 

directs the EPA to set “standards of performance” (typically a 

maximum emissions rate) for stationary sources like power 

plants that emit harmful air pollutants. Section 111(b) covers 

new facilities, while Section 111(d) gives the EPA and states 

shared responsibility for curbing pollution from existing 

facilities. Under Section 111(d), the EPA issues guidelines 

on “the best system of emission reduction,” and then each 

state is required to adopt and submit a plan for setting and 

meeting emission standards. 

In President Obama’s first term, the EPA responded to 

the Supreme Court decision in Massachusetts v. EPA by 

presenting overwhelming scientific evidence that CO2

and other heat-trapping pollutants do indeed endanger 

public health and welfare. The administration then set new 

standards in 2010 and 2012 to dramatically cut the carbon 

pollution from new cars and SUVs and from heavy trucks and 

buses. The U.S. Court of Appeals for the District of Columbia 

Circuit upheld both the endangerment determination and 

the vehicle standards, and the Supreme Court declined to 

review those holdings.6,7

In September 2013, the EPA took the first step toward 

addressing power plant pollution as directed by the 

president’s Climate Action Plan by proposing the “Carbon 

Pollution Standard for New Power Plants” under Section 

111(b). The standard would require that new coal power 

plants emit no more than 1,100 pounds of CO2

 per megawatthour (lbs/MWh) and that most new natural gas–fired plants 

limit emissions to no more than 1,000 lbs/MWh. 

To put that in context, existing coal power plants typically 

produce about 2,100 lbs/MWh, and gas-fired plants emit 

1,100/MWh or less. Power companies building new gas plants 

could meet the standard with efficient natural gas combinedcycle plants. The EPA, the Department of Energy, and most 

private analysts do not anticipate construction of new coalfired power plants for economic reasons, but if new coal 

plants were built in the future, they could meet the standard 

with partial carbon dioxide capture systems. 

The EPA will accept comments on its proposal for future 

power plants until May 9, 2014. The agency will then review 

these comments and, after making any revisions it considers 

necessary, will finalize the standards for new power plants no 

later than June 1, 2015. 

Also pursuant to the president’s Climate Action Plan, 

the EPA has begun work on the largest source of carbon 

pollution, existing power plants. Since September 2013, 

the EPA has held numerous meetings with state officials, 

power companies, environmental organizations, and others, 

including 11 public listening sessions at which more than 

1,600 people spoke. EPA has also received more than 2,000 

written submissions from interested parties. 

The price tag ranges from no increase over 

the Reference case to about $14.6 billion in 

2020, depending on the level of ambition and 

the package of solutions employed. But the 

benefits—in saved lives, reduced illness, and 

climate change avoided—would be $28 billion 

to $63 billion, far exceeding the costs.
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Cleaner and Cheaper: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental, and Economic Benefits

NRDC’s approach to setting standards under Section 

111(d) is consistent with the many stakeholder comments 

calling for a flexible approach in which states and power 

plant owners may design their own plans for achieving the 

required emission reductions by selecting among a wide 

variety of measures. The EPA refers to approaches that 

incorporate these flexible compliance options as “system 

based” standards.8

 Attorneys at NRDC and Harvard Law 

School have shown that EPA has the legal authority to set 

such system-based standards.9

NRDC’s proposal also addresses the challenge of creating 

equitable regulations for the affected sources, recognizing 

that the mix of existing power plants varies among the states. 

If all plants were limited to 1,000 pounds of CO2

/MWh, for 

instance, states with a high percentage of coal-fired plants 

would face a much larger task than would those with lots 

of natural gas plants or renewables. The approach NRDC 

has proposed would help reduce the carbon pollution from 

existing power plants in a fair, affordable, and achievable 

manner.

State-Specific Standards and 

Flexible Compliance Options

The NRDC plan has two key elements: 

(1) The EPA would set state-specific emission rates, reflecting 

the diversity of the nation’s electricity sector as well as the 

state-by-state structure of Section 111(d).

(2) Power plant owners and states would have broad 

flexibility to meet standards in the most cost-effective way, 

through a range of technologies and measures.

