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The Power of Policy

All indicators point to a significant shift in national energy policy following the election of Donald Trump for President of the United States. Two of the more dramatic changes would be for the U.S. to pull out of the Paris Agreement on global greenhouse gas emissions and to rescind the Clean Power Plan (CPP).

To withdraw from Paris, the U.S. could give 1-year notice beginning 3 years after it went into effect. In other words, the earliest a withdrawal could occur would be November 4, 2020. Alternatively, the U.S. could withdraw from the parent agreement to Paris, the United Nations Framework Convention on Climate Change, with 1-year notice. This would automatically withdraw the U.S. from Paris. Pulling out of the UNFCCC would be the quick way, but may also be less politically palatable, as the UNFCCC forms the basis of all international cooperation on climate. North Korea is currently the only nation that is not a party to the UNFCCC.

Perhaps more importantly, we must remember that the Paris agreement is based on country-by-country, voluntary Nationally Determined Contributions (NDCs). The CPP was set to be a main piece of the U.S.’s NDC to reduce its greenhouse gas emissions. So pulling out of Paris but implementing the CPP would have more of a political impact than a direct environmental impact.

The CPP is really where the rubber meets the road on the U.S. commitment to climate change with respect to the electric power sector. The rule aims to slash CO2 emissions from the nation’s power plants by 32% from 2005 levels by 2030. Logistically, it can be clawed back any number of ways:

  • Voluntary remand from the Trump administration
  • A rejection of the rule by the D.C. Circuit Court without appeal
  • A rejection by the U.S. Supreme Court upon appeal or petitioning
  • Federal legislation

Should the CPP survive each of these hurdles, the Trump Administration would have to rescind the rule through a rulemaking, replete with public comment.

But if we assume the CPP is abandoned, how might the power sector shape up? In the absence of a strong national policy for renewable electricity, three other forces that could fill the void are state policy, technology, and our old friend the free market. State policy has been driving renewable electricity adoption for some time now, with renewable portfolio standards in place in 29 states (Database for State Incentives on Renewables and Efficiency).  According to CSU’s Center for the New Energy Economy, 7 bills related to renewable portfolio standards have been enacted so far in 2016, and none rolled back an RPS. In fact, Oregon and Rhode Island both significantly increased their RPSs. California and Maryland enacted bills requiring statewide greenhouse gas emission reductions.

Technological developments that could affect renewable power production include smarter grids that more readily enable real-time integration of variable wind and solar generation as well as cheaper battery storage. And of course national policy, state policy, and technological developments all get played out in the power market. With natural gas prices expected to remain low, it should continue to displace coal. Recent prices for utility scale wind and solar remain competitive with natural gas, so they should also continue to grow. In 2015, wind and solar made up 2/3rds of all new electric power generation in the U.S.

Still other factors can influence our nation’s electricity mix, such as public engagement and trade tariffs that could hike prices on products like Chinese solar panels. With this many factors in play, the future of carbon reduction in the U.S. power sector is impossible to predict. But there are reasons to believe that there may be a bumpy but unmistakable continued path to lower emissions despite the absence of a national energy policy intended to do so.

P.S. A neat tool for playing around with the carbon (and other) impacts of various energy policies and market changes is the National Renewable Energy Laboratory’s “2016 Standard Scenarios Results Viewer”. Even the model’s “High Cost Renewable Energy” scenario” predicts a 31% carbon reduction from 2010 levels by 2030. Note that its “Mid-case Scenario” assumes implementation of the Clean Power Plan.

References:

  • “Legal Note: Could a future president reverse U.S. approval of the Paris agreement?”. Bodansky and O’Connor. Arizona State University.
  • “Rule’s demise looms, but how Trump will ax it remains unclear”. E&E News, 11/9/2016.

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