WASHINGTON—Power plants have to cut carbon dioxide and other emissions under a new federal environmental plan, but states have to decide how they will allocate emission allowances to local energy companies — and their decisions will have long-range infrastructure implications, said environment and energy experts at the Bipartisan Policy Center on Monday.
The Clean Power Plan was announced in August and intends to reduce pollution from existing power plants by 32 percent in 2030 compared with 2005 levels. Under the plan, states have the freedom to decide how they will reach those goals, but that also means sorting through the consequences of myriad factors in handling their allowances, said panelist Bruce Phillips.
“This is an opportunity for state policymakers to shape the way the Clean Power Plan is implemented in their state and the impact it has on their constituencies,” said Phillips, director of the energy consulting firm the Northbridge Group.
The panelists, all experts from the different energy sectors, discussed the impacts on state economies and power infrastructures of mass-based approaches – based on the amount of pollutants a plant produces – compared with rate-based approaches – based on the rate at which a plant produces pollution versus energy. States can decide how to allocate emission allowances, which give energy producers the right to release a given amount of emission.
States using the mass approach can either give away their allowances to the companies or auction them, said Bruce Wilcoxon, director of environmental affairs at electric utility company Dynegy.
Philip Wallach, a senior fellow at the Brookings Institution, said each option affects companies differently.
“If you allocate without auction, it’s a huge giveaway to some power companies. They’re gaining this new property right they can sell on the market without having earned it,” said Wallach. “If you auction them off, certain companies will be saying they’ll be put out of business, which causes loss of jobs and threats to the reliability of the grid.”
A big benefit of the federal plan is that by putting a price on carbon dioxide emissions, it creates a new source of economic value, said Dallas Burtraw, a senior fellow with Resources for the Future, a natural resources think tank.
“The state is in a situation of deciding now what its energy infrastructure is going to look like in the future,” said Burtraw. “It is a turning point in the electricity sector and for the economy.”