Host Daniel Raimi talks with RFF Research Associate Amelia Keyes about her recent research on the Trump administration's Affordable Clean Energy (ACE) rule. Amelia and several colleagues have estimated the effect of the rule on emissions of carbon dioxide, sulfur dioxide, and nitrous oxide, finding that ACE could actually increase these emissions rather than reduce them.
Listen to the Podcast
Top of the Stack
References and recommendations made during the podcast:
- "Mapping America’s Wicked Weather and Deadly Disasters" by Tim Meko, The Washington Post
- Mothers of Invention
The Full Transcript
Daniel Raimi: Hello and welcome to Resources Radio, a weekly podcast from Resources for the Future. I'm your host Daniel Raimi. This week, we talk with RFF research associate, Amelia Keyes, about her recent research on the Trump Administration's Affordable Clean Energy, or ACE Rule. Amelia and several colleagues have estimated the effect of the rule on emissions of carbon dioxide, sulfur dioxide, and nitrous oxide, finding that ACE could actually increase these emissions rather than reduce them. How is that possible? Stay with us and find out.
All right, Amelia Keyes, my colleague from Resources for the Future, thank you so much for joining us today on Resources Radio.
Amelia Keyes: Thanks for having me, I'm really excited to be here.
Daniel Raimi: Yeah, it's great to have you. So we're going to talk today about a recent paper that you wrote with some co-authors on EPA's Affordable Clean Energy Rule, or the ACE Rule. But, before we get into that topic, we always ask folks how they got interested in energy and environmental policy in the first place, so can you tell us about that?
Amelia Keyes: So yeah, I grew up in Maine, and I spent my childhood on the ocean and hiking around the mountains in Maine and New Hampshire with my family. I don't know about how other generations experience this, but as a millennial, for me, climate change was always a well-known phenomenon from when I was a child. So I grew up with this really urgent feeling that our society just wasn't sustainable, and the places that I really loved growing up are at risk. I always felt like I needed to do something about that. But, I knew I didn't want to be a scientist, so in college, I discovered this really awesome discipline called economics where I could study social issues, but also address environmental problems. Then, after college, I had the opportunity to work for the Council of Economic Advisors at the White House under the Obama Administration and work on environmental policy there. That just really solidified my excitement about solving policy problems, and specifically doing that in environmental policy, bringing together my values from growing up and then my career interests.
Daniel Raimi: Yeah, that's fascinating, and I identify with that somewhat. I'm sort of right on the edge between the millennial generation and the one before, which I guess is what, Generation X or something?
Amelia Keyes: Yeah.
Daniel Raimi: So climate change has also been on the periphery for me, although I am, I think, about 10 years older than you or something like that.
Amelia Keyes: Right.
Daniel Raimi: So thanks for making me feel old at the outset of the podcast.
Amelia Keyes: Sorry about that.
Daniel Raimi: Let's get into the topic at hand, which is the article that you wrote with a variety of co-authors called, “The Affordable and Clean Energy Rule and the Impact of Emissions Rebound on Carbon Dioxide and Criteria Air Pollutant Emissions,” which is in the journal Environmental Research Letters. So we're going to break down sort of that long dense title and talk about each of the components of it.
But, first, I want to give a little background, just sort of policy background, for those who haven't followed this issue too closely. We've talked a lot about carbon pricing on this podcast. But, as I think we all know, carbon pricing does not exist at the US federal level. However, the Supreme Court, in 2007 ruled that the EPA is legally obligated to regulate carbon dioxide emissions under the Clean Air Act. So we're going to talk about how the Trump Administration is proposing to do that under the EPA. We're going to look at this Affordable Clean Energy Rule, which we might call the ACE Rule. It's essentially the replacement of the Obama Administration's Clean Power Plant, which never actually went into effect, again, because of court rulings.
So the ACE targets something called heat rate improvements at coal-fired power plants. Can you start us off with an explanation of, what is a heat rate, and what does it have to do with carbon dioxide emissions?
Amelia Keyes: Yeah. So to start off, I think it might be helpful to share a bit more background about the differences between the CPP and ACE?
