An integrated approach to climate policy in the US electric power sector

The US electric power sector provides both unique challenges and opportunities for national climate policy. This paper discusses and evaluates policies to reduce carbon dioxide (CO2) emissions from electricity generation in the US. The paper begins with an overview of the history of the electric power sector, its recent developments, and its expected future evolution. Next, it summarizes the current policy context, focusing on barriers to lower-carbon and less polluting electricity generation. It then discusses policies to overcome these barriers, the approach taken to evaluate them, and results of the evaluation. The analysis demonstrates that a complementary package of supply-side policies can induce diffusion of environmentally benign technologies into the US generation mix, significantly reducing emissions of CO2 and other pollutants by 2010, at a modest cost. When combined with electric efficiency policies in the end-use sectors, the resulting integrated package of supply-side and demand-side policies results in deeper reductions in emissions, while yielding net monetary benefits.