@BGOV will regularly feature insight and background on the development of Bloomberg Government Studies from the analysts and reporters behind them. Here, energy analysts Rob Barnett and Marisa Buchanan share the background on a study they wrote on EPA’s greenhouse gas (GHG) regulations.
EPA’s GHG regulations have been criticized by members of Congress and by influential business groups such as the Chamber of Commerce and National Association of Manufacturers. Our new study “Big Bark, Small Bite: An Assessment of EPA’s Current Regulations on Greenhouse Gases” (subscription required) looks into the controversy.
One of the study’s main findings is that EPA’s existing GHG regulations for stationary sources are unlikely to impose substantial new costs on industry. At the same time, the regulations are unlikely to have a material impact on GHG emissions.
We’ve ended up with a lukewarm set of regulations that aren’t likely to change business behavior. This is because EPA’s current GHG regulations are basically a mandate that companies invest in energy efficiency to reduce GHG emissions from new or modified facilities. Our analysis shows that efficiency has been steadily increasing in the U.S. economy, and that EPA’s rules are not likely to require technology investments that differ significantly from those that companies generally plan for in new construction. When new power plants or other industrial facilities are built, they tend to be more efficient than those they’re replacing. For example, the average heat rate of natural gas-fired electric generators decreased approximately 19 percent between 2001 and 2009, according to the Energy Information Administration (EIA). A lower heat rate — the energy, measured in BTUs, needed to generate 1 kilowatt hour of electricity — indicates improved efficiency.
This isn’t to say that criticism is completely unfounded. A second round of GHG rules due later this year for power plants and petroleum refineries may impose greater costs. These rules may be more stringent than current regulations, and will apply to a greater number of sources.
Business planning is made difficult by regulatory uncertainty. Our view is that companies in the power sector will favor natural gas-fired generation over coal to reduce the chance of additional regulatory costs.
Rob Barnett is an energy analyst at Bloomberg Government. Prior to joining Bloomberg, Rob was an Associate Director of Climate Change and Clean Energy at IHS Cambridge Energy Research Associates. He holds advanced degrees in economics and electrical engineering.
Marisa Buchanan is an energy analyst at Bloomberg Government. Prior to joining Bloomberg, Marisa was a Manager at Verdeo Group where she developed carbon offset projects in the mining and oil & gas sectors. She holds degrees from Wellesley College and Columbia University’s School of International and Public Affairs.