Daniel Raimi: Yeah, great.
Amelia Keyes: There's some legal context here that I think is really interesting and important to understand why the EPA is doing what they're doing right now. As you mentioned, the EPA is legally obligated to regulate carbon emissions from major emissions sources, which includes power plants, and that's what the CPP was designed to do originally. The CPP was fulfilling EPA's legal obligation, but it also was one of the Obama Administration's hallmark climate policies.
The biggest difference between ACE and CPP comes from the fact that, in comparison to the Obama EPA, Trump's EPA takes a different interpretation of what the EPA's authority is actually, to regular carbon in the power sector. So while the CPP took what we call a systems-based approach to addressing emissions in the power sector, which basically means that it set emissions reduction targets for states and allowed the states to meet their targets with a combination of different methods. So those methods included, on the one hand, making coal plants more efficient, but also a whole range of other options, like switching to low emissions power sources, like natural gas, and using more renewables. It also included, beyond the generation side, improving energy efficiency to reduce demand for electricity.
So the CPP really was a systems-wide approach that aimed to take advantage of any resources available in the electricity sector to reduce carbon emissions. On the other hand, the Trump EPA argues that the systems-based approach that the Obama EPA undertook with the CPP exceeds their authority under the Clean Air Act. And, the Trump Administration believes that they're only authorized to regulate emissions at major emitting power plants. The term that is often used for that is, inside the fence line. So the EPA contends that they are not allowed to require reductions from beyond the fence line. An example of a beyond the fence line measure is switching from coal generation to renewables or natural gas. So that really restricts the types of methods that the EPA can take to reduce emissions in the power sector. That gets us to the question about heat rates.
One of the ways to get coal plants to reduce their emissions is to require them to operate more efficiently. And, by efficient, I mean getting the same amount of electricity generation with less carbon emissions. The heat rate is basically a measure of a coal plant's efficiency. When a coal plant improves its heat rate, it reduces the amount of fuel input that it needs to generate a kilowatt hour of electricity, and it becomes more efficient.
Daniel Raimi: Yeah, so a higher heat rate is more efficient, and a lower heat rate is less efficient.
Amelia Keyes: Exactly. So ACE identifies heat rate improvements as the way to reduce emissions at coal plants, and that's the only strategy that they're implementing to reduce carbon in the power sector.
Daniel Raimi: Great. You and your co-authors in this study, you focus on something called an emissions rebound that takes place because of the structure of this rule. Can you tell us what you mean by an emissions rebound?
Amelia Keyes: Yeah. So I just want to interlude for a second to say that this analysis that I did with co-authors was a result of a collaboration between myself and Dallas Burtraw, RFF, and then a team of researchers at Harvard, Syracuse, and Boston University, who are experts on environmental policy, air quality, and public health.
To answer your question, an emissions rebound is a really good example of the kind of adverse policy outcome that economists always like to look for. The idea of an emissions rebound is that when a coal plant improves its heat rate and becomes more efficient, it's not only reducing its emissions, but it's also potentially reducing its operating cost. That actually makes it more competitive in electricity markets, and as a result of becoming more competitive, it might operate more often, and in some cases, even delay its retirement. Higher generation dries up carbon emissions, so the rebound somewhat offsets the emissions reductions that would've occurred if a plant became more efficient, but held its generation constant. The emissions rebound effect is a really common consequence of policies that focus on improving efficiency and don't directly regulate the volume of emissions coming from a plant.
Daniel Raimi: We see this in things like vehicle efficient standards, and home heating efficiency standards, and then there's variety of research on this topic, trying to measure how big is this rebound effect.
Amelia Keyes: Exactly. So it's a very well-documented phenomenon in the economics literature. Our paper specifically, shows that the rebound effect is expected to play a big role in minimizing the carbon dioxide reductions from ACE.
Daniel Raimi: So before I ask you about the magnitude of the effects that you find, I want to follow up on that question that might occur to some, especially economists. The question would be, if a coal plant can become more efficient and become more competitive in power markets, why isn't it doing that already, and why would a regulation incentivize them to be more efficient than they already might be, if they were smart about their business?
