Electric Utility Restructuring
Briefing Book
Congressional Research Service Library of Congress
Redistributed as a service of the National Library for the Environment

Environmental Issues

Larry Parker

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 emissions 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. 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 would 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. Suggested options to mitigate possible air pollution impacts from electric utility restructuring include: (1) cap and trade programs to prevent increases in pollution levels; (2) green pricing to encourage consumers to choose less polluting sources of electricity; (3) renewable portfolio standards to require a percentage of electricity generated to come from renewable, non-polluting, sources.

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.

For a discussion of current EPA efforts to control NOx emissions (including cap and trade programs), see CRS Report RS20553, Air Quality and Electricity: Initiatives to Increase Pollution Controls and CRS Report 98-236, Air Quality: EPA's Proposed Ozone Transport Rule, OTAG, and Section 126 Petitions -- A Hazy Situation? Also see CRS Report 98-615, Electricity Restructuring: The Implications for Air Quality and CRS Report RS20326, Electricity Restructuring and Air Quality: Comparison of Proposed Legislation.

Other Material on the Environment and Restructuring

Northeast States for Coordinated Air Use Management (NESCAUM): Report that emissions are already increasing from wholesale restructuring, (click on "Air Pollution Impacts of Increased Deregulation in the Electric Power Industry: An Initial Analysis.")

Global Climate Coalition: Represents the business viewpoint on global climate change

Green Pricing: Discussion from the American Wind Energy Association.

Green Pricing: Another discussion from the Union of Concerned Scientists.

Renewable Energy: Not Cheap, Not "Green": For another viewpoint on renewable energy, see this Cato Institute paper.

Environmental Science and Technology: This article discusses air pollution. issues.

Environment Library: (From Resources for the Future) includes an article on electricity restructuring and air quality.

Report on Emissions: The Natural Resources Defense Council (NRDC) collaborated with the Public Service Electric and Gas Co. and Pace University's Mid-Atlantic Energy Project on this report.

Page last updated January 4, 2001.

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