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Working Paper

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Abstract or Description

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.

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