Amelia Keyes: Yeah. That's a really good question. I think there are a number of different answers to that. But, one is that entities often don't behave in the rational way that economists would expect them to act. Another is that the fixed costs of making those investments are high enough that they may not, from an economic perspective, be worth it to those companies. But, once they're required to make them, it does end up reducing their operating costs.
Daniel Raimi: Right, yeah, so it reduces ... So it could increase their capital costs that they have to pay off over the long term, but their marginal cost, which is what determines the price that they bid into the market for, that could actually be lower.
Amelia Keyes: Right, exactly. And, electricity is a pretty highly regulated market, so there are a lot of regulatory processes that affect decisions in a way that wouldn't come into play in a perfectly free market.
Daniel Raimi: Right, sure. Okay, great. So let's talk about what you've found then. So when you incorporate the rebound effect, if I read the paper correctly, you find that about 30 percent of coal plants end up producing more carbon dioxide than they would if ACE didn't exist. I think you've already explained kind of the concept of how that happens. But, do you want to elaborate on that finding a little bit?
Amelia Keyes: Yeah. Well, Daniel, you mentioned that the rebound effect is pretty commonly observed in a lot of different policies. In most of those contexts, the emissions rebound effect usually just makes the emissions reductions resulting from the policies smaller. But the surprising result that we found in our analysis of ACE is that the emissions rebound may be strong enough in this case to cause absolute increases in emissions at a lot of coal plants. So that's a pretty, from what we know, a pretty uncommon finding from the rebound effect. A lot of people are actually shocked to realize that when we're talking about emissions increases at coal plants, we're comparing the baseline as no policy at all. So compared to no policy at all, we actually see 28 percent of coal plants producing more carbon.
Daniel Raimi: Wow. So 28 percent of coal plants produce more CO2 relative to if no policy existed, that's not comparing it to the Clean Power Plant, for example. So this is really quite a big difference.
Amelia Keyes: Exactly, yeah. The takeaway from that that always feels kind of logically confusing to me is that while the purpose of ACE is to identify the best system for reducing emissions within coal plants, it's a bit confusing to think about the fact that the best system is actually increasing emissions at a large number of those plants. It's not clear that this will lead to significantly better outcomes emissions-wise, compared to doing nothing.
Daniel Raimi: Right. So you've talked so far about the increases that could occur at individual plants. When we aggregate up all those plants across the country, what are the effects that we see in terms of national level carbon dioxide emissions? Also, what is the ... do you see variation across different states?
Amelia Keyes: Yeah. In most of the years that APA modeled emissions outcomes, ACE is expected to lead to slightly lower national power sector emissions compared to no policy. But, the modeling actually suggests that, by 2050, ACE may cause higher emissions than no policy at the national level. We think this is probably because of delayed coal plant retirements due to the fact that they're becoming more efficient.
Daniel Raimi: Right, so they're more efficient and they're more profitable over the long term, which means they stay open longer and they continue emitting.
Amelia Keyes: Yeah, exactly. So we primarily focused on the year 2030 when we looked at state level emissions outcomes. In 2030, at the national level, emissions under ACE are expected to be .8 percent lower compared to no policy. But, at the state level, there's a pretty big range in outcomes. We found that 18 states plus DC are expected to have emissions that are at least slightly higher than compared to no policy at all. So this is the rebound effect at work, because we're seeing that in most of those 18 states, their coal generation becomes less emissions intense, so the plants are becoming more efficient. But, their volume of generation increases.
Daniel Raimi: Right. So I just remembered, sometimes people talk about the rebound effect; if the rebound effect is so big that it actually leads to an increase in aggregate emissions, sometimes it's called the backfire effect, is that right?
Amelia Keyes: I haven't heard that term, but that's a good way to put it. Yeah.
Daniel Raimi: Yeah, so it's like a really bad rebound is a backfire. So that's what we're seeing here. So those 18 states plus DC you mentioned, are those ... is there any way to sort of characterize the location of those states? Are they sort of the Midwestern and south east states that have a lot of coal generation, or is there some other way to kind of group them?
