FAIRFAX, Va., March 14, 2001 (PRNewswire) ICF Consulting released today the industry's first integrated study of carbon emissions, analyzing the impact of various potential carbon regulatory scenarios on the electric generation and natural gas sectors.
The Carbon Emissions Market Outlook concludes that utility emissions can be reduced to levels experienced a decade ago without severe impacts on the generation sector, but not without incorporating crucial flexibility mechanisms such as international emissions trading and offsets.
Limiting carbon emissions from the electric power sector is feasible, but will require substantial flexibility to make compliance costs manageable for the electric sector and to keep electric prices sustainable for the economy. Given that 2010 electric sector emissions are forecast to be 50 percent higher than 1990 levels, flexibility is essential to any policy that would require the utility industry to return to those levels.
A policy centered solely around "on-system" reductions (costing well over $100/tonne) would be prohibitively expensive for the utility industry and the United States economy because of the impact on wholesale power prices.
"Our analysis shows how potential carbon regulations expose power companies and coal producers to considerable risk. Companies can manage that risk by taking a proactive role in the policy debate and by capturing high quality, low-cost carbon offsets," says John Blaney, Senior Vice President and Managing Director of ICF Consulting's private sector environmental practice. "ICF Consulting is unique in its capabilities to work with companies to minimize the risks and capture the opportunities associated with a potential carbon policy."
Optimizing Compliance Decisions in the Face of Regulatory Uncertainty
The release of ICF Consulting's Carbon Emissions Market Outlook sheds light on the huge regulatory uncertainty now facing electric generators and the rest of the economy as the industry tries to grapple with potential restrictions on carbon emissions. While President Bush recently decided against regulating electric sector carbon emissions, legislative bills are being re-introduced in Congress to regulate carbon emissions as part of a comprehensive multi-pollutant regulatory strategy. The President's announcement only serves to add to the tremendous uncertainty facing the electric power, coal, and natural gas industries.
The study goes beyond simple sensitivity analysis, providing an in-depth assessment of carbon regulatory developments. The Carbon Emissions Market Outlook provides a detailed discussion of the Kyoto Protocol and its flexibility mechanisms, including international trading, the Clean Development Mechanism and Joint Implementation. The study also incorporates the most up- to-date information regarding opportunities for non-carbon dioxide (CO2) greenhouse gas reductions (methane and other high global warming potential gases) to assess the importance of incorporating these greenhouse gas offsets into a utility's carbon compliance mix.
"A major challenge facing owners of generation assets today is to determine which emission offset investments make economic sense in the face of tremendous carbon regulatory uncertainty. Our Carbon Emissions Market Outlook shows that the economics of many "legitimate" offset decisions are attractive across a broad range of alternate carbon regulatory scenarios," observed Blaney. "We believe that an integrated analysis of the dynamic electric, fuel, and emissions market impacts of existing and potential future regulations is the only way to evaluate air compliance decisions."
Impacts of Regulatory Uncertainty on Natural Gas Markets Analyzed
ICF Consulting's Carbon Emissions Market Outlook includes an in-depth view of the natural gas market and its ability to deliver the gas necessary to comply with alternative restrictions on carbon emissions from the utility industry.
"Absent major technological breakthroughs, gas is the compliance tool of choice for utilities that need to reduce their CO2 emissions," says Blaney. "Our analysis shows that under a 1990 stabilization policy that includes no flexibility, we are looking at total gas consumption of 35 trillion cubic feet (TCF) per year in the United States. This includes utility, commercial, and residential use. Our extensive analysis of the gas resource base indicates to us that there will be sufficient resources to meet this tremendous increase in gas demand. We also believe that the infrastructure can be put in place to support such demand. That being said, the costs may be prohibitive. Our Carbon Emissions Market Outlook outlines a variety of potential carbon scenarios and evaluates the gas demand and well-head price resulting from the relative stringency of each carbon cap facing the electric utility sector."
ICF Consulting, with more than 30 years of experience, is one of the world's leading professional services firms advising clients on managing global resources in a sustainable way. ICF Consulting helps clients optimize energy resources, meet environmental challenges, foster economic and community development, enhance transportation projects and policies, and manage information technology resources. ICF Consulting's more than 750 employees are based in 16 offices around the globe, including offices in Bangkok, Fairfax, London, Los Angeles, Melbourne, Moscow, New York, San Francisco, Toronto, and Washington, D.C. The firm reported gross revenue of more than $100 million in 1999. For additional information, please visit our Web site at
SOURCE: ICF Consulting