A Closer Look at Rate-Based Approaches

Posted on October 1, 2015 by Jessica Bell

Resources for the Future recently released a closer look at the economics of rate-based environmental regulations, The Environmental Effects of Clean Energy Innovations under Rate-Based Regulation. The researchers conclude through modeling that improvements in technology that reduce the cost of generation with lower CO2 emissions can actually increase the use of energy sources with higher emissions when the standard is fixed and binding. The paper focuses on three regulatory schemes in its analysis: renewable portfolio standards, emissions rate standards (such as those provided as an option by the Clean Power Plan), and fuel economy standards for passenger vehicles.

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Putting a Price on Carbon

Posted on September 29, 2015 by Anjali Patel

There are many schools of thought regarding which policies will be most effective in reducing carbon emissions. One of the more widely discussed methods is to monetize, or put a price on, carbon emissions. Potential pricing mechanisms include carbon taxes and emission trading systems (e.g. auctions). On September 20, the World Bank Group and its partners released two reports related to carbon pricing:

State and Trends of Carbon Pricing 2015, prepared jointly by the World Bank and Ecofys, provides an annual update on the use of carbon pricing mechanisms around the world. The report notes that the number of carbon pricing instruments that have been implemented or are scheduled to be implemented has almost doubled since 2012. It also notes that currently 39 countries and 23 regions, states, and local governments have implemented a carbon pricing mechanism and that these pricing instruments collectively cover about 12% of annual global greenhouse emissions.

The FASTER Principles for Successful Carbon Pricing: An Approach Based on Initial Experience was prepared jointly by the World Bank and the Organization for Economic Cooperation and Development (OECD). This report lays out six principles, called the FASTER principles, for governments and businesses to consider when developing carbon pricing mechanisms, and provides case studies of how these principles have been implemented. The principles are: Fairness, Alignment with Existing Policies, Stability and Predictability, Transparency, Efficiency and Cost-effectiveness, and Reliability and Environmental Integrity.

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CPP Briefing Scheduled for Tuesday

Posted on September 28, 2015 by Jessica Bell

Tomorrow, Tuesday September 29, 2015, the Environmental and Energy Study Institute (EESI) will hold a briefing about how states plan to comply with the Clean Power Plan. The speakers include Joe Goffman (EPA), Bill Becker (National Association of Clean Air Agencies), David Terry (National Association of State Energy Officials), and Charles Gray (National Association of Regulatory Utility Commissioners).

The briefing is scheduled for 1:00-2:30 P.M. Eastern in the Cannon House Office Building (Room 334) and will be live webcast. This event is free, but EESI suggests registering in advance if you plan to attend in person.

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Q&A: The Congressional Review Act

Posted on September 24, 2015 by Jessica Bell

The Congressional Review Act (CRA) requires federal agencies to submit certain final rules to both houses of Congress (and to the Government Accountability Office) before the rule can take effect. Congress has the opportunity to review and may prevent a rule from going into—or continuing in—effect.

What rules are subject to the CRA’s requirements?

“Major rules,” defined in 5 U.S.C. § 804, are subject to the delayed effective date requirement of the CRA and may not take effect until 60 days after Congress receives the report on the rule or the rule is published in the Federal Register. Whether a rule is “major” is an economic issue. The Office of Information and Regulatory Affairs makes this determination, taking several statutory factors into account, including the potential for significant adverse effects on competition or employment, and the potential for an annual effect on the economy of $100 million or more. Agencies must submit nonmajor rules to Congress as well, but these rules are not subject to the delayed effective date provision.

Is the Clean Power Plan subject to the CRA?

Yes. EPA has stated that the final CPP is subject to the CRA as a major rule.

Are the Carbon Pollution Standards for New Power Plants subject to the CRA?

Yes. Although the new source performance standards (NSPS) for new power plants are not a “major rule” as defined in the CRA, the final rule is subject to congressional review under the CRA. However, it will not be subject to the delayed effective date provision.

What does Congress do under the CRA?

Congress can pass a joint resolution of disapproval of a final rule. This could prevent a rule from taking effect (or from continuing in effect). If a rule does not take effect (or continue in effect) under the CRA, then the agency may not issue a new rule that is “substantially the same” as the disapproved rule, unless the new rule is specifically authorized by a subsequent statute, under 5 U.S.C. § 801(b)(2).

What if Congress passes a resolution to block the CPP or the NSPS?

If Congress passes a joint resolution that would prevent the CPP from taking effect or prevent the NSPS from continuing in effect, President Obama would still have to sign the legislation for it to become law. Since President Obama directed EPA to develop these rules, he would likely veto any such resolution. It would require a two-thirds vote of each house of Congress to override the veto and block the rule under the CRA.

What are the chances a rule will be overturned under the CRA?

Since the CRA was enacted in 1996, Congress has only disapproved of one rule, the Department of Labor rule on ergonomics. Overturning a rule under the CRA entails significant congressional action. Although the CRA provides for an expedited legislative process for considering joint resolutions of disapproval, Presidential sign-off on the disapproval (or a veto override) is often unlikely in these cases.

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Modeling the Clean Power Plan

Posted on September 22, 2015 by Anjali Patel

The Clean Power Plan’s implementation costs and impact on the nation’s electric portfolio depend largely on the compliance mechanisms that states will choose to implement (or in the case of states who say no, that EPA will choose to implement). Nevertheless, there are several options one can use to model potential costs and impacts.

In developing the rule, EPA used the Integrated Planning Model (IPM) v. 5.15 to analyze CPP costs and the potential for the electric sector to comply with each of EPA’s proposed building blocks.  EPA stated that IPM “is a multi-regional, dynamic, deterministic linear programming model of the U.S. electric power sector that the EPA has used for over two decades to evaluate the economic and emission impacts of prospective environmental policies.” More information about EPA’s IPM analysis and the modeling assumptions it used to conduct the analysis can be found here.

Colorado State University, through its Western States Clean Power Plan Initiative, has developed an inventory of various CPP models that is available here.  The inventory includes a link to each modeling tool, a description of potential inputs and the expected outputs of the model, and a note on whether the model has been updated since the release of the CPP.

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