Amelia Keyes: It's actually pretty mixed across the country. We didn't see a really clear pattern in which states are experiencing emissions increases.
Daniel Raimi: Okay, interesting. We've been talking so far just about carbon dioxide, but your analysis, as you've mentioned, does not only focus on CO2, it also looks at other emissions from coal-fired power plants, such as sulfur dioxide, nitrous oxides, which both have significant health effects. As well as other emissions from coal plants, such as mercury. Are the results that you find for those non-CO2 emissions basically the same as the results of the CO2 analysis you just described, or do they differ in some ways?
Amelia Keyes: Yeah. We saw that the results were pretty similar to the results for CO2. For sulfur dioxide, national emissions in 2030 are expected to decrease by about .7 percent under ACE compared to no policy, which is quite similar to the results for CO2. Then, we expect that 19 states will have a emissions increases in sulfur dioxide. On the nitrous oxide side, we're projecting a similar national decrease of about 1 percent in 2030. Then, 20 states plus DC are expected to show nitrous oxide emissions increases.
Daniel Raimi: Okay, so yeah, pretty similar to the CO2 findings it sounds like, with a little bit of variation. Can you talk a little bit about the public health implications of increased emissions of those particular pollutants? CO2, of course, is the primary driver of climate change, and we've talked a lot on this podcast about the risks to different economic sectors and public health from climate change. But, can you talk directly about sulfur dioxide and nitrous oxide?
Amelia Keyes: Yeah, because these local pollutants are also emissions from coal plants, any carbon policy targeting coal plants has pretty significant implications for public health. Sulfur dioxide and nitrous oxide are precursors to PM2.5 in ozone, which are air pollutants that contribute to a lot of health issues, including asthma and cardiovascular disease. We don't model the specific effects of changes in local pollutants in our research. For these types of pollutants, unlike carbon dioxide, it really matter where they're emitted and where they end up, and that's why air quality modeling is really important. When EPA did their own air quality modeling as part of their analysis of the ACE Rule, they estimated that compared to the CPP, ACE was likely to result in about 1,000 additional premature deaths per year, and over 40,000 lost work days. That's due to the exacerbation of health issues like asthma and cardiovascular disease.
Daniel Raimi: Right. So that was EPA's own analysis that found that, that's interesting.
Amelia Keyes: Right.
Daniel Raimi: If people want to look up that analysis by EPA, they would look for what? The regulatory impact statement?
Amelia Keyes: Yep. EPA published a regulatory impact analysis along with the ACE Rule. I believe some of the highlights of those results are published in a fact sheet, just on the ACE webpage.
Daniel Raimi: Okay, great. One question that's coming to mind is the legal status of the ACE Rule, sort of where it is in the regulatory process, as well as what it might be facing in terms of legal challenge in the future. Can you give us an update on where things stand on the administrative front?
Amelia Keyes: Yeah. The ACE Rule that's out now is actually the proposed rule. So the next step in the regulatory process is for EPA to release a final rule. As part of that, they're expected to incorporate the huge volume of public comments that came in as a response to the proposed rule. The final rule is expected out sometime in 2019. But, it really remains to be seen what types of changes we'll see in that rule compared to the proposed rule, and whether they'll respond to any specific public comments. I think it's very likely that we're going to see a large volume of legal challenges to the final version of the rule.
Daniel Raimi: Right. If there's one thing that's certain in environmental policy today, it's that any rule for the EPA will endure substantial legal challenge.
Amelia Keyes: Exactly.
Daniel Raimi: One last question before we go to our Top of the Stack segment, which is about just sort of trends in the power sector more broadly. I think many of our listeners will know that carbon dioxide emissions have declined in the power sector pretty substantially over the last 10 years or so. What does the ACE Rule mean for the future of continued emissions reductions compared with a world where maybe the Clean Power Plant had stayed in place?
