Full Title: 2015 Carbon Dioxide Price Forecast
Author(s): Patrick Luckow, Elizabeth A. Stanton, Spencer Fields, Bruce Biewald, Sarah Jackson, Jeremy Fisher, and Rachel Wilson
Publisher(s): Synapse Energy Economics Inc.
Publication Date: 03/2015

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Description (excerpt):

Prudent and reasonable planning requires electric utilities and other stakeholders in carbon‐intensive industries to use a reasonable estimate of the future price of carbon dioxide (CO2) emissions when evaluating resource investment decisions with multi‐decade lifetimes. However, forecasting a CO2 price can be difficult. The federal government is moving forward with regulations to limit CO2 emissions from new and existing power plants, but a regulation is not yet finalized. To make sound investment decisions, utilities must consider existing, proposed, and expected future regulations.

Although the lack of a defined policy setting a price on carbon poses a challenge in CO2 price forecasting, an assumption that there will be no CO2 price in the long run is not, in our view, reasonable. The scientific basis for attributing climatic changes to human‐driven greenhouse gas emissions is irrefutable, as are the type and scale of damages expected to both infrastructure and ecosystems. The need for a comprehensive U.S. effort to reduce greenhouse gas emissions is clear. While the Clean Power Plan proposed by the U.S. Environmental Protection Agency (EPA) in June 2014 does not specify a price on carbon, any policy requiring or leading to greenhouse gas emission reductions in the electric sector will result in higher costs to the generating resources that emit CO2.

This 2015 report updates Synapse’s Spring 2014 CO2 Price Report with the most recent information on federal regulatory measures, state and regional climate policies, and utility CO2 price forecasts, and provides an updated CO2 price forecast. 1 The Synapse CO2 price forecast is designed to provide a reasonable range of price estimates for use in utility integrated resource planning (IRP) and other electricity resource planning analyses. We have reviewed and updated our summary of the key regulatory developments and data from utility IRPs, which are frequently changing and crucial to understanding the impetus for a carbon price forecast and the number of utilities that have adopted one for planning purposes.