Transcript Outline

Economic Impacts of Implementing a
Regional SO2 Emissions Program in the
Grand Canyon Visibility Transport Region
Prepared for:
Western Regional Air Partnership
Market Trading Forum
Prepared by:
ICF Consulting
January 2000
Agenda
 Overview of Analytic Framework and Inputs to REMI
 Detailed Discussion of Economic Impacts
2
Volume II
Overview of Analytic Framework
and Inputs to REMI
3
Volume II
Regional Economic Impact
 Regional economic impacts were analyzed using
REMI’s Policy Insight Model.
 A10-region, 53 sector version of REMI’s model was
acquired to simulate the regional economic impact of
regional SO2 reduction policies at the state level for
the the nine GCVTC states and the single tribal region.
 Key drivers to REMI were derived from the economic
modeling using ICF’s IPM.
4
Volume II
Key Inputs to REMI
 Key inputs to REMI derived from IPM are:
– Non-fuel expenditures resulting from the policy
• Total Capital Investment
• Annual incremental cost
– Changes in wholesale electricity prices
– Changes in fuel production and consumption
– Net revenue from permit allocations.
 All impacts from IPM were characterized by state,
sector and year.
5
Volume II
Key Drivers: Non-Fuel Expenditures
Non-fuel Compliance Costs (by state and sector)
• Incremental Capital Investments
• Incremental Annual Fixed and Variable O&M
Annualized Cost (by State and Sector)
Expenditures from Installation of Equipment
(scrubbers, new generation or retrofits)
• Capital expenditures are split between
construction and equipment purchases
• Regional Purchase Coefficients (RPC) in REMI
determines allocation of expenditures across
regions
• REMI allocates regional expenditures by
sector and input mix.
•Secondary effects are on household income,
wages, prices,
6
•Net Change in annualized production costs =
change in revenue+change in annual capital and
FOM+Net fuel cost changes+net permit revenues
•Electric generators pass-through unrecoverable
cost changes or excess revenues to shareholders
> Share ownership - national and
distributed based on household income
• Other sectors experience decreased profitability
due to increased production cost
> Sectors that compete regionally pass-through
costs via to producers and consumers
> Sectors that compete nationally experience a
change in market share
Volume II
Annual Incremental Cost
 Annual incremental costs, projected by IPM, denote the compliance cost
of the policy and are incremental to the base case.
 Annual incremental cost consist of changes in capital investment and
changes in variable and fixed operating cost.
 Annual incremental costs affect the regional economy in two main ways.
7
–
Non-electric industries that compete nationally experience a decrease in
competitiveness, while non-electric industries that compete locally change their product
price. Electric generators pass through unrecoverable cost changes or excess revenues
to shareholders.
–
Capital investments spur construction and increase equipment purchase.
Volume II
Incremental Annual Cost in 2013
(millions 1997$)
State
AZ
CA
CO
ID
NM
NV
OR
UT
WY
Tribal
Total
8
Minority
10
3
-7
5
-14
-9
4
11
8
11
MTF
25
-31
-19
1
15
-33
-9
12
28
20
9
EPA
32
-54
-26
2
19
-44
-9
15
40
26
1
Environ- Command &
mental
Control
62
37
-130
-1
-49
55
5
-2
38
1
-83
4
-9
4
25
11
75
102
50
-16
211
Volume II
Incremental Annual Cost in 2018
(millions 1997$)
State
AZ
CA
CO
ID
NM
NV
OR
UT
WY
Tribal
Total
9
Minority
5
6
15
1
5
-2
2
1
24
3
60
MTF
25
-22
39
1
10
2
16
41
9
121
EPA
41
-39
43
1
12
3
2
20
51
11
145
Environ- Command &
mental
Control
68
40
-37
-2
33
47
1
-8
5
-3
-6
-1
4
21
12
199
108
1
2
274
210
Volume II
Annual Incremental Cost
(Continued)
 Sources located in AZ, CO and WY bear most of the
cost (primarily capital investment costs) associated
with the command & control scenario because a large
share of the BART-eligible sources are located in
these states.
 Sources located in CA realizes lower costs in 2013
and 2018 under the trading scenarios because of the
lower level of repowering of existing oil/gas steam
units relative to the Baseline.
10
Volume II
Annual Incremental Cost
(Continued)
 Similarly, sources located in CO and WY realize lower
costs in 2013 under the trading scenarios relative to
the baseline because repowering of existing ICI boilers
is postponed in anticipation of the policy in 2018.
