Last year, when the U.S. made its INDC pledge to reduce net GHG emissions 26-28% below 2005 by 2025, it was built on Obama’s 2013 Climate Action Plan with the proposed Clean Power Plan (CPP) among its key elements. At the time, a range of climate policy observers, including Climate Action Tracker, U.S. Chamber of Commerce, Climate Advisors, and the World Resources Institute, noted that additional policies would be needed to meet this pledge.
New information and developments compel another look at the gap:
- Congress extended the 30% Investment Tax Credit (ITC) for solar and $0.23/kWh Production Tax Credit (PTC) for wind.
- The U.S. Energy Information Administration (EIA) released its 2015 Annual Energy Outlook (AEO), and the U.S. submitted its second UNFCCC Biennial Report.
- As we blogged in February, the Supreme Court issued a stay on the CPP’s implementation.
The Rhodium Group released a report in January – Taking Stock: Progress Toward Meeting U.S. Climate Goals – that accounts for the first two when analyzing if and how the U.S. can achieve its pledge. Its analysis considers various uncertainties (different paths for future economic growth, potential shifts in transportation demand, and different rates at which the cost of renewable energy and battery storage technology will decline) and integrates these with a set of climate and energy policies, including:
- The Clean Power Plan
- Pending methane (CH4) emissions standards for new oil and gas sources
- Pending heavy-duty vehicle (HDV) efficiency standards revisions
- Pending hydroflourocarbon (HFC) phasedown efforts under the Montreal Protocol
The report also considered the sizeable uncertainty in sequestration pathways for LULUCF, as identified in the U.S.’s second Biennial Report. (The use of the “net” approach in GHG accounting indicates the inclusion of land use, land use changes, and forestry (LULUCF) as carbon sinks to offset emissions.)
The Rhodium Group concluded that emissions reductions of 10%-23% would be expected by 2025, when incorporating the Biennial Report’s wide range of uncertainty on LULUCF sequestration potential, the full range of uncertainties for economic and technology outcomes, and uncertainties in CH4, HFCs, and HDVs reductions. To move beyond the most optimistic prediction will require building on existing policy frameworks, targeting industrial CO2 emissions, creating additional CH4 reduction pathways, and “enhancing the forest sink,” all within the next 5-10 years.
But, what do things look like without the CPP? While we can’t understand all the permutations, two CPP analyses (both assuming optimal implementation) help us get a glimpse. EPA, in its August 2015 Regulatory Impacts Analysis, estimates that the CPP would provide a 9-10% reduction in power sector CO2 emissions below the 2005 level by 2025 as compared to its base case (Table 3-6). Another Rhodium Group report, co-authored with the Center for Strategic and International Studies, Assessing the Final Clean Power Plan, projects a 17-18% reduction compared to its base case. A number of factors (e.g., different modeling frameworks and historical data) made EPA’s base case significantly more optimistic. Still, both calculated total power sector change from 2005 of 28-29% by 2025. Notably, these figures were derived before the recent passage of the solar and wind tax credits.Extrapolating using this range of figures, EIA historical date, and the Biennial Report for other sector reductions, the CPP would likely have a roughly 4-11% impact on overall net emissions in 2025. (There are many nuances in doing such a calculation; but, as calibration, the Rhodium Group’s Taking Stock report projects a combined 15% reduction with the CPP and the ITC/PTC.)
At a 4%-11% benefit, the CPP would provide somewhere between 15% and 40% of the reductions needed to meet the INDC pledge. Without it, the U.S.’s intention likely moves beyond optimism to just wishful thinking.