Electricity Restructuring: The Implications for Air Quality

Publication Date: January 2001

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Energy

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Abstract:

The electricity generating industry is currently undergoing change, both from new generating and transmission technologies and from shifting policy perspectives with respect to competition and regulation. As the industry is a major source of air pollution as well as of greenhouse gases, the changes underway are being closely examined for their potential environmental effects. At issue is whether proposed legislation to restructure the industry should include environmental protections. Future electricity demand and implementation of air quality regulations will determine air emission impacts from electricity restructuring. Projected increases in electricity demand in the short- to mid-term suggest that restructuring may further encourage utilities to renovate a sizeable amount of existing coal-fired capacity, which generally produces more air pollutants and greenhouse gases than alternative types of generation. The analysis indicates that renovating existing coal-fired facilities is often very cost-effective compared with new, less polluting construction, portending the potential for an increase in emissions of some air pollutants, especially nitrogen oxides, and of carbon dioxide, a greenhouse gas.

The Clean Air Act regulates emissions of conventional air pollutants from electric utilities. While it has historically focused on new construction in applying its most stringent standards, several current and prospective regulations and enforcement actions could significantly increase controls on existing, coal-fired facilities. These controls may diminish the attractiveness of renovating older, more polluting facilities, but the effectiveness of the regulations in coping with a restructured industry remains to be seen. In addition, greenhouse gas emissions are not currently regulated, so any increases in carbon dioxide would not be controlled under existing authorities.

Thus the environmental effects of restructuring depend on whether, for conventional air pollutants, the existing regulatory regimen will work effectively as the industry structure changes. For some pollutants, such as sulfur oxides, a nationwide emissions “cap” seems secure; but for others, particularly nitrogen oxides, the state-led implementation process may have difficulty coping with regional disparities in emissions. For carbon dioxide, any controls would be contingent on future ratification of the Kyoto Agreement to curtail emissions and on domestic legislation.

The potential for environmental deterioration from restructuring electricity generation is difficult to project — both because various technical and economic changes are affecting the industry at the same time and because of an evolving policy context. Those focused on preventing environmental deterioration tend to take a precautionary stance, to propose immediate preventative measures, and to argue that such measures be attached to available legislative vehicles. In contrast, those who believe the substantial regulatory structure in place will suffice tend to take a wait-and- see position. Further complicating this picture is that attitudes about restructuring are embedded in and partly a surrogate for a more fundamental debate that is underway because of global climate change concerns — about the future direction of energy use in the U.S. and the federal role in affecting it.