EPRI Analysis on Economic Approach

News Release


Heather Lynch Hansen

Clay Perry


Palo Alto, Calif. - June 7, 2007 The Electric Power Research Institute (EPRI) today released the results of an analysis that shows that California can achieve its goals of reducing greenhouse gas emissions to 1990 levels by 2020, but at a cost to the state's economy.

Depending on how California implements its climate legislation, cumulative real costs to the state's economy range from 0.2 percent to 1.2 percent ($100 billion to $511 billion) through 2050. In general, costs increase as limits on California's future greenhouse gas become more stringent, the report says.

For the analysis, EPRI integrated two widely-accepted, advanced economic models: the state-level Multi-Region National (MR) model and a detailed model of the U.S. electricity sector, the North American Electricity and Environment Model (NEEM). The California Environmental Protection Agency and the Air Resources Board are currently using this new EPRI modeling tool for informing their climate implementation work.

"By linking these two well-known economic models in an integrated way, EPRI has developed an important new tool to help society understand how we can achieve significant reductions in future greenhouse gas emissions while minimizing the impact on energy prices and the economy," said Bryan J. Hannegan, EPRI's Vice President -Environment.

The EPRI analysis reviewed 20 different policy implementation scenarios, and demonstrated that implementation options based on a broad, market-based cap-and-trade program will likely be more cost-effective than a sector-specific program of command-and-control regulations, or an approach that covers only one part of the state's economy. Several key issues were highlighted for further study, including leakage of emissions to nearby states, the role of forestry offsets, and the role of electrification as a method for reducing greenhouse gas emissions across the economy.

"Part of EPRI's role is to provide critical information and strategic guidance for regulators, legislators and electric utilities," said Larry J. Williams, an EPRI environmental economist who oversaw the project and report completion. "We believe these results provide new insight to guide the state as it weighs its policy implementation options to reduce greenhouse gases."

For more information about the report, visit www.epri.com

About the Electric Power Research Institute

The Electric Power Research Institute (EPRI), with major locations in Palo Alto, California; Charlotte, North Carolina; and Knoxville, Tennessee, was established in 1973 as an independent, nonprofit center for public interest energy and environmental research. EPRI brings together members, participants, the Institute's scientists and engineers, and other leading experts to work collaboratively on solutions to the challenges of electric power. These solutions span nearly every area of electricity generation, delivery, and use, including health, safety, and environment. EPRI's members represent over 90% of the electricity generated in the United States. International participation represents nearly 15% of EPRI's total research, development, and demonstration program.