The Wall Street Journal yesterday criticized EPA’s recent proposed standards for carbon emissions from existing power plants on the grounds that they will have a large disproportionate impact across states. That may or may not be the case, but figuring out which states have a greater burden is not as simple as the WSJ implies. The Journal looks at each state’s carbon intensity – the tons of carbon it emits for each unit of energy produced – and claims that those states with high carbon intensity (mostly heartland states dependent on coal) will have a much greater burden than those with lower carbon intensity (mostly coastal and, the WSJ claims not coincidentally, liberal states).
That claim might be true if EPA set a uniform carbon intensity standard for the whole country. But the agency did not do so. Instead, it calculated a unique carbon intensity target for each state, based on four “building blocks”, each corresponding to different emissions-cutting opportunities EPA estimates is available in the state. These targets vary widely: for example, during the initial compliance period, Montana’s target is more than seven times greater (that is, less stringent) than Washington’s. This does not mean that Montana will have an easier time meeting its targets – it may or may not, depending on how accurate EPA’s estimates are of the opportunities available to each state, the relative cost of those opportunities, and whether states have other emissions-cutting opportunities that EPA did not consider. You simply can’t tell from EPA’s target numbers, much less from a simple list of states’ carbon intensity, which states will have the greatest burden (either total or per-capita). Figuring that out will take careful modeling and analysis (working on it at RFF). Brad Plumer at Vox makes a similar point in a good post with more details.
To be fair to the WSJ, they admit that the carbon intensity figures they point to are not "a perfect proxy" for states' burden under EPA's proposal. But they nevertheless claim the figures are "a good indicator of which states will have to adjust the most". That's not true - or at least we can't conclude that it is based on carbon intensity rankings alone.
Moreover, even if states do have differential burdens (in economic terms, different marginal abatement costs), the EPA proposal allows them to form multistate groups and trade with each other. Doing so will narrow the gap between state burdens, and potentially equalize them. But it will be up to states whether to join together. In this sense and many others, states’ burden will depend more on the policies they choose than on the targets EPA sets.
In short, it’s too soon to tell who the “winners” and “losers” among the states are. We will know more in the coming weeks and months, but there will be a lot of uncertainty until the program is in place in 2020 – a lot can change between now and then. And if states trade, the winners and losers on paper may not matter as much.
Another small point - the WSJ piece talks briefly about "stranded assets". I don't like the term, partly because it's not well defined, and partly because I read it as either an appeal to the attraction of the sunk-cost fallacy or an attempt to ignore externalities (or both). But here the term just pops up in the lede, so that's a point for another day.