Here’s how it would work: The EPA would first tally up the 

share of electricity generated by coal and gas-fired plants 

in each state during the baseline years (2008–2010 was 

used for this analysis). Then the agency would set a target 

emission rate for each state for 2020, based on the state’s 

baseline share of coal and gas generation. The Ambitious 

case state standards analyzed in this report were calculated 

by applying a benchmark rate of 1,400 pounds of CO2

/MWh 

for the baseline coal generation share and 700 pounds of 

CO2

/MWh for the baseline gas-fired generation share. The 

Moderate case state standards were calculated by applying a 

benchmark rate of 1,500 lbs/MWh for the baseline coal share 

and 1,000 lbs/MWh for the baseline gas share. 

For example, a state that now gets 90 percent of its fossilfueled electricity from coal and 10 percent from gas would be 

required to reduce its 2020 emissions rate to 1,330 lbs/MWh 

in the Ambitious case [(90 percent x 1,400) + (10 percent x 

700)]. In the Moderate case, the target would be 1,450 lbs/

MWh [(90 percent x 1,500) + (10 percent x 1,000)]. In contrast, 

a state with 90 percent gas-fired generation would have a 

target of 770 lbs/MWh in the Ambitious case [(10 percent x 

1,400) + (90 percent x 700)] and 1,050 lbs/MWh [(10 percent 

x 1,500) + (90 percent x 1,000)] in the Moderate case. A 

state starting with a 50:50 ratio of coal and gas generation 

would have a target of 1,050 lbs/MWh in the Ambitious case 

and 1,250 lbs/MWh in the Moderate case. In all cases, the 

allowable emissions rate would drop further in 2025. 

The emission standard for each state would be an overall 

average of all fossil fuel plants in the state. An individual plant 

could emit at a higher or lower rate. 

Each covered plant with an emission rate above the state 

standard could meet the standard by using one or more 

compliance options: First, a plant could reduce its own 

CO2

 emission rate by retrofitting a more efficient boiler or 

installing CO2

 capture systems, for instance, or it could burn a 

mixture of coal and cleaner fuels such as gas or certain types 

of biomass. 

Second, the owners of multiple power plants could average 

the emissions rates of their plants, meeting the required 

emission rate on average by running coal plants less often, 

ramping up generation from natural gas plants or renewable 

sources instead. They could retire coal plants and build new 

natural gas and renewable capacity, if needed, creating a 

cleaner overall electricity-generating fleet. Low- or zeroemitting sources, such as wind and solar, would earn credits 

that generators could use to lower their average emissions 

rate. The plan also allows trading of credits between 

companies, both within a state and across state lines (among 

states that choose to allow it), further lowering the overall 

costs of compliance.

An innovative feature of the proposal is the inclusion of 

energy efficiency. State-regulated energy efficiency programs 

could earn credits for avoided pollution resulting from 

reduced electricity consumption. Generators could purchase 

and use those credits toward their emissions compliance 

obligations, effectively lowering their calculated average 

emissions rate. Energy efficiency is one of the lowest-cost 

energy resources and emission reduction options. States 

could use this provision to slash emissions without costly and 

lengthy power plant retrofits or new construction, reducing 

the overall cost of the regulations. 

Improving energy efficiency also cuts costs to consumers 

and businesses. Switching to more efficient lightbulbs, 

adding weather-stripping or insulation in buildings, or 

installing more-efficient appliances and equipment reduces 

electricity bills and creates jobs that can’t be outsourced to 

other countries. 

Energy efficiency programs should include rigorous 

requirements to ensure that reductions in electricity use and 

the resulting emission reductions are real and verifiable. 

These requirements are addressed in the NRDC proposal. 

The range of compliance options enables a 21 to 31 

percent reduction in emissions of climate-change-causing 

CO2

 from existing power plants by 2020 compared with 2012 
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Cleaner and Cheaper: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental, and Economic Benefits

levels (or, equivalently, a reduction of 470 million to 700 

million short tons relative to the Reference case; see Figures 

1 and 2). 

Each state will have many options to customize a 

compliance strategy based on the state’s energy resources, 

the structure and geography of its energy markets, local 

demographics, and the state’s economic development plan. 

States could, for instance, adopt California’s portfolio of 

policies, or model their approach on the Northeast states’ 

Regional Greenhouse Gas Initiative—as long as the states 

demonstrate those approaches will achieve equal or lower 

emissions. 

