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States are well positioned to implement the U.S. Environmental Protection Agency's (EPA) recently proposed Clean Power Plan, according to a new report from Analysis Group.

The report, funded by the Energy Foundation and the Merck Family Fund, was released at the National Association of Regulatory Utility Commissioners' conference in Dallas. Analysis Group says the study is based on a careful analysis of states that already have experience regulating carbon pollution. It finds that those states' economies have seen net increases in economic output and jobs.

“Several states have already put a price on carbon dioxide pollution, and their economies are doing fine. The bottom line: the economy can handle - and actually benefit from - these rules,” says Analysis Group Senior Advisor Susan Tierney. “Those states have shown they already have the tools available to cut CO2 emissions while generating macroeconomic benefits and protecting consumers from dramatic hikes in their energy bills.”

The EPA's proposed Clean Power Plan would regulate carbon emissions from existing fossil-fueled power plants using the EPA's authority under the Clean Air Act. Due to be finalized next year, the draft rules allow states to choose a variety of market-based and other approaches, such as renewables, to cut the greenhouse gas emissions.

The Analysis Group team analyzed the carbon-control rules already in place in several states to see what insights they might hold for the success of the national rule.

“We found that well-designed programs implementing the Clean Power Plan will not lead to major price impacts or economic disruption,” comments Paul Hibbard, vice president of Analysis Group. “Costs from well-designed CO2-pollution-control programs will be modest in the near term and likely offset by longer-term benefits for all and common protections for low-income customers.”

So far, the report says net economic effects on states that already regulate carbon pollution have been positive in terms of both economic output and jobs, and the same can be expected if states comply thoughtfully with the Clean Power Plan. States that work together to form carbon markets or other collaborative initiatives have the potential to experience greater benefits than they would by trying to meet the new standards by themselves, the report says.

“Experience shows that states that work together on market-based compliance initiatives - like [the Regional Greenhouse Gas Initiative (RGGI)] in the Northeast - can provide net economic benefits in terms of jobs and economic output,” says Hibbard. “And RGGI shows that each state can have control over its own program design, so that combined efforts don’t step on states' rights.”

Multi-state market-based programs to control CO2 emissions can also respect the practicalities of electric system operations and can work for both traditionally regulated and competitive electric markets, the report finds.

Analysis Group notes that the report was based on states' existing track records, rather than projecting costs and benefits that might be expected under the Clean Power Plan. Although the report suggests energy efficiency has so far proven to be the most economically beneficial way to achieve carbon cuts, many predict the Clean Power Plan will also greatly help spur renewable energy development. In fact, the American Wind Energy Association's recently said the EPA plan could be the third largest driver of wind-powered generation behind state renewable portfolio standards and the federal production tax credit.

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