New Issue Brief Explores Effects of Two Key Design Choices in Clean Electricity Standards

WASHINGTON, DC—Resources for the Future (RFF) today released a new issue brief examining the clean energy standard (CES) policy designs underpinning two Congressional policy proposals: the Clean Energy Standard Act of 2019 (CESA 2019) and the discussion draft of the CLEAN Future Act.

This issue brief focuses on two critical CES design considerations. One is the benchmark used to determine which generators receive clean energy credits, and how many credits they receive. (A higher benchmark would allow natural gas generators to receive some credit, as they have lower emissions than coal plants but higher than renewable energy and nuclear generators.) The other factor is how the clean energy targets will escalate over time under each policy.

Using RFF’s Engineering, Economic, and Environmental Electricity Simulation Tool (E4ST), the authors examine the effects of these two design considerations on power sector emissions, electricity generation, electricity prices, and societal benefits and costs—including climate and health impacts from air pollution.

Key findings include:

• If a higher benchmark is used and partial credit is consequently given to natural gas-fired generation, the policies would still reduce natural gas use compared to the current policy scenario, but would result in more natural gas use and less coal use than an otherwise identical CES with a lower benchmark that precludes natural gas from earning credit.
• By further reducing coal-fired generation, the higher benchmark reduces sulfur dioxide and nitrogen oxide emissions more than the lower benchmark does, resulting in fewer premature deaths.
• For a given clean energy target, a higher benchmark results in less GHG emissions reductions than a lower benchmark due to more natural gas generation.
• Under the higher benchmark, the target can be increased to match GHG emissions under the lower benchmark. The resulting policy reduces emissions at lower cost and produces larger air quality benefits, compared to the policy with the lower benchmark.
• Holding the benchmark emission rate constant, the CESA 2019 target escalation method yields higher targets on average than the linear escalation in the CLEAN Future Act discussion draft, through approximately 2040. Higher targets require a larger number of clean energy credits to be surrendered. All else equal, they are associated with lower emissions.
• From approximately 2040 through 2050, the linear escalation targets are on average higher, as targets reach 100 percent of retail sales by 2050 under the draft CLEAN Future Act but not necessarily under the CESA 2019 method.