05/17/2012 05:01 pm ET Updated Jun 10, 2013

Is There a Clean Energy Standard in Our Future?

Crossposted with The Green Grok.

Americans want it, but how much will it cost?

Just because Congress is unlikely to pass a carbon tax or a cap-and-trade bill anytime soon does not mean the United States can't work on lowering its greenhouse gas emissions. It turns out there's more than one way for America to skin that carbon cat.

It starts by splitting the problem into two parts. Turns out about 60 percent of total U.S. greenhouse gas emissions come from two sources: transportation (27 percent) and electricity generation (34 percent). If the federal government can figure out how to lower emissions from those two sources through regulations and standards, we'll have gone a long way to licking the problem.

On the motor vehicle side we've actually made significant progress. If the new corporate average fleet economy standards (aka CAFE) proposed by the Department of Transportation and the Environmental Protection Agency stand, average fuel efficiency of new cars will increase from about 26 miles per gallon today to 50 miles per gallon by 2025. (See EPA's numbers on carbon dioxide (CO2) emissions and fuel economy trends, and my post on fuel economy trends for some context.) That will translate into a halving of the transportation sector's greenhouse gas emissions over the lifetime of the vehicles sold by 2025 relative to 2010.

Things have proved to be a good deal more difficult on the electricity side. EPA has recently used its authority under the Clean Air Act (as directed to by the Supreme Court in Massachusetts v EPA) to propose carbon emission standards on new electric power plants. But while quite controversial, they do little more than enforce business as usual and will not bring about a significant decrease in emissions from the electrical sector.

Another Approach: Clean Energy Standard

Another approach to reducing emissions from electricity generation is through a clean energy standard, which specifies a minimum percentage from so-called "clean energy" sources. Of course, the devil is often in the details and in the case of a clean energy standard one of the devils is what is defined as a clean energy source. There is what I call the "strong" clean energy definition, meaning only renewable (essentially carbon-free) sources; there's the "moderate" definition, which includes renewable plus nuclear energy; and finally there's the "weak" clean energy definition, which includes all of the above plus cleaner fossil fuel sources such as natural gas or coal with carbon capture and storage.

To date, almost 37 states plus D.C. and Puerto Rico have gotten on board with either a renewable energy standard or goal. (See this excellent map [pdf] for an idea of who is doing what.) Some are more ambitious than others. They range from requiring anywhere from 10 to 40 percent renewable power as early as 2015 or as late as 2035.

The president has gotten into the act too and has stated a goal of "80 percent clean energy by 2035" as part of his "Blueprint for a Secure Energy Future" [pdf], which would "create a domestic market for clean energy, drive innovation, and create new energy jobs and industries." Obama's plan adopts the weak definition for clean energy and includes renewable energy sources like wind, solar, biomass, and hydropower; nuclear power; natural gas; and coal with carbon capture utilization and sequestration. Still, it's a pretty ambitious goal.

A president can have great aspirations but it's going to be pretty difficult to get there without Congressional action. And that's where Senator Jeff Bingaman (D-NM) comes in. He has proposed the "Clean Energy Standard Act" (S2146) that lays out a road map to reach Obama's goal.

The legislation would use a market-based approach that is inclusive of the energy technologies in Obama's blueprint. Beginning in 2015, Bingaman's proposed standard would require that the largest eight percent of utilities sell 24 percent of their electricity from clean energy sources. Each year that percentage would grow by three percent rising to meet the goal of 80 percent in 2035. In 2025, the proposed standard would cover just 13 percent of utilities. Some smaller utilities would be exempt.*

While many think this is a good start, some critics complain that the bill fails to carve out a specific role for energy efficiency.

The Economic Impact: How Much Is All This Clean Energy Going to Cost?

Good start or no, you might be wondering about the economics of the bill; specifically, will it raise your utility bill so much that you'll have to move to the poorhouse? To answer that, Sen. Bingaman asked the U.S. Energy Information Administration to crunch some numbers. Those findings were released in early May.

EIA's findings suggest that you probably won't need to relocate to pauper-ville but it will cost you some. According to EIA, the bill would:

  • Drop CO2 emissions from electricity generation by 20 percent in 2025 and 44 percent in 2035 as compared to the business-as-usual reference case. This would represent a 20 percent decline in total energy emissions in 2035 compared to year 2005. (Note: By itself this is off the pace needed to meet our Copenhagen commitment, which called for a 42 percent cut by 2030.)
  • Leave delivered electricity prices unchanged through about 2021. After that, rates would begin to increase relative to the reference case rising to just under four percent in 2025, but growing to as much as 18 percent on average by 2035. The analysis projected an average price in 2035 of 9.54 cents per kilowatthour (for the reference case) versus 11.29 cents per kilowatthour and the clean energy standard.

This is similar to but a bit higher than a 2011 independent analysis that found a clean energy standard would increase national average electricity rates by less than five percent through 2030, reaching 11 percent in 2035.

Is That Too Expensive for the Average American?

Polls show that most Americans want renewable energy, pretty much regardless of political affiliation. But how much of that support evaporates when a price tag is associated with it? A paper by Joseph Aldy of Harvard University and colleagues appearing in this week's Nature Climate Change takes a stab at answering that question. Their analysis included an April/May 2011 survey of about 1,000 people gauging their support for "80 percent clean energy by 2035" as well as modeling of how that support would translate into elected officials' willingness to pass a clean energy standard bill.

The Aldy et al. study confirms that "a majority of U.S. citizens support clean energy and climate-change policies." However, that support is cost-sensitive and declines as costs increase. They found that the average American is willing to pay about 13 percent more or an average of about $162 (95 percent confidence range is $128- $260) per year in higher electricity bills to reach the 80 percent goal. That's not quite as large as the 18 percent increase in costs for the bill estimated by the EIA.

In contrast to the general support for a clean energy standard in the United States, the authors found that 24-30 percent of the public would oppose clean energy standards even if there were no extra cost. Perhaps it's not that surprising, but this suggests that there is a pretty sizable contingent of Americans who are ideologically opposed to clean energy and/or to government mandates for clean energy standards regardless of the economics.

Perhaps more disheartening for supporters of a standard, Aldy et al. found a "stark contrast" between the average American's preference for clean energy and the preferences of the voting blocks that determined the membership of the current Congress. Assuming each member of Congress would vote on the clean energy standard in a manner that is consistent with her or his constituency, the Senate would only be likely to pass such a bill if the average household increase in electricity bills were no more than $59 per year (an almost five percent hike). To pass the House, the average household electric bill couldn't increase by more than $48 per year (an almost four percent hike).

Takeaway: The American Public Is 'Behind' the President's Proposed Standards

Americans are behind Obama, in the sense that they support the president's concept of a national clean energy standard. But they're also behind, in the sense that the voting public is unwilling to go as far as the president wants to go because of costs. To get to where he wants America to go, the president's going to have to convince a good deal of those lagging Americans to catch up. Of course, depending on what happens in November, it could turn out that that convincing task will fall to his Republican opponent. Wouldn't that be interesting?

End Note

Per the Senate's Energy and Natural Resources Committee website, the proposed clean energy standard would work like this: "All generators of clean energy would be given credits based upon their carbon emissions. Greater numbers of credits would be awarded to generators with lower emissions per unit of electricity. This flexible framework naturally allows a wide variety of sources (solar, wind, nuclear, natural gas, coal with carbon capture and storage, etc.) to be used to meet the standard; allows market forces to determine what the optimal mix of technologies and fuels should be; and makes it easy for new technologies to be incorporated."