The Benefits of Implementing 

the Proposal

NRDC asked ICF International to analyze the proposed 

approach using ICF’s proprietary Integrated Planning Model 

(IPM®) and NRDC’s assumptions. Used routinely by both the 

utility industry and regulators to determine cost-effective 

ways of meeting the nation’s electricity needs and to assess 

the effects of regulations, the IPM models the entire electric 

power sector. It integrates extensive information on power 

generation, fuel mix, transmission, energy demand, prices of 

electricity and fuel, environmental policies, and other factors.

For this analysis, NRDC made a series of conservative 

assumptions about fuel prices, energy demand, and policies 

to plug into the IPM. We also assumed that new EPA rules 

limiting emissions of mercury and other air toxins and 

further reducing sulfur dioxide and nitrogen oxides would 

be implemented. 

Electricity Sector Modernization

The results from the model show that the proposed approach 

would begin to modernize and clean up America’s electricity 

sector without significantly changing the nation’s electricity 

bill. This is because energy efficiency programs adopted in 

response to the incentives created by the approach would 

cause overall demand to decline by as much as 6 percent 

between 2012 and 2020, rather than increase by 4 percent. In 

response to questions raised about the magnitude of energy 

efficiency gains assumed in its original analysis, NRDC 

developed a new approach to allow energy efficiency to be 

selected on an economic basis within the model, using a 

three-step energy efficiency supply curve with utility program 

costs ranging from 2.3 to 3.2 cents per kilowatt-hour. NRDC 

also examined Constrained Efficiency scenarios in which 

it assumed that states would implement only half as much 

energy efficiency by 2020 as assumed in its 2012 analysis. In 

those cases, electricity demand remains essentially flat from 

2012 through 2020.

Billions (2012 Dollars)

■ Coal ■ Coal with CCS ■ Gas ■ Nuclear ■ Wind ■ Efficiency ■ Other 

■ Compliance Cost ■ Estimated SO2 and NOx Benefits ■ Estimated CO2 Benefits

Reference

Case

Moderate,

Full Efficiency

Moderate,

Constrained

Efficiency

Moderate,

Full Efficiency

Moderate,

Constrained Efficiency

Ambitious,

Full Efficiency

Ambitious,

Constrained

Efficiency

Ambitious,

Full Efficiency

Ambitious,

Constrained Efficiency

Ambitious, Constrained

Efficiency, PTC

Ambitious,

Constrained

Efficiency, PTC

29%

10%

10%

5%

19%

26%

39%

10%

5%

19%

26%

1%

30%

9%5%

6%

19%

28%

2%

26%

9%

10%

5%

19%

28%

3%

26%

9% 5%

6%

19%

30%

5%

25%

5% 10%

8%

19%

29%

5%

fig 1

0

10

20

30

40

50

60

Figure 1. Projected Generation Mix in 2020
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Cleaner and Cheaper: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental, and Economic Benefits

Millions short tons CO2

012 Dollars)

fig 4

40

50

60

$70

0

500

1,000

1,500

2,000

2,500

3,000

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

Historical

Reference Case

Moderate, Full 

Efficiency

Moderate, 

Constrained 

Efficiency

Ambitious, 

Full Efficiency

Ambitious, 

Constrained 

Efficiency

Ambitious, 

Constrained 

Efficiency, PTC

Figure 2. NRDC Policy Cases vs. Reference Case (Emissions 2005 – 2025)

Table 1. Summary Results of NRDC Scenarios in 2020

Emission 

Reductions below 

2012 (T)

Emission 

Reductions below 

2012 (%)

Incremental Cost 

(Billions 2012$)

Benefits Range* 

(Billions 2012$)

Reference 0 0%

Moderate, Full Efficiency 530 24% 0 29.9 - 50.3

Moderate, Constrained Efficiency 470 21% 6.6 27.6 - 46.9

Ambitious, Full Efficiency 660 29% 8.5 37.3 - 62.0

Ambitious, Constrained Efficiency 670 30% 14.6 36.7 - 60.2

Ambitious, Constrained Efficiency, PTC 700 31% 11.1 38.2 - 63.1

*NOTE: Carbon reduction benefit (low) is calculated according to the Obama administration’s updated Social Cost of Carbon (SCC) of $43 (2012$) per 

short ton in 2020, reflecting the 3% discount rate case. Carbon reduction benefit (high) is calculated according to an SCC estimate of $62 (2012$) per 

short ton, using a 2% discount rate. Benefits for SO2 and NOx reductions are preliminary estimates based on scaling previous estimates.10
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Cleaner and Cheaper: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental, and Economic Benefits

