In response to a request from the Senate Committee on Energy and Natural Resources, the Energy Information Administration (EIA) has released its Analysis of Impacts of the Clean Energy Standard Act of 2012. Committee chairman Jeff Bingaman (D-NM), introduced the Act, which aims to increase low-carbon power generation in the U.S. by more than 80% by 2035 utilizing a market-based system of tradable energy credits.
Beginning in 2015, utilities would be required to sell an increasing percentage of energy from clean energy sources. Utilities could generate electricity from clean sources to meet the Act’s requirements, or could purchase clean energy credits from other market participants. Electricity generators would be assigned credits corresponding to their emissions, with low-carbon sources receiving greater numbers of credits. Utilities that do not or cannot generate electricity from qualified sources or purchase credits may also comply by paying the “alternative compliance payment.” 75% of those payments would go towards the implementation of state’s energy efficiency plans. The bill would not put a limit on overall U.S. emissions or on total emissions from electric generation.
The EIA’s analysis found that the Act would reduce electric power sector CO2 emissions to a level 44% below EIA’s 2035 business-as-usual scenario. It would also lead to an 18% increase in average electric prices—although according to the EIA, the price increase would not exceed 5% until after 2025. Coal-fired generation would fall 54% through 2035, with natural gas generation largely offsetting the difference up to 2020, and nuclear and hydro taking on a larger role beyond 2020.
Is an 18% increase in electricity prices an acceptable trade-off for a 44% drop in emissions? Would a policy like this make the U.S. more, or less, resilient and flexible? Do you have any reason to believe that the EIA analysis over- or understates the Act’s impacts?