Full Title: A Market-based Regional Approach to Valuing and Reducing GHG Emissions from Power Sector
Author(s): Judy Chang, Jurgen Weiss, PhD. Yingxia Yang, PhD.
Publisher(s): The Brattle Group
Publication Date: 4/2014

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This discussion paper outlines a proposal for a regional, market-based approach as a compliance option for the EPA’s forthcoming rule under Section 111(d) of the Clean Air Act to regulate greenhouse gas emissions from existing power generating sources (“Existing Source Rule”).

The proposed approach would allow states to include in their State Implementation Plans (SIPs) used to meet Section 111(d) a commitment to meeting the regional targets as a way to comply with the greenhouse gas emission reduction targets for generation resources that participate in the proposed approach. To gain the EPA’s acceptance of this approach, and recognizing that attaining agreement among multiple states on appropriate carbon prices will not be simple, we propose that an independent entity facilitate the participating states’ efforts to agree on an initial set of carbon prices estimated to be sufficient to achieve required emissions reductions as well as on a mechanism for adjusting carbon prices should the actual path of emissions diverge from the path expected from the initial price path.