California's Blueprint for Meeting (and Exceeding) EPA's Clean Power Plan

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Even before the Environmental Protection Agency proposed the nation’s first federal limits on carbon pollution from power plants last week, naysayers were claiming California’s longstanding policies to cut emissions and improve energy efficiency don’t work and have sent electric bills soaring. But Californians and anyone else taking a close look at the state’s success know otherwise.

While the perennial critics blustered, California calmly continued doing what it’s been doing for decades: reducing emissions, growing the economy, improving efficiency and delivering the cost savings to consumers. The results have produced electric bills lower than the national average and put California well on its way to meeting, and likely exceeding, the federal standard.

All told, EPA's Clean Power Plan represents the most significant step the United States has taken to combat climate change, resulting in a projected 30% cut in power plant emissions below 2005 levels by 2030. It gets there by setting carbon intensity targets for each state based on readily achievable emissions reductions in the power system, but affords the states flexibility to design their own plans to meet the targets.

California’s Head Start

That’s good news for California. Under the Global Warming Solutions Act (AB 32) and our clean power law (SB 1368), California’s program to cut carbon pollution and promote clean energy is already up and running. California is steadily reducing its carbon intensity while growing the economy. EPA’s guidance allows California to continue implementing its portfolio of clean energy strategies as the foundation for its state plan, including:

  • Cap on carbon pollution: California’s cap-and-trade program requires the state’s largest emitters to acquire a shrinking pool of permits for every ton of carbon pollution they emit. The state sells a portion of pollution allowances at quarterly auctions, which have raised over $730 million for clean energy investments, and over $1 billion that is distributed to utility customers twice annually in the form of a “climate credit” on their electric bill (the initial credits in April ranged from $30-40 for most households). EPA’s guidelines encourage states to collaborate to submit joint implementation plans, which could include regional cap-and-trade markets.
  • Energy efficiency: California has been a leader for decades at improving the efficiency of our buildings and appliances – upgrades that make us more comfortable at home, lower our utility bills, and reduce pollution. These efforts have already saved Californians more than $50 billion and avoided the need for 30 large power plants. The EPA’s proposed standards promote energy efficiency as one of the key building blocks to reducing emissions from existing power plants.
  • Cleaner power plants: California’s Emissions Performance Standard (SB 1368) ensures that any long-term investments utilities make on behalf of their customers go to cleaner and more efficient sources. EPA’s proposed carbon limits for new power plants, released last year, is modeled closely on California’s current standard.
  • Renewable energy: California is well on its way to achieving the nation’s most ambitious renewable energy standard, requiring one-third of the state’s power come from clean sources by 2020. Together with policies to promote clean distributed generation, the standards are helping spur the rapid growth of the clean energy industry, which added jobs at a clip ten times faster than the statewide average over the past decade.

EPA’s plan requires every state with fossil-fuel fired power plants to make progress reducing its “pollution-to-power ratio” (or the amount of carbon emitted for every megawatt hour of electricity produced in the state). More to come in a later blog on what achieving that ratio means for California. But the takeaway is clear: thanks to AB 32 and related policies that have put the state on track to slash total GHG emissions below 1990 levels by 2020, California is already well-positioned to meet and exceed the federal standard. 

Chicken Little Comes Calling (Again)

Polluters and their allies the U.S. Chamber of Commerce and National Mining Association (NMA) have been raising fears of skyrocketing electricity costs and job losses from implementing EPA’s proposal. This comes as no surprise. Every time new air quality standards have been enacted for pollutants like mercury, sulfur or lead, we’ve heard the same dire predictions of economic calamity, and every time they’ve been dead wrong.

In one notable example, following the 1990 Clean Air Act amendments (which established one of the first cap-and-trade programs to reduce acid rain), the leading industry lobby warned the amendments would portend the “quiet death for business across the country.” The results? Emissions declined more than a third (even as output increased), compliance was achieved at one-fifth of the projected cost (with public health benefits exceeding costs by a factor of 40 to 1) – and business remained very much alive.

California’s Competitive Advantage

The same doomsday chorus recently pointed to California as an example of what to expect from scaling up clean energy, claiming the state’s electricity costs put businesses at a competitive disadvantage. Outside of pinning all the factors underlying rates on California’s clean energy progress (debunked here), the NMA warning misses the forest for the trees. As the results of the newly released 2014 California Green Innovation Index highlight:

  • As a fraction of the state’s economy, California’s carbon emissions are the fourth- lowest in the nation, making the state among the most efficient and least carbon intensive economies in the world. That trend has continued even as California’s economy recovers from the recession - from 2009 to 2012, California’s Gross Domestic Product grew by 5% while emissions held steady.
  • The state’s electric bills are well below the national average for both the residential and industrial sectors. While California’s average per kilowatt hour rates are slightly higher, most people don’t know or care what a kilowatt hour is – they care about how much they’re spending every month to power their homes and businesses. And those bills are lower thanks to energy efficiency.

  • Thanks to its longstanding investment in energy efficiency, California produces nearly twice as much economic output for the same amount of energy as the national average. If the state were as inefficient as Texas, California’s electric bill would be nearly $10 billion higher (now that’s a competitive disadvantage).

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The Road Ahead

EPA’s Clean Power Plan is a huge step forward for climate progress in the United States and internationally. We’ve long known we’ll need much broader and deeper reductions to stabilize the climate, and we’ve shown it can be done (just like the RGGI states). EPA’s proposal opens the door for increased coordination among the states to share lessons learned and achieve greater efficiencies in reducing emissions. It also provides a shot in the arm for increased international cooperation, building off California’s existing partnerships with Quebec, China, Peru, Israel and Mexico to foster greater collaboration on combatting climate change. With the experience, innovation, and know-how California has cultivated as a clean energy leader for decades, the state is primed to capitalize on its investment.