Climate Change Policies in the Northeast: Carbon Emission Caps and Energy Cost

ASHRAE Winter Meeting, New York City January 20, 2008

Presented by Bruce Biewald

www.synapse-energy.com | ©2008 Synapse Energy Economics Inc. All rights reserved.

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Climate change impacts in the Northeast (NYC example)

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Evolution of CO2 emissions policy in the Northeast:NEG/ECP

August 2001 New England Governors and Eastern Canadian Premiers “Climate Change Action Plan.”

• Short-term Goal: Reduce regional GHG emissions to 1990 emissions by 2010.

• Mid-term Goal: Reduce regional GHG emissions by at least 10% below 1990 emissions by 2020…

• Long-term Goal: Reduce regional GHG emissions sufficiently to eliminate any dangerous threat to the climate; current science suggests this will require reductions of 75-85% below current levels.

• Nine “action steps” dealing with inventories, planning to meet targets, public awareness, energy conservation, etc.

June 2007 Resolution reaffirming.

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Evolution of CO2 emissions policy in the Northeast: RGGI

• December 2005 seven governors signed the “Regional Greenhouse Gas Initiative” Memorandum of Understanding.

• RGGI is the first mandatory cap and trade program in the US for CO2. Emissions capped at current levels in 2009, and then reducing by 10% by 2019.

• August 2006. RGGI Staff Working Group issues final drafts of model rules.

• January 2007. Massachusetts and Rhode Island commit to join.

• April 2007. Maryland commits to join.

• December 2008. Deadline for final regulations.

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Proposals require deep CO2 emissions reductions

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CO2 emissions price forecasts

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MIT - Stabilize Emissions at 2008 LevelsMIT - Reduce Emissions by 50% by 2050MIT - Reduce Emissions by 80% by 2050Bingaman-Specter Safety ValveEIA S.280 - Fixed 30% OffsetsEIA S.280 Core ScenarioEIA S.280 - No Int'l OffsetsEIA S.280 - No New NuclearEIA S.280 - Unlimited OffsetsEIA S.280 - Ref. Nuclear & BiomassEIA S.280 - Ref. Nuclear & Biomass - No CCSEIA S.280 - Ref Nuclear, Biomass & LNG - No CCSEPA S.280 Core Scenario - ADAGE ModelEPA S.280 Senate Core Scenario - IGEM ModelEPA S.280 - Low Int'l ActionsEPA S.280 - Unlimited OffsetsEPA S.280 - No OffsetsEPA S.280 - Lower Nuclear GenerationEPA S.280 - No CCS TechnologySynapse LowSynapse MidSynapse HighXcel LowXcel MidXcel HighNew Mexico Public Regulation Commission - LowNew Mexico Public Regulation Commission - MidNew Mexico Public Regulation Commission HighMIT Future of Coal - LowMIT Future of Coal - High

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CO2 emissions: market prices and externality cost

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Power plants in the United States

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CO2 emission rates from fossil-fueled electric power generation

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15701661065Num Plants0.640.811.02MedianGasOilCoal

CO2 Emission Rates for US Plants (2005)P

erce

nt o

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nts

Tons CO2 per MWh

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Hourly fossil average CO2 emissions rates from the New England electric power system (2005)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan0.6

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Hourly Average Emissions Rate (HAER) in New England (NEWE)

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r

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5101520

0.6 0.65 0.7 0.75 0.8 0.85 0.9 0.95 1

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Hourly simulated wind generation for New York and New England

New England (Boston)

New York (Upstate: Binghampton)

New York (City)

Synthetic Wind Power (KW)

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Power plants in the Northeast

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U.S. generating capacity by vintage and fuel type

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U.S. generating capacity: cumulative by vintage and fuel type

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PlannedGeothermalPlanned Wind

PlannedBiomassPlannedHydroPlanned Oil

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Sources• Page 2 – Frumhoff, Peter, James McCarthy, Jerry Melillo, Susanne Moser, and

Donald Wuebbles. Confronting Climate Change in the U.S. Northeast.Northeast Climate Impacts Assessment / Union of Concerned Scientists: 2007. Map source: Google, Sanborn Map Company, Inc.

• Page 5 – World Resources Institute• Page 6 – Carbon price forecasts from:

– Johnston, Lucy, Ezra Hausman, Anna Sommer, Bruce Biewald, Tim Woolf, David Schlissel, Amy Roschelle, and David White. Climate Change and Power: Carbon Dioxide Emissions Costs in Electricity Resource Planning. Cambridge: Synapse Energy Economics, March 2007. http://www.synapse-energy.com/Downloads/SynapsePaper.2007-03.0.Climate-Change-and-Power.A0009.pdf

– Energy Information Administration. Supplement to Energy Market and Economic Impacts of S.280. November 2007. www.eia.doe.gov/oiaf/servicerpt/biv/index.html

– Ansolabehere, Stephen, et al. The Future of Nuclear Power: An Interdisciplinary MIT Study. Cambridge: Massachusetts Institute of Technology, 2003.

– Energy Information Administration. Energy Market and Economic Impacts of S. 280, the Climate Stewardship and Innovation Act of 2007. Washington, DC: July 2007.

– Paltsev, Sergey, John Reilly, Henry Jacoby, Angelo Gurgel, Gilbert Metcalf, Andrei Sokolov, and Jennifer Holak. Assessment of U.S. Cap-and-Trade Proposals. Cambridge: MIT Joint Program on the Science and Policy of Global Change, April 2007.

– U.S. Environmental Protection Agency, Office of Atmospheric Programs. EPA Analysis of the Climate Stewardship and Innovation Act of 2007: S. 280 in 110th Congress. Washington, DC: July 16, 2007.

– New Mexico Public Regulation Commission. Order Approving Recommended Decision and Adopting Standardized Carbon Emissions Costs for Integrated Resource Plans. Order, in Notice of Inquiry into Adoption of Staged Standardized Carbon Emissions Costs. July 2007.

– Xcel Energy. 2007 Resource Plan. December 14, 2007.

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Sources, continued

• Page 7 – Hornby, Rick, et al. Avoided Energy Supply Costs: 2007. Synapse Energy Economics.

• Page 8 – Map created by Synapse based on NERC ES&D data.• Page 9 – Based on EPA EGRID data.• Page 10 - Based on EPA ETS data.• Page 11 - Synapse• Page 12 - Map created by Synapse based on data from NERC ES&D.• Page 13 - Synapse calculations based on EIA-860 and NERC ES&D data.• Page 14 - Synapse calculations based on EIA-860 and NERC ES&D data