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The Clean Power Plan: A Critical Step Toward Decarbonizing America’s Energy System

Solar panels that are part of the Wright-Hennepin Cooperative Electric Association's community gardens are shown in Rockford, Minnesota.

The United States is in the midst of an energy transition in which cheap natural gas is displacing coal as the go-to fuel choice for electricity generation. While this trend has helped reduce carbon pollution from the nation’s power plants, switching fuel sources does not go far enough to achieve the deep reductions necessary to prevent catastrophic and irreversible climate change. Ambitious deployment of renewable energy and energy-efficiency technology must form the cornerstone of any successful climate mitigation strategy. The Environmental Protection Agency, or EPA’s, Clean Power Plan is a critical part of the U.S. strategy to transition away from carbon-intensive fuels and toward a cleaner energy future.

The U.S. energy system in transition

Last week, Bloomberg New Energy Finance released a report declaring that 2015 will be a “transformative year” for the U.S. electric power sector. Bloomberg predicts that three key trends—a build-out of renewable capacity, new electricity generation from natural gas, and coal-fired power plant retirements—will ensure that the U.S. energy system will generate less carbon pollution in 2015 than it did in 1994.

According to the Bloomberg report, the United States will experience a “temporary boom” of renewable energy installations in 2015, as investors hurry to take advantage of expiring tax breaks, and “an unprecedented period” of coal plant retirements amounting to 50 gigawatts of generation capacity by 2020, caused by a confluence of market factors. At the same time, Bloomberg forecasts that these retirements and the availability of cheap natural gas will lead to “structural”—rather than cyclical—growth in electricity generated from natural gas. Bloomberg predicts that the United States will add 56 gigawatts of new natural-gas-fired generation capacity by 2020—more than the coal-fired capacity lost to retirement.

The Bloomberg report is good news; the United States is taking a “giant, permanent step” toward decarbonizing the U.S. economy. But the report also signals a key challenge from the perspective of long-term climate mitigation: The United States is locking in decades of new natural gas use.

Natural gas, although cleaner than coal, is still a fossil fuel that releases carbon when burned. U.S. policymakers can celebrate the switch from coal to gas as a means to cut carbon pollution in the short term. But this approach only gets the United States part of the way toward the long-term goal of truly decarbonizing its energy system—that is, generating electricity without releasing any carbon pollution, not just reducing carbon pollution.

The need for rapid decarbonization

Simply put, the world is not decarbonizing fast enough. In 2014, PriceWaterhouseCoopers, or PwC, released a report that examined how quickly the world needs to decarbonize the global economy in order to avert the worst impacts of climate change. PwC found that in order to limit warming to a 3.6°F increase above pre-industrial levels—a target that many countries have accepted as a shared goal—world leaders need to decarbonize the economy by 6.2 percent each year through 2100. This is more than five times higher than the current rate.

Similarly, the International Energy Agency, or IEA, warned in 2012 that the world’s existing power plants and other infrastructure had already “locked in” almost four-fifths of the global carbon budget—the amount of carbon pollution the world can emit before 2035 without exceeding the 3.6°F threshold. The IEA also warned that if the world does not take urgent steps to deploy zero-carbon and energy-efficiency technologies before 2017, the energy infrastructure that exists at that time will lock in the entire carbon budget, leaving no room for emissions growth without potentially devastating consequences for the climate.

Decarbonizing electricity generation is a key component of any cost-effective and successful strategy to stretch the global carbon budget. But some scientists have raised concerns about whether natural gas can form the cornerstone of this strategy. Researchers at the University of California, Irvine, published a study concluding that abundant natural gas supplies could slow the process of decarbonization in the United States by delaying the deployment of renewable energy technologies—that is, unless policymakers enact strong emissions limits or renewable energy requirements. Similarly, researchers at Duke University concluded that while natural gas can help reduce greenhouse gas emissions by offsetting coal use, its use alone will not change the global emissions trajectory in a significant way.

The Clean Power Plan’s role in mitigating natural gas use

The EPA’s proposed Clean Power Plan takes advantage of lower-carbon natural gas, but it relies on renewable energy and energy efficiency to mitigate the electricity sector’s natural gas use over time. From a climate perspective, successful deployment of renewable energy technologies and energy-efficiency programs will be critical to the Clean Power Plan’s success.

The Clean Power Plan achieves significant carbon-emissions reductions by shifting electricity generation from high-carbon coal to cleaner-burning natural gas, particularly during the early years of the compliance period. In a 2014 report, the Center for American Progress analyzed EPA data to determine the impact that this fuel switching will have on natural gas use. During the early years of the Clean Power Plan, the electricity sector’s natural gas consumption will increase sharply. By 2030, however, more renewable energy and energy-efficiency programs will come online as states continue to implement the plan’s building blocks. By the end of the Clean Power Plan’s compliance period in 2030, the electricity sector’s natural gas consumption will be higher than it is today but lower than it would have been without the plan.

The EPA also studied what would happen if states relied almost entirely on switching from coal to natural gas without implementing complementary clean energy and energy-efficiency policies. If states choose this path, the electricity sector’s natural gas use would surpass the currently projected levels of consumption by as much as 25 percent by 2030.

These findings underscore the need for state policymakers to embrace the renewable energy and energy-efficiency building blocks in the Clean Power Plan. If states shift aggressively to renewable energy and implement all available energy-efficiency measures, they can help ensure that the electricity system does not become over-reliant on natural gas and accelerate decarbonization of the electricity sector.

Setting ambitious clean energy targets

The good news is that tremendous potential exists for states to make renewable energy and energy-efficiency programs the cornerstone of their carbon-reduction strategies. The Union of Concerned Scientists has shown that the EPA, in proposing state targets to reduce carbon pollution under the Clean Power Plan, significantly underestimates the ability of states to generate more electricity from renewable energy sources. Likewise, the Natural Resource Defense Council has demonstrated that the draft Clean Power Plan overestimates the cost of renewable energy and energy-efficiency technologies and, as a result, does not take full advantage of the plan’s potential for carbon-pollution reduction.

As a result, the Clean Power Plan—which the EPA will finalize this summer—provides rather conservative guidelines for state implementation of renewable-energy and energy-efficiency programs.The EPA must ensure that the final plan maximizes the deployment of renewable energy and energy-efficiency technologies in order to strengthen the interim and final carbon-reduction targets. For their part, the states should develop implementation plans that put the country on a clear path toward decarbonization by investing aggressively in truly no- and low-carbon energy solutions.

Alison Cassady is the Director of Domestic Energy Policy at the Center for American Progress.