How Stringent Are the US EPA’s Proposed Carbon Pollution Standards for New Power Plants?

In the absence of legislation for a US national climate policy, regulatory responsibility has fallen to the US Environmental Protection Agency (EPA). In March 2012, the EPA announced a proposed carbon pollution standard for new power plants. Then in September 2013, the EPA withdrew the proposal upon issuing a revision as part of President Obama’s Climate Action Plan. This article analyzes the stringency of the proposed emission standards for new electricity generating units relative to the emission rates of existing, recently constructed, and proposed units in the United States. No coal-fired units would come close to the emission targets unless there are future innovations in carbon capture and storage. While natural gas units designed to meet peak demand are effectively exempt, very few of them would comply on an annual basis. For the baseload natural gas units—that is, combined-cycle gas turbine units—we find that between 90 and 95 percent of the units that began operating in 2006 or later would already meet the proposed targets. Finally, we discuss differences among states regarding the characteristics of recently constructed and planned units as they relate to the proposed standards. (JEL: Q40, Q52, Q58)