Amelia Keyes: Yeah, so actually an interesting factoid that not a lot of people know is that the CPP, obviously, was never implemented because it was stayed by the Supreme Court. But, the power sector actually is on track to meet the emissions targets of the CPP without having any policy in place at all. That's mostly because when the CPP was originally created back in 2015, the EPA wasn't anticipating such a large increase in natural gas generation and renewables that have played a big role in driving down emissions in the power sector. So the CPP was designed to continue updating every eight or so years in order to really leverage the changes in market conditions that could enable further emissions reductions. But, what we're seeing now with EPA's action on ACE is a reversal in the trend of increasing stringency of emissions targets.
Daniel Raimi: Great. Well, Amelia, thank you so much for sharing this total wealth of knowledge on these different policies and the results of your research, which I think are really significant and important for us to know about. We're going to close it out now with our Top of the Stack segment, where we ask you what's on the top of your literal or metaphorical reading stack, things that you've read, or watched, or heard lately that you've enjoyed and that you'd recommend to our listeners.
I'm going to start us off with a recommendation of a data visualization that I stumbled across recently in the Washington Post webpage. It’s this data viz called mapping America's Wicked Weather and Deadly Disasters, which is kind of overwrought title, I think, but the data visualizations are really, really cool. It's really detailed geospatial visualizations of natural disasters and weather trends in the United States for a variety of topics. Basically, it shows you where, since 2008, there have been major floods, tornadoes, hurricanes, wildfires, earthquakes, extreme heat and cold, and lightning strikes. So these maps are just really detailed, they're visually really nice. You see all sorts of interesting trends about where lightning strikes happen most frequently in the United States, which I certainly hadn't thought much about. As well as, looking at where the earthquakes are happening, what their magnitudes are, tornadoes, floods, and more.
So it's a really cool visualization, and we'll put a link to it on our webpage. But, Amelia, what's on the top of your stack?
Amelia Keyes: That sounds really interesting. On my side, what I want to recommend is actually another podcast, which I only listen to in my free time after I'm done listening to Resources Radio, of course.
Daniel Raimi: Exactly, of course.
Amelia Keyes: But, the product is called Mothers of Invention, and it's this really cool podcast hosted by two women, one of them is the former President of Ireland, the first female President of Ireland. They talk about the intersection of climate change and feminism. It mainly features women that are leading efforts to address climate change and environmental justice issues. I really love it because it kind of exposes you to women who are coming from all over the world, from so many different backgrounds, and they're all addressing climate problems in really innovative ways and ways that are informed by their own unique perspectives. So I find it really fascinating and empowering. It's also just a really good reminder of the extent to which climate change touches, really, every element of society, and how the types of solutions that are emerging in different places, not only address environmental issues, but also address really important social issues.
Daniel Raimi: Yeah, that sounds great. I'm literally looking it up right now so I can add it to my podcast queue.
Amelia Keyes: You'd love it. The second host of it, besides Mary Robinson, who's the female President of Ireland, is a comedian, so it kind of adds a little bit of entertainment value too.
Daniel Raimi: Great. The title of the podcast, of course, I think, is a reference to Frank Zappa's band, which was called Mothers of Invention.
Amelia Keyes: I think so too.
Daniel Raimi: Yeah, so little Zappa in there too, can't hurt. Great. Well, Amelia, this has been really fun and really interesting. Thank you so much for talking to me and telling us about your research.
Amelia Keyes: Yeah, this has been great. Thanks so much for having me.
Daniel Raimi: Thank you so much for joining us on Resources Radio. We'd love to hear what you think, so please write us on iTunes, or leave us a review, it helps us spread the word. Also, feel free to send us your suggestions for future episodes. Resources Radio is a podcast from Resources for the Future. RFF is an independent, non-profit research institution in Washington DC. Our mission is to improve environmental, energy, and natural resource decisions through impartial economic research and policy engagement. Learn more about us at RFF.org. The views expressed on this podcast are solely those of the participants. They do not necessarily represent the views of Resources for the Future, which does not take institutional positions on public policies. Resources Radio is produced by Kate Peterson, with music by Daniel Raimi. Join us next week for another episode.