Modeling a clean energy standard for electricity: Policy design implications for emissions, supply, prices, and regions

The electricity sector is responsible for roughly 40% of U.S. carbon dioxide (CO2) emissions, and a reduction in CO2 emissions from electricity generation is an important component of the U.S. strategy to reduce greenhouse gas emissions. Toward that goal, several proposals for a clean energy standard (CES) have been put forth, including one espoused by the Obama administration that calls for 80% clean electricity by 2035 phased in from current levels of roughly 40%. This paper looks at the effects of such a policy on CO2 emissions from the electricity sector, the mix of technologies used to supply electricity, electricity prices, and regional flows of clean energy credits. The CES leads to a 30% reduction in cumulative CO2 emissions between 2013 and 2035 and results in dramatic reductions in generation from conventional coal. The policy also results in fairly modest increases on national electricity prices, but this masks a wide variety of effects across regions.

► We model a clean energy standard (CES) for electricity at 80% by 2035. ► We analyze effects on CO2 emissions, investment, prices, and credit trading. ► 80% CES leads to 30% reduction in cumulative CO2 emissions by 2035. ► Modest national average electricity price increase masks regional heterogeneity.