Implications of Clean Air Act Section 111(d) Compliance for North Carolina

Since the mid-2000s, North Carolina has increased natural gas generation, reduced coal dependence, established a renewable energy and energy-efficiency portfolio standard, and taken other actions that will assist it in meeting new carbon emissions targets under the U.S. Environmental Protection Agency’s proposed Clean Power Plan (CPP) promulgated under Clean Air Act (CAA) section 111(d). The CPP, as proposed, assigns state-specific emissions rate targets for existing fossil-fueled generators—targets adjusted for levels of renewable generation and energy efficiency measures. This analysis examines possible implications of meeting proposed CPP targets in North Carolina. To achieve those targets, North Carolina will increasingly shift from coal-fired to natural gas-fired electricity generation, incurring a modest rise in resource costs but creating a potentially significant revenue stream, which policy makers must decide how to allocate. Although the CPP will likely drive down overall emissions in North Carolina, the reductions are smaller than might be expected because North Carolina has already made headway in meeting its emissions targets and because new natural gas generation that is not covered under the 111(d) mass-based target will likely be a component of compliance. Alternative compliance measures, such as specific zero-carbon (e.g., nuclear and solar) investments and increased energy efficiency, reduce future natural gas dependence and hedge against natural gas price risk, though potentially at a cost higher than market-based compliance.