1. CHEAPER AND CLEANER: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental and Economic Benefits March 2014 Update

2. “We limit the amount of toxic chemicals like mercury and sulfur and arsenic in our air or our water, but power plants can still dump unlimited amounts of carbon pollution into the air for free. That’s not right, that’s not safe, and it needs to stop.” -President Obama, June 25th, 2013 CLOSING THE POWER PLANT CARBON POLLUTION LOOPHOLE: SMART WAYS THE CLEAN AIR ACT CAN CLEAN UP AMERICA’S BIGGEST CLIMATE POLLUTERS 2

3. THE TIMELINE January 20 th End of President Obama's second term. 2017 January 20 th Start of President Obama's second term. June 25 th President Obama announces Climate Action Plan. September 20 th EPA proposes carbon pollution standards for future power plants. 2013 May 9 th End of public comment period for future power plant proposal. June 1 st EPA to propose guideline for carbon pollution standards for existing power plants. June-September Public comment period on existing power plant proposal. 2014 June 1 st EPA to finalize power plant carbon pollution standards. 2015 June 30 th States to submit implementation plans for existing power plants to EPA. July-DecemberEPA reviews state plans for compliance with its guideline. 2016 3

4. EPA proposes “emission guideline” June 2014, final June 2015. Guideline includes performance standard and compliance provisions. States have until June 2016 to adopt and submit state plans. If a state submits no plan, or one EPA cannot approve, EPA must issue a federal plan. EPA CO2 Emissions Guideline & State Plans THE CLEAN AIR ACT AND EXISTING POWER PLANTS THE “101” ON 111 (d) “Source-based” approach limited to options plants can do “within the fenceline” (e.g. heat-rate improvements) – yields limited reductions, higher costs “System-based” approach includes all options that reduce emissions –yields deeper reductions, lower costs Heat-rate improvements Shifting generation from coal to gas Increasing zero -emission power (renewables and nuclear) Increasing energy efficiency “Best System of Emission Reduction” 4

5. State-specific fossil-fleet average CO2 emission rates (lbs/MWh) for 2020 and 2025 Calculated by applying benchmark coal and gas rates to each state’s baseline (2008-2010) fossil generation mix Averaging allowed among all fossil units in state (including new units subject to the 111(b) standard) States may opt in to interstate averaging or credit trading Credit for incremental renewables and energy efficiency (equivalent to adding MWhs to denominator in calculating emission rate for compliance purposes) NRDC PROPOSAL SYSTEM-BASED, STATE SPECIFIC STANDARDS States may adopt alternative plans, including mass-based standards, provided they achieve equivalent emission reductions 5

6. STATES ALLOWED FLEXIBLE COMPLIANCE OPTIONS Heat rate reductions Cleaner power sources More renewablesInvestments in efficiency 6

7. Reference Case Moderate Case, Constrained Efficiency Ambitious Case, Full Efficiency Ambitious Case, Constrained Efficiency, PTC Ambitious Case, Constrained Efficiency Moderate Case, Full Efficiency NRDC SPECIFICATIONS LIST OF SCENARIOS 7

8. AEO 2013 demand projections Onshore wind costs: DOE/LBL 2012 Wind Technologies Report Nuclear units re-licensed All Cases NRDC SPECIFICATIONS LIST OF SCENARIOS Full Efficiency Cases: 482 TWh available in 2020 (Synapse) Constrained Efficiency Cases: 241 TWh available in 2020 Efficiency AssumptionsAmbition Assumptions 8

9. 9 EE Program Costs (cents/kWh) 2013-20202021-2030 Low2.32.6 Middle2.62.9 High3.23.5 Same energy efficiency potential (maximum MWhs saved) as in 2012 analysis Divided evenly into three cost blocks in each region, 482 TWh in total Energy Efficiency Quantity Assumptions Costs apply nationwide, do not vary across regions Derived based on utility program costs from Synapse and relative values from LBNL cost curve to estimate costs of each block Middle cost block is equal to the Synapse utility program cost Customer contribution at 45% of total cost is included in cost-benefit calculations Energy Efficiency Cost Assumptions NRDC SPECIFICATIONS SIMPLE ENERGY EFFICIENCY SUPPLY CURVE

10. 2012 Actual 2020 Reference NRDC POLICY CASES vs REFERENCE CASE GENERATION MIX: 2012 vs. 2020 REFERENCE CASE 10

11. NRDC POLICY CASES vs REFERENCE CASE PROJECTED GENERATION MIX IN 2020 11

12. 12 NRDC POLICY CASES vs REFERENCE CASE EMISSIONS 2014-2025 Historical Reference Case Moderate, Constrained Efficiency Moderate, Full Efficiency Ambitious, Constrained Efficiency Ambitious, Full Efficiency Ambitious, Constrained Efficiency, PTC - 500 1,000 1,500 2,000 2,500 3,000 200520062007200820092010201120122013201420152016201720182019202020212022202320242025 CO 2 Emissions (short tons)

13. NRDC POLICY CASES vs REFERENCE CASE EMISSIONS REDUCTIONS IN 2020: CO 2 SO 2 NO x 13

14. NRDC POLICY CASES vs REFERENCE CASE COSTS AND BENEFITS FROM REDUCED EMISSIONS IN 2020 14

15. STATE EMISSION RATE TRAJECTORIES UNDER NRDC POLICY AMBITIOUS CASES 2020 AND 2025 15

16. WESTERN REGIONAL RESULTS GENERATION MIX IN 2020 16

17. WESTERN REGIONAL RESULTS EMISSION REDUCTIONS IN 2020: CO 2 SO 2 NO x 17

18. PNW AND CA+OTHERWEST REGIONAL RESULTS CO2 CREDIT PRICES ($/Ton) 18 20202025 Moderate Full Efficiency CA + OTHERWEST 8.42 9.59 PNW 10.48 11.58 Moderate Constrained Efficiency CA + OTHERWEST 12.97 14.32 PNW 16.59 18.43 Ambitious Full Efficiency CA + OTHERWEST 11.19 11.56 PNW 10.48 11.58 Ambitious Constrained Efficiency CA + OTHERWEST 27.90 32.15 PNW 16.80 18.46 Ambitious Constrained Efficiency, PTC CA + OTHERWEST 15.05 17.40 PNW 13.42 15.09

19. Exporter states Importer states A multi-state compliance agreement would allow each state to plan around utility portfolios, whether or not they cross state lines INTERSTATE ISSUES FOR CONSIDERATION 19 Power leaves the state, emissions remain States exporting to CA: emissions already counted under AB-32? Ability to select compliance pathways potentially limited by decisions in exporting states Changes in out of state purchases reflected? Out of state renewables and REC purchases?

20. The Northwest Power and Conservation Council analyze three pathways to ~35% emissions reductions by 2029 for the region, including imported power All scenarios included 5900 MW of additional Energy Efficiency HIGHER AND LOWER COST OPTIONS TO REACH THE SAME EMISSIONS LEVELS: NORTHWEST EXAMPLE 20 $45/ton carbon tax: 14% revenue requirement increase Cap and trade with free allocation: 2% revenue requirement increase Phased coal retirement: 15% revenue requirement increase

21. nlong@nrdc.org syeh@nrdc.org