The report focuses on four power plant pollutants for which public emissions data are available: sulfur dioxide (SO2), nitrogen oxides (NOx), mercury, and carbon dioxide (CO2). These pollutants are associated with signifi cant environmental and public health problems, including acid deposition, global warming, fine particle air pollution, mercury deposition, nitrogen deposition, ozone smog, and regional haze. The report benchmarks, or ranks, each company’s absolute emissions and its emission rate (determined by dividing emissions by electricity produced) for each pollutant against the emissions of the other companies.
A key focus of the report is CO2 emissions, which are under increased scrutiny due to growing national and international concern about the threat of climate change. The U.S. Congress is currently considering the establishment of a national “cap-and-trade” system for regulating CO2 emissions from power plants and other industrial sources. Under a cap-and-trade system, a limit is placed on the overall emissions from covered sources by requiring power plant operators and other regulated sources to surrender “allowances” for the greenhouse gases they release to the atmosphere, and by limiting the number of allowances available each year.
An allowance is a permit to emit a discrete quantity of greenhouse gases (e.g., one ton of CO2). Companies can trade or hold allowances for future use, but at the end of each compliance period they must surrender allowances equal to their emissions.
This report evaluates diff erent options for allocating emissions allowances within the electric power sector, including options for distributing allowances to electric power producers and local electric utilities for consumer benefit. This analysis is intended to help inform the ongoing policy debate, as well as educate investors and companies which face potential fi nancial risks from foreseeable CO2-reducing regulations.