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Important Considerations for a “Utility Only” Climate Bill

A bill that strips the EPA of its authority or that sets a weak cap on greenhouse gas emissions could do more harm than good.

This post originally appeared on the National Journal Energy & Environment Blog.

With senators scrambling to find the right mix of policies that will get votes, one idea under consideration is a greenhouse gas reduction bill for the electric power sector –- so called “utility only ”-- rather than one that covers most sectors of the U.S. economy. If the Senate goes this route, there are important issues that must be considered in order to come anywhere close to cutting total emissions by 17 percent below 2005 levels by 2020, President Obama’s commitment to the international community, and ensuring a pathway to a near-zero economy by 2050. We also need to make sure such a program doesn’t undermine its environmental goals. Here are key points to keep in mind:

  • A utility-only emissions reduction cap alone will not be enough to reduce U.S. emissions to target levels. Emissions from electric power account for only about a third of total U.S. GHG emissions. We still need to address the other two-thirds. That’s why existing authorities’ ability to regulate GHGs, especially on uncapped sectors, must remain intact. We will also need to use new and existing complementary policies (such as appliance and vehicle standards) to achieve national emissions reductions goals.

  • The design of an electric power-only emissions trading program must be ambitious. According to the Electric Power Research Institute, the sector is capable of achieving reductions of 20-27 percent below 2005 levels by 2020 using existing and cutting edge technologies. Emissions reductions in the electric power sector are also cheap relative to other sectors. Moreover, it is imperative that any cap establishes a long-term pathway for reductions out to 2050. For these and other reasons, a strong cap is desirable, and achievable.

  • Cost-containment measures should be considered carefully. A price ceiling set at too low a level would miss opportunities to achieve reductions from under the electric power cap, where affordable abatement (GHG reduction) options are widely available. This would also inhibit the deployment of new clean energy technologies. Allowing large amounts of offsets for compliance would yield a similar outcome. It’s important to remember that the overall demand for offsets will be much lower under an electric power-only program as compared to an economy-wide approach. In addition, given that large uncapped sectors such as transportation and industry need to be subject to regulation to ensure adequate economy wide reductions, they should not be allowed to generate offsets under an electric power only cap. To do so would undermine one of the key principles of quality offsets – that they represent additional emission reductions.

A strong bill could jump start American investment and jobs in clean energy. If we don’t move forward with the economy-wide cap that is needed and instead implement a utility-only cap, we should tread cautiously. A bill that strips the EPA of its authority or that sets a weak cap on emissions could do more harm than good.

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