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Power Sector Transition: GHG Policy and Other Key Drivers

In June 2014, the Environmental Protection Agency (EPA) is expected to propose a new regulation for existing power plants under Section 111(d) of the Clean Air Act. As part of the Bipartisan Policy Center’s (BPC) ongoing efforts to explore the challenges and opportunities presented by this regulatory approach, BPC conducted an economic analysis exploring the impact of greenhouse gas (GHG) regulation of the power sector. The analysis does not predict, propose, or endorse a path forward for the EPA. Instead, it compares the impacts of a GHG policy under a range of assumptions, including a range of carbon dioxide (CO2) emission limitations.

The analysis:

  • highlights trends already underway in the power sector that have reduced CO2 emissions in recent years, such as flat demand growth and low natural gas prices;
  • and delves into how the power sector could respond to a 111(d) regulatory approach, depending on the level of stringency, the price of natural gas, the cost of demand side energy efficiency, and the future of the nuclear power fleet.

This effort serves as a bounding analysis of potential impacts and highlights trends and the relative importance of various factors. The magnitude of power sector impacts from a 111(d) regulation will largely depend on EPA and state interpretations of the rule, technical analysis and decisions, and market factors. As a result, BPC plans to release updated analysis after EPA’s release of the proposed rule.

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