ANALYSIS: Proposed EPA rule on power sector emissions gets closer to EU climate ambition
By Gerard Wynn
A proposed U.S. cap on power sector carbon emissions is getting closer to equivalent European Union targets, shows a comparison of carbon prices and projected emissions.
Last week, the U.S. Environmental Protection Agency (EPA) proposed a new ruling, under its Clean Power Plan, to cut carbon pollution from the power sector by 30% by 2030, compared with 2005 levels.
The announcement came too late for the Department of Energy’s “Annual Energy Outlook” this year, published in May.
However, the department’s statistics service, the Energy Information Administration (EIA), drew attention on Monday to an analysis of similar climate policies, made in its Annual Energy Outlook 2014.
The EIA analysis showed how the EPA’s proposed ruling was similar to the impact of a $10 carbon price.
That compares with EU carbon prices presently around €5.5 ($7.4), which are not expected to rise above €10 this decade.
According to such a comparison, the U.S. policy is comparable with the EU, but a comparison of projected emissions cuts suggests that the EU is more ambitious.
The European Commission has proposed a halving of power sector emissions in 2030, also compared with 2005 levels, some way beyond the EPA’s proposed 30% cut.
The EU has long said that it is the world leader on climate change action, with some justification, given that it has by far the world’s biggest cap and trade scheme, and has binding national targets for the deployment of renewable energy.
But EU carbon prices have plunged since the financial crisis, while U.S. carbon emissions have fallen as a result of a shift to gas from coal.
Carbon price
The EPA proposed rule would target a 30% cut in power sector emissions, to 1.7 billion tonnes in 2030, from 2.4 billion tonnes in 2005.
In its Annual Energy Outlook 2014, the EIA considered the impact of two low carbon policies: a carbon price of $10 and of $25 per tonne of CO2 from 2015.
Each was assumed to rise by 5% annually thereafter, to $80 and $200 respectively in 2030.
Under an initial $10 carbon price, CO2 emissions would fall to 1.8 billion tonnes in the power sector in 2030, the EIA showed. That was equivalent to a 25% cut versus 2005 levels.
Under a $25 carbon price, emissions would fall to just 0.8 billion tonnes. That was equivalent to a 66% cut.
The EPA’s proposed 30% cut is therefore equivalent to a little more than the impact of a $10 carbon price, according to the EIA’s analysis.
That compares with EU carbon prices ranging in the past 30 days between €4.7 and €5.5.
Emissions trajectory
Alternatively, EU and US climate policies can be compared according to proposed emissions cuts in the power sector.
The proposed EPA rule is for a 30% cut in power sector emissions, against 2005 levels.
The EU, meanwhile, proposed in January a “policy framework for climate and energy”, including targets in 2030.
Here the EU was more ambitious than the United States, especially regarding cuts in the power sector.
The European Commission proposed, in general, a 40% cut in greenhouse gas emissions across the entire EU, in 2030 compared with 1990 levels.
Within that overall target, the EU proposed a cut in greenhouse gas emissions of 43% across industrial sectors in its cap and trade scheme, including the power sector, compared with 2005 levels.
The brunt of the cuts would fall disproportionately on the power sector, however, with proposed cuts of about 50%, compared with 2005 levels.
The EU’s proposed target by this measure, therefore, is some way more ambitious than the EPA’s.
In addition, an analysis of power sector emissions to date, from 2005 to 2013, show that the United States has already gone a little further towards its 2030 goal.
US power sector emissions last year were 15% below 2005 levels, compared with the EU’s 12% below.