ADDITIONAL DETAILS ON NRDC’S ASSUMPTIONS

To update its 2012 power sector analysis, NRDC revised a number of assumptions to more accurately reflect current 

trends. The Reference case in the previous analysis relied on projections from the Energy Information Administration’s 

Annual Energy Outlook for 2011. This analysis is based on the EIA’s outlook for 2013. Given the significant changes in the 

energy industry over the past few years, the differences in these baseline projections materially affect the results. Power 

sector carbon dioxide emissions projected for 2020 are 11 percent lower in the updated Reference case than they are in 

the original Reference case. Additionally, NRDC adopted assumptions for the capital costs of building new wind capacity 

from the Lawrence Berkeley National Laboratory (LBNL) 2012 Wind Technologies Market Report and assumed that nuclear 

units could be re-licensed beyond a 60-year operating life for an additional 20 years. 

For the policy cases, NRDC developed an endogenous approach to representing demand-side energy efficiency in the 

model using a simplified supply curve. NRDC derived the energy efficiency supply curve from the total electricity demand 

reduction from energy efficiency projected by Synapse Energy Economics on the basis of the performance of leading state 

programs; this was also used in the 2012 analysis. For the present analysis, NRDC divided that total into three equal blocks 

with different costs. The maximum projected savings from energy efficiency in 2020 was 482 TWh, so each cost block 

represents 161 TWh of demand reduction. Then NRDC assigned utility program costs to each block such that the cost of 

the middle block would be equal to the cost assumed in the 2012 analysis. The relative costs assigned to the other two 

blocks were scaled on the basis of a generic cost curve given in a 2013 LBNL report on the projected costs and savings of 

utility-funded energy efficiency programs.11 The first block of energy efficiency savings was available at 2.3 cents/kWh, the 

second block at 2.6 cents/kWh, and the third block at 3.2 cents/kWh. The costs are uniform throughout the country, while 

the quantities of energy efficiency available vary by region based on the Synapse assessment. In each region, the model 

selects how much energy efficiency to deploy based on its levelized cost relative to other sources. The selection of the 

efficiency resource in the model is based on these utility program costs, but NRDC includes the participant’s contribution 

(assumed to be 45 percent of the total cost of efficiency measures) in the calculations of total compliance costs. To 

examine scenarios in which energy efficiency contributes to compliance on a more limited basis, the Constrained Efficiency 

cases assume that only half the amount of energy efficiency is available. This is represented in the model simply by 

reducing the amount of energy efficiency available in each cost block by 50 percent. 

The Ambitious policy scenarios included in the present analysis is based on tighter nominal emission rate targets in the 

2020 and 2025 compliance years compared with the Moderate case, which used the same targets as the 2012 analysis. 

The Ambitious case also includes an additional step in 2030 (Table 2). 

NRDC added the Ambitious policy scenarios to 

examine the potential for even greater emission 

reductions because the cases based on the 

Moderate emission rate targets showed minimal 

to low compliance costs.

NRDC also examined a case in which the federal 

wind production tax credit (PTC) is extended 

until 2020 with ambitious targets and constrained efficiency. This case results in a compliance scenario that relies more 

heavily on wind and less heavily on efficiency and natural gas than in the other cases, all of which assume that the PTC is 

phased out on its current schedule. All of the cases assume that existing state renewable energy standards remain in place 

but are not strengthened. 

Table 2. Nominal CO2 Emission Rate Targets (lbs/MWh)

2020 2025 2030

Moderate cases Coal: 1,500

Gas: 1,000

Coal: 1,200

Gas: 1,000

Coal: 1,200

Gas: 1,000

Ambitious cases Coal: 1,400

Gas: 700

Coal: 1,150

Gas: 600

Coal: 900

Gas: 500
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Cleaner and Cheaper: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental, and Economic Benefits

0

100

200

300

400

500

600

700

800

0

100

200

300

400

500

600

700

800

0

50

100

150

200

250

300

350

CO2 SO2 NOx

Million short tons 

Thousand short tonsThousand short tons

MODERATE, FULL EFFICIENCYMODERATE, CONSTRAINED EFFICIENCY AMBITIOUS, FULL EFFICIENCY AMBITIOUS, CONSTRAINED EFFICIENCY AMBITIOUS, CONSTRAINED EFFICIENCY, PTC MODERATE, FULL EFFICIENCY MODERATE, CONSTRAINED EFFICIENCY AMBITIOUS, FULL EFFICIENCY AMBITIOUS, CONSTRAINED EFFICIENCY AMBITIOUS, CONSTRAINED EFFICIENCY, PTC MODERATE, FULL EFFICIENCY MODERATE, CONSTRAINED EFFICIENCY AMBITIOUS, FULL EFFICIENCY AMBITIOUS, CONSTRAINED EFFICIENCYAMBITIOUS, CONSTRAINED EFFICIENCY, PTC