11
Volume II
Trading Cases –
Incremental Cost for GCVTC States
in 2018
Environmental
$274 MM
500
M illion 1997 $
400
EPA
$149 MM
300
200
Minority
$61 MM
100
0
-1 0 0
MTF
$123 MM
-2 0 0
V a r ia b le O & M
12
F ixe d O & M
Fuel
C a p ita l
Volume II
Incremental Annual Capital Cost in 2013
(millions 1997$)
State
AZ
CA
CO
ID
NM
NV
OR
UT
WY
Tribal
Total
13
Minority
MTF
1
0
-3
0
1
-4
-2
0
2
1
-4
Environmental
EPA
3
-5
-9
0
2
-9
-2
-1
4
3
-14
4
-9
-12
0
2
-12
-2
-1
6
4
-20
8
-23
-25
0
5
-25
-2
-2
11
9
-44
Command &
Control
21
-1
28
0
3
3
4
6
43
0
107
Volume II
Incremental Annual Capital Cost in 2018
(millions 1997$)
State
AZ
CA
CO
ID
NM
NV
OR
UT
WY
Tribal
Total
14
Minority
MTF
-1
0
3
2
2
-1
3
-1
4
-2
9
EPA
3
-5
11
2
4
-1
3
3
6
-3
23
4
-9
10
2
3
-1
3
2
8
-5
17
EnvironCommand &
mental
Control
-22
22
-27
-1
-24
27
2
0
-10
5
-16
0
3
4
-20
7
20
45
-33
1
-127
110
Volume II
Key Drivers: Changes in Wholesale
in Electricity Prices
Electric Distribution Companies
•Changes in electricity prices affects industrial, commercial and residential customers.
•Changes in wholesale electricity prices affects utility revenues and shareholder profits.
Commercial/Industrial Users of Electricity
Residential User of Electricity
• Changes in electricity prices for the
commercial/industrial sector affects the cost of
raw material inputs.
• Changes in electricity prices affects residential
consumers as change in Consumer Price Index
(CPI) and purchasing power
• Non-electric sectors that compete regionally
are able to pass-through input cost changes to
their consumers.
• Changes in CPI directly affects real after-tax wage
rate, and has indirect effects on migration, labor
force and government services.
• Sectors that compete nationally experience a
change in competitiveness relative to other
regions.
15
Volume II
Wholesale Electricity Prices
 Projected changes (relative to the baseline) in
wholesale energy prices from IPM are used to derive
changes in retail energy prices paid by residential,
commercial and industrial sectors.
 We assume competitive market conditions where
changes in wholesale energy prices are the only price
impacts observed by end users under a policy. Any
unrecoverable costs are absorbed by shareholders;
revenues in excess of costs are passed on to
shareholders in the form of increased dividends.
16
Volume II
Wholesale Electricity Prices
(Continued)
 Wholesale energy prices in IPM represent the variable
cost of the marginal generating unit and simulate
continuously clearing competitive electric generation
markets.
 Electricity prices only change if the variable cost of
production of the marginal unit changes.
 Electricity price impacts in the command & control
scenario are small relative to the trading scenarios
because capital investment (which does not directly
influence variable operating cost) dominate the
compliance strategy under the command & control
scenario.
17
Volume II
Wholesale Electricity Prices
(Continued)
 Since fuel costs (which directly influence variable cost
of operation) dominate incremental cost under the
trading scenarios, electricity price impacts under the
trading scenarios are relatively more pronounced.
 Decline in electricity prices in 2013 represent inter-
temporal tradeoffs in anticipation of the policy in 2018.
18
Volume II
Wholesale Electricity Price Impacts
2013
S ta te
M i n o r i ty
1 9 9 7 m ills
MTF
EPA
E n vi r o n m e n ta l
p e rc e n t 1 9 9 7 m ills
p e rc e n t 1 9 9 7 m ills
p e rc e n t
1 9 9 7 m ills
/k W h
ch a n g e
/k W h
ch a n g e
/k W h
ch a n g e
AZ
- 0 .1 7
- 0 .7 %
- 0 .3 2
- 1 .3 %
- 0 .4 3
CA
- 0 .1 9
- 0 .7 %
- 0 .3 3
- 1 .2 %
CO
- 0 .1 7
- 0 .7 %
- 0 .3 2
ID
- 0 .1 9
- 0 .7 %
NM
- 0 .1 9
NV
C o m m a n d & C o n tr o l
p e rc e n t 1 9 9 7 m ills
p e rc e n t
/k W h
ch a n g e
/k W h
ch a n g e
- 1 .7 %
- 0 .8 1
- 3 .2 %
- 0 .0 5
- 0 .2 %
- 0 .4 0
- 1 .5 %
- 0 .7 9
- 2 .9 %
- 0 .0 3
- 0 .1 %
- 1 .3 %
- 0 .4 3
- 1 .7 %
- 0 .8 1
- 3 .2 %
- 0 .0 5
- 0 .2 %
- 0 .3 3
- 1 .2 %
- 0 .4 1
- 1 .6 %
- 0 .8 0
- 3 .0 %
- 0 .0 3
- 0 .1 %
- 0 .7 %
- 0 .3 3
- 1 .2 %
- 0 .4 1
- 1 .5 %
- 0 .8 0
- 3 .0 %
- 0 .0 3
- 0 .1 %
- 0 .1 8
- 0 .7 %
- 0 .3 3
- 1 .2 %
- 0 .4 1
- 1 .6 %
- 0 .8 0
- 3 .0 %
- 0 .0 4
- 0 .2 %
OR
- 0 .1 9
- 0 .7 %
- 0 .3 3
- 1 .2 %
- 0 .4 1
- 1 .5 %
- 0 .8 0
- 3 .0 %
- 0 .0 3
- 0 .1 %
UT
- 0 .1 8
- 0 .7 %
- 0 .3 2
- 1 .2 %
- 0 .4 2
- 1 .6 %
- 0 .8 0
- 3 .1 %
- 0 .0 4
- 0 .2 %
WY
- 0 .1 7
