A Performance Standards Approach to Reducing CO₂ Emissions from Electric Power Plants

The premise of this paper is that significant reductions in the carbon dioxide (CO₂ ) emissions from fossil fuel power plants are urgently needed as part of a national effort to address global climate change. This paper describes one of several policy approaches for reducing CO₂ emissions from U.S. electric power plants, namely, the application of performance standards limiting CO₂ emissions from electric power generators. In contrast to a cap-and-trade policy that limits the total annual mass emissions of CO₂ from a collection of sources, a performance standard may apply to individual generating units or to a collection of plants. It typically specifies a maximum allowable rate of emissions per unit of product (e.g., pounds of CO₂ per megawatt-hour of electricity generated or sold), or a required percentage reduction in potential emissions. For new fossil fuel power plants that begin construction after a specified date, a New Source Performance Standard (NSPS) could restrict CO₂ emissions to levels achievable only with CO₂ capture and storage (CCS). For existing power plants, emissions could be restricted in any of several ways, including: age-based performance standards for individual units; fleet-wide performance standards that vary over time (with flexibility for emissions trading); or performance standards applied to electricity sales from either coal plants or all plant types (also varying over time). Several types of CO₂ performance standards are evaluated and compared to a cap-and-trade policy based on nine criteria established under the Pew Center Coal Initiative. Maintaining a significant role for coal in the U.S. generating mix emerges as an especially important criterion in evaluating alternative policy options.