A sustainable “building block”?: The paradoxical effects of thermal efficiency on U.S. power plants' CO2 emissions

Under its recently proposed Clean Power Plan, the U.S. Environmental Protection Agency (EPA) gives states several “building blocks” to choose from to reduce their power plants' CO2 emissions, including improving plants' heat rate efficiency. However, skeptics suggest that precisely because efficiency enhances electrical output, it may reduce power plants' emission rates but increase their emission levels. Using the EPA's new Greenhouse Gas Reporting Program (GHGRP) data, this paper conducts the first analysis of the effect of thermal efficiency on the rate and level at which individual power plants emit carbon dioxide. Consistent with the arguments of skeptics, we find that while efficiency lowers CO2 emission rates, it actually increases CO2 emission levels. In suggesting to states that improving efficiency is one of the best systems of emission reductions, therefore, the EPA needs to consider whether more efficient plants are subject to such “rebound effects.”