■ NRDC Moderate 

 Full EE

■ NRDC Moderate

 Half EE

■ NRDC Ambitious 

 Full EE

■ NRDC Ambitious 

 Half EE

■ NRDC Ambitious

 PTC

fig 3

Figure 3. Projected Emission Reductions from Reference Case in 2020 

Billions (2012 Dollars)

■ Compliance Cost ■ Estimated SO2 and NOx Benefits ■ Estimated CO2 Benefits

Moderate,

Full Efficiency

Moderate,

Constrained Efficiency

Ambitious,

Full Efficiency

Ambitious,

Constrained Efficiency

Ambitious, Constrained

Efficiency, PTC

fig 1

fig 4

0

10

20

30

40

50

60

$70

0

500

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025

Figure 4. Large Benefits, Low Costs (Cost and Benefits from Reduced Emissions, 2020)

NOTES

•	 Benefits from SO2

 and NOx reductions are scaled from previous estimates using an extensively peer-reviewed dispersion model developed by Abt Associates to estimate 

health impacts from power plants for EPA. Lower and Higher estimates based on different statistical relationships between pollution concentrations and health effects that 

are used by EPA. Value of statistical lives lost is the primary component of the monetary value of the estimated benefits.

•	 Lower carbon reduction benefit calculated with Social Cost of Carbon (SCC) of $43 (2012$) per short ton in 2020, reflecting the Administration’s 3% discount rate case.

Higher carbon benefit calculated with independently calculated SCC of $62 (2012$) per short ton in 2010, reflecting a 2% discount rate case. See Endnote 13.
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Cleaner and Cheaper: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental, and Economic Benefits

Coal-fired generation’s market share of total electricity 

services (including energy efficiency) drops from 39 

percent in the Reference case to between 25 percent (in 

the Ambitious, Full Efficiency case) and 30 percent (in 

the Moderate, Constrained Efficiency case). Natural gas 

generation’s market share in the policy cases remains about 

the same as in the Reference case at 26 to 30 percent, but 

the total number of kilowatt-hours generated with natural 

gas declines compared with 2012 levels. Wind’s market share 

increases from 3.5 percent in 2012 to between 5 percent (in 

the Reference case and Full Efficiency cases) and 8 percent 

(in the Production Tax Credit extension case). 

Investments in energy efficiency are the lowest-cost 

compliance pathway—much cheaper than building new 

power plants or installing pollution control equipment—so 

including this flexibility significantly reduces overall costs. 

Because of the many benefits of energy efficiency, utilities 

scaled up annual demand-side management program 

budgets from $2.7 billion in 2007 to $6.9 billion in 2012,12

with a corresponding increase in energy savings. Efficiency 

investments reduce the need to build additional power plants 

and infrastructure, reduce wholesale power prices, and 

deliver significant bill savings to individuals and businesses. 

Because substantial reductions in CO2

 can be achieved 

through energy efficiency without building many new 

power plants or installing lots of expensive pollution control 

equipment, the total costs of compliance would be low—

ranging from no increase (relative to the Reference case) 

in electricity system costs in the Moderate, Full Efficiency 

case in 2020, to a net compliance cost of $14.6 billion in the 

Ambitious, Constrained Efficiency case. 

Health, Environmental, and Economic Benefits

The benefits of the proposal far outweigh the costs. Carbon 

dioxide from power plants contributes to the severity of heat 

waves, droughts, floods, and rising sea levels, all of which 

bring an enormous toll in human lives, environmental 

devastation, and economic disruption. The value of reducing 

carbon pollution in 2020 is estimated at $43 to $62 per ton, or 

more.13

The proposal also brings additional cuts in emissions 

of pollutants that are already regulated, such as sulfur and 

nitrogen oxides (SO2

 and NOx). The emissions reductions 

delivered by implementing the proposal would prevent more 

than 17,000 asthma attacks annually, avoid more than 1,000 

emergency room visits and hospital admissions per year, 

and prevent thousands of premature deaths, among other 

benefits.

