Analysis of the Bingaman clean energy standard proposal

Abstract

A clean energy standard (CES) is a flexible approach to encouraging a cleaner technology mix for electricity production. The most recent federal CES proposal from former Senator Bingaman would transform the way electricity is produced and result in substantial reductions in CO2 emissions with small national average electricity price effects through 2025. After 2025, electricity prices would increase substantially. The alternative compliance payment (ACP) for clean energy credits will be binding, so actual deployment of clean energy will fall short of the intended targets, and cumulative emissions reductions by 2035 will be 12 percent smaller than they would be without an ACP. The small utility exemption from the CES requirements equates to roughly $29billion in avoided electricity expenditures by the customers of exempted utilities in 2035 alone. Excluding power generated by existing nuclear and hydroelectric facilities from CES compliance responsibility raises electricity prices in competitive regions to the benefit of owners of existing nuclear and hydroelectric capacity.