The U.S. power sector is responsible for 30 percent of the nation’s carbon dioxide (CO2) emissions—a figure higher than total CO2 for any other country except China. While emerging natural gas and renewable energy sources will lower U.S. emissions levels somewhat, the nation still needs a harmonized and comprehensive energy and climate change policy to curb power sector emissions.
An effective national policy framework would complement the state requirements currently in place and would establish a national clean energy standard—jointly administered by the U.S. Environmental Protection Agency and the U.S. Department of Energy—and based on performance-based metrics. The system would feature clean-energy credits to offset emissions, with revenues from the credit marketplace used to fund research and development, and demonstration projects used to promote cleaner energy generation.
Despite bipartisan interest in advancing American energy policy, comprehensive energy and climate legislation fell short in the Senate last year after passing in the House of Representatives in 2009. The difficulty of coming to broad agreement highlights the need for a more targeted and incremental approach. One promising intermediate step would be a technology-neutral national clean energy standard that applies to the U.S. power sector. This paper proposes a standard that would lower carbon dioxide emissions by as much as 60 percent relative to 2005 levels over twenty years, streamline the fragmented regulatory system that is currently in place, generate fiscal benefits, and help fund energy innovation. Through a simple design and transparent implementation, the National Clean Energy Standard would provide certainty about the economic returns to clean energy that would facilitate investment in new energy projects and lower the emission intensity of the power sector. It would also serve as an ambitious bridge to economy-wide energy and climate policy.