The benefits of reducing CO2

 and the traditional pollutants 

are both substantial, adding up to $28 billion to $63 billion 

across the cases in 2020, yielding net benefits ranging from 

$21 billion (low estimate, Moderate, Constrained Efficiency 

case) to $53 billion (high estimate, Ambitious, Full Efficiency 

case). See Figure 4.

What’s more, this approach would stimulate investments 

of $52 billion to $121 billion in energy efficiency and 

renewables between now and 2020, boosting local and state 

economies. Establishing such CO2

 emission standards now 

will also give the power industry the investment certainty it 

needs to avoid billions of dollars of stranded investment in 

obsolete power plants. 
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Cleaner and Cheaper: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental, and Economic Benefits

ENDNOTES 

1 www.nrdc.org/air/pollution-standards/files/pollution-standards-report.pdf. 

2 NRDC, American Wind Farms: Breaking Down the Benefits from Planning to Production, September 2012, www.nrdc.org/energy/files/americanwind-farms-IP.pdf. The wind industry now employs 75,000 Americans.

3 Solar Foundation, National Solar Jobs Census 2013 (January 2014), thesolarfoundation.org/sites/thesolarfoundation.org/files/TSF%20Solar%20

Jobs%20Census%202013.pdf. As of November 2013, the solar industry employed 142,698 workers.

4 See Energy Information Administration, Annual Coal Report, December 12, 2013. There are 180,000 jobs in the coal industry: 89,000 in mining, 

31,000 in transportation, and 60,000 in power generation. This is many fewer than the total jobs in the wind and solar industries (217,000), and the latter 

figure does not even include the thousands of additional jobs created in the clean energy sector from investments in energy efficiency. 

5 Brian Lee et al., Clean Currents v2: A Light at the End of the Tunnel, Research Roundtable, Goldman Sachs Equity Research, March 9, 2014. 

6 Coalition for Responsible Regulation v. EPA, 684 F. 3d 102 (D.C. Cir. 2012).

7 See D. Doniger, “Carbon Copy: Understanding What Is, and Is Not, At Stake in the Latest Supreme Court Climate Case,” NRDC Switchboard, 

switchboard.nrdc.org/blogs/ddoniger/carbon_copy_understanding_what.html. The Supreme Court denied petitions for certiorari on these questions in 

Utility Air Regulatory Group v. EPA, 134 S. Ct. 418 (Oct. 15, 2013), granting review only on a question relating to the Clean Air Act permitting provisions. 

The decision on the permitting question (expected by June 2014) will not affect the EPA’s authority to set standards for power plants under Section 111 

of the Act. 

8 www2.epa.gov/sites/production/files/2013-09/documents/20130923statequestions.pdf.

9 See http://www.nrdc.org/air/pollution-standards/files/system-based-pollution-standards-IB.pdf, blogs.law.harvard.edu/environmentallawprogram/

files/2013/03/The-Role-of-Energy-Efficiency-in-the-111d-Rule.pdf.

10 See D. Lashof and S. Yeh, Closing the Power Plant Carbon Pollution Loophole: Smart Ways the Clean Air Act Can Clean Up America’s Biggest 

Climate Polluters, “Chapter 10: The Economic Benefits of Emission Reductions,” pp. 30-32. Direct PM emission reductions are not modeled in this 

analysis.

11 The Future of U.S. Utility-Funded Energy Efficiency Programs: Projected Spending and Savings Through 2025, Lawrence Berkeley National 

Laboratory, January 2013.

12 Consortium for Energy Efficiency (CEE), www.cee1.org/annual-industry-reports.

13 The value of reducing carbon pollution is calculated in accordance with the Administrations’ Social Cost of Carbon (SCC) of $43 (2012$) per short 

ton in 2020, reflecting the 3% discount rate case. For more details on the Administration’s SCC, see its Technical Support Document, “Technical Update 

of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, available at: http://www.whitehouse.gov/sites/default/

files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf. The $62 (2012$) per short ton SCC is based on an 

independent estimate using the 2% discount rate case. See L.Johnson and C.Hope, The Social Cost of Carbon in U.S. Regulatory Impact Analyses: an 

Introduction and Critique,” Journal of Environmental Studies and Sciences (September 2012), available at: http://link.springer.com/article/10.1007%2

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