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In 1981, the Congress began to consider amending the Clean Air Act; that process is still underway. Among the critical areas being examined are the federal standards that regulate air pollutant emissions from new electric power plants using coal. Whether the regulations now in force can control pollutant emissions effectively without imposing undue cost burdens on the utilities and without affecting the distribution of U. S. coal production are critical questions in the Congressional debate.

The Congressional Budget Office has prepared this analysis of these interrelated issues, focusing both on the current standards and four alternative policies that would contribute to abating pollutant emissions from new coal-fired power plants. The study was undertaken at the request of Senator Robert T. Stafford, Chairman of the Senate Committee on Environment and Public Works. In keeping with the CBO's mandate to provide objective analysis, this paper offers no recommendations.

John Thornasian of CBO's Natural Resources and Commerce Division prepared the study, under the supervision of David L. Bodde and Everett M. Ehrlich. The author wishes to express special thanks to Hoff Stauffer of ICF, Incorporated for his assistance in preparing the coal-market analysis, to Johanna Zacharias for assistance in drafting the paper, and to Angela Z. McCollough for typing the manuscript and preparing it for publication. Valuable contributions also were made by Emily W. Fox and Paul Ginsburg of CBO, Richard L. Gordon of Pennsylvania State University, and J. Steven Herod of the U. S. Department of Energy.
 

Alice M. Rivlin
Director
April 1982
 
 

SUMMARY

CHAPTER I. INTRODUCTION

• Coal and Pollutant Emissions
• Regulatory Mechanisms
• Issues Before the Congress
• Plan of the Paper

CHAPTER II. STANDARDS AFFECTING THE ELECTRIC UTILITY INDUSTRY--THEIR EFFECTS ON EMISSIONS AND COSTS

• Clean Air Act Requirements Affecting Electric Utilities
• Effects on Pollutant Emissions
• Nationwide Pollution Control Costs to Utilities and to Electricity Consumers

CHAPTER III. POLLUTION CONTROL AND THE ELECTRIC UTILITIES' FINANCIAL CONDITION

• Financial Condition of the Industry and Regulation by Public Utility Commissions
• Contribution of Air Pollution Control Costs to Industry Capital Expenses
• The Effect of Air Pollution Control Costs on the Electric Utilities' Financial Position

CHAPTER IV. PROMOTING RELIANCE ON COAL AND THE EFFECTS OF THE CLEAN AIR ACT

• Prevailing Regulations for Coal Conversions
• Cost Analysis--The Potential Benefits of Reconversion or Replacement Compared to Continuation of Oil or Gas Use
• Inhibiting Factors
• The Immediate Prospects for Conversion

CHAPTER V. THE U. S. COAL MARKET AND THE CLEAN AIR ACT

• The Nature of the U. S. Coal Market
• The 1971 New Source Performance Standards and U. S. Coal Consumption
• The Revised NSPS and Projections for U. S. Coal Markets

CHAPTER VI. CHOICES FOR NEW SOURCE PERFORMANCE STANDARDS

• Alternative Emissions Standards
• Comparison of Alternative Emissions Standards
• Conclusions from the Analysis

APPENDIX A EFFECTS OF THE PSD PROGRAM

APPENDIX B. ANALYTICAL ASSUMPTIONS AND METHODOLOGY

APPENDIX C. FINANCIAL EFFECTS OF DIFFERENT ACCOUNTING METHODS FOR CONSTRUCTION WORK IN PROGRESS
 

TABLES
1.	NEW SOURCE PERFORMANCE STANDARDS FOR COAL-FIRED ELECTRIC UTILITIES
2.	NATIONAL AMBIENT AIR QUALITY STANDARDS AND ALLOWABLE INCREMENTS UNDER PREVENTION OF SIGNIFICANT DETERIORATION PROVISIONS
3.	BOND RATING DISTRIBUTION OF 100 RATED ELECTRIC UTILITIES AND SAMPLE SUBGROUPS WITH INVESTMENTS IN ENVIRONMENTAL CONTROL
4.	CAPITAL AND GENERATING COSTS FOR A 500-MEGAWATT OIL-FIRED, RECONVERTED OIL, AND NEW COAL-FIRED POWER PLANT
5.	PROJECTED REGIONAL GROWTH IN COAL-FIRED ELECTRICITY, TO YEAR 2000
6.	REGIONAL COAL PRODUCTION FOR 1979 AND PROJECTED TO THE YEAR 2000
7.	SUMMARY OF CURRENT AND ALTERNATIVE EMISSIONS STANDARDS
8.	TOTAL PROJECTED SULFUR DIOXIDE EMISSIONS AND COMPARISON OF COST EFFECTIVENESS UNDER CURRENT LAW AND ALTERNATIVE STANDARDS
9.	PROJECTED COST EFFECTS ON THE UTILITY INDUSTRY OF ALTERNATIVE EMISSIONS STANDARDS
10.	UTILITY COAL CONSUMPTION IN 1979 AND PROJECTED FOR THE YEAR 2000, BY REGION
11.	REGIONAL COAL PRODUCTION FOR THE YEAR 2000 UNDER EACH ALTERNATIVE
12.	ESTIMATED LOW SULFUR COAL PRODUCTION IN 2000, BY REGION
FIGURES
1.	ACTUAL AND PROJECTED POLLUTANT EMISSIONS FROM ELECTRIC UTILITY PLANTS--TOTAL AMOUNTS AND AVERAGE RATES
2.	FINANCIAL TRENDS IN INVESTOR OWNED ELECTRIC UTILITIES ACCORDING TO TWO MEASURES: 1970-1980
3.	U. S. COAL FIELDS AND PRODUCING REGIONS
4.	TOTAL U. S. COAL PRODUCTION BY REGION AND MINING METHODS: 1979
5.	MONTHLY DELIVERIES OF COAL TO U. S. ELECTRIC UTILITIES, BY SULFUR CONTENT: 1974-1980
6.	U. S. COAL SUPPLY REGIONS
7.	U. S. COAL DEMAND REGIONS
8.	U. S. COAL PRICES, BY SULFUR CONTENT: 1974-1980

 

As the Congress considers revising portions of the Clean Air Act, it confronts the sometimes difficult balance between two federal objectives:

• Achievement and maintenance of environmental quality, and
  
  
• Assurance of a reliable and low-cost supply of electricity derived from coal, the nation's most abundant domestic energy source.

At present, coal combustion in utilities furnishes roughly half of the nation's electricity--at the same time emitting nearly two-thirds of all the sulfur dioxide, a gaseous pollutant, released into the United States' atmosphere.

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