What the EPA’s clean power plan looks like in practice

Minnesota wind farm
A renewable standard in Minnesota has led to a 900 per cent increase in the amount of wind energy in the state from 2000 to 2010, an achievement that is part of a growing list among US states. Image: Shutterstock

Something reassuring happened Monday after EPA Administrator Gina McCarthy unveiled the Obama administration’s proposed Clean Power Plan, arguably the most important step the US has taken in the fight against global climate change: The S&P 500 and Dow Jones stock indexes rose to record highs. I’ll take that as a sign investors aren’t buying the old scare tactic that federal climate action is bad for the economy. The public, too, understands that we can’t afford not to do this: More than two-thirds of Americans support carbon pollution limits on power plants, according to a new Washington Post poll. The days when lobbyists could kill climate action by trotting out bogus gloom-and-doom economic studies may finally be coming to an end.

Attitudes have changed since 2010, the last time Washington debated serious climate action, and not only because most of us have connected the dots between climate change and the extreme weather events that ravage our communities. Americans — and American companies — have also connected the dots between clean energy and economic growth, with 87 per cent last year saying that developing clean energy should be a priority for the President and Congress.

Renewables are growing faster than any other kind of of power generation, with more solar panels installed in the US over the last 18 months than the previous 30 years combined. The cost of solar and wind are falling rapidly; in fact, a few days before the new EPA announcement, Xcel Energy, which provides power to the American heartland, revealed that it was acquiring extensive wind and solar assets, “all at prices below fossil fuel alternatives.” Policies such as the new EPA proposal, which would establish firm limits on carbon pollution from power plants, will only help accelerate these much-needed market innovations.

The beauty of the EPA framework is that, while the limits on pollution are firm, the paths to reaching the targets are flexible. States and power companies can design their own way to compliance…

There will be time to debate whether the EPA’s proposed targets are sufficiently ambitious. After all, the power sector is already halfway toward meeting its 2030 target of 30% below 2005 CO2 emissions levels. But the beauty of the EPA framework is that, while the limits on pollution are firm, the paths to reaching the targets are flexible. States and power companies can design their own way to compliance using a mix of onsite operational improvements and “beyond the fence” innovations, such as increased reliance on renewable energy sources, low-cost energy efficiency measures, and demand response, which compensates electricity customers for conserving energy.

These solutions aren’t in any way a mystery: They are market-tested, cost-effective, and proven to work, because many states are already doing what the EPA will require. Their success is evidence that the country is ready to meet and beat the targets laid out in the proposed standards.

Fifteen of these front-runner states wrote to the EPA at the end of last year detailing the health and economic benefits they’d achieved. All told, they slashed carbon pollution from electricity by 20 per cent from 2005 to 2011, led by Washington, which saw a 46 per cent reduction during that period.

California is also delivering some big results. The Golden State’s energy efficiency programs have saved its residents $74 billion over the last few decades and avoided the construction of more than 30 power plants. The state has a successful cap and trade program covering power plant pollution and a 33 per cent-by-2020 renewable energy mandate, the most stringent of the 29 state renewable standards currently on the books.

Meanwhile, in the northeast, the nine-state Regional Greenhouse Gas Initiative (RGGI) has been operating a cap and trade system covering power plants for several years. The program delivered $1.6 billion in net economic benefit between 2009 and 2011 and is on course to cut region-wide power plant carbon pollution by half from 2005 to 2020. The RGGI states are so pleased with their own success they have emphatically asked the EPA to pave the way for other states to join RGGI or to embark on similar regional efforts.

Low-carbon leadership isn’t just confined to the coasts. Illinois, a state heavily dependent on coal for electricity, has aggressive energy efficiency mandates that require utilities to cut energy use by 2 per cent annually by 2015, as well as a 25 per cent-by-2025 renewables standard has been a boon for the state’s wind industry. A similar renewable standard in Minnesota led to a 900 per cent increase in the amount of wind energy in the state from 2000 to 2010. In Colorado, the state renewable energy mandate was bumped up from 20 per cent to 30 per cent in 2010. And the US national champion for wind production? Texas, thanks in part to a renewables standard signed in 1999 by then-Governor George W. Bush.

The most exciting action here is coming from dynamic American companies that are developing energy products and services that save consumers money and give them new options. Google’s Nest thermostat, for example, lets homeowners control their appliances remotely to reduce peak load and save money. SolarCity’s groundbreaking solar leasing approach, and SCIenergy’s cost-cutting energy efficiency services for commercial customers, are both changing the energy cost equation.

Since the days of Thomas Edison, the power sector has had but one business model: a power company burned fuel to create electricity, then sent it along inefficient wires to the customers. Today that model is giving way to one in which power and information flow in both directions, and customers not only receive but also produce and store electricity. Given the sheer scale of our energy system, such change doesn’t happen overnight. But the EPA’s Clean Power Plan is focused on where America is going, and designed to help us get there faster.

Eric Pooley, an award-winning journalist, is senior vice president for strategy and communications at the Environmental Defense Fund, and author of The Climate War: True Believers, Power Brokers, and the Fight to Save the Earth. This post originally appeared in The Harvard Business Review blog network.

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