A comparison of Clean Power Plan forecasts for Wyoming: The importance of implementation and modeling assumptions

Abstract

An impact analysis estimating the potential economic effects of the Clean Power Plan on Wyoming highlights how such estimates are heavily dependent on the initial simulation assumptions used to generate them. Simulation results also are highly sensitive to how policy is implemented, and modeling assumptions. Regardless of the simulation, economic impacts of the CPP are shown to be severe to a coal-producing state like Wyoming, potentially reducing that state's employment by over 3 percent, and reducing state revenues by 14 percent or more.

The potential impact of rate-based or mass-based rules on coal-producing states under the Clean Power Plan

“…These losses, while substantial, are much lower than those shown in Godby and Coupal (2016) where losses were in the 2-2.5% range by 2030. Specifically, under mass-based standards there may be an incentive for a larger natural gas combined-cycle buildout in generation capacity that reduces future coal generation substantially.…”

“…The impact of the rate-vs. mass-based choice has important economic consequences on coalproducing states. For example, using the economic impact model described in Godby and Coupal (2016), Wyoming employment in the coal sector under the mass-based alternative is estimated to be almost 6,600 positions lower than under the reference case. Rate-based rules reduce this loss to 4,300 fewer jobs.…”

“…22 AEO2015 assumptions with respect to PRB production costs and oil prices are discussed in Godby and Coupal (2016). Midwestern production increases also occur as Mercury and Air Toxics Standards go into effect in 2016, causing a reduction in low-sulfur coal demand from the PRB due to induced plant retirements and reinvestments.…”

“…The emphasis on emissions trading in final 2015 CPP rules is consistent with several modeling results for rules under the 2014 proposal, which found that wider trading reduced significantly the potential cost of meeting the CO 2 standards of the CPP. 10 Reduced costs of implementation also reduce the impact of the rules on coal producing states like Wyoming as shown in Godby et al (2015 a,b) and Godby and Coupal (2016). Those results, using simulation results from Larsen et al (2014) and the EIA (2015) to estimate state impacts as well as state revenue outcomes for the implementation of the 2014 CPP rules showed that wider trading could reduce such impacts from by 7-8% in the case of employment losses for Wyoming, the nation's largest coalproducing state.…”

“…Previous simulations on the originally proposed rules have also indicated the sensitivity of potential outcomes to assumed conditions in the natural gas and coal markets, and assumptions regarding renewable costs. Some of these are described in Godby and Coupal (2016). In particular, earlier simulations like those used in Larsen et al (2014) and across the results reported in Hopkins (2015) used EIA's Annual Energy Outlook 2014 (AEO2014) modeling assumptions and generally identified displacement of coal with natural gas generation as the predominant means of meeting new CO 2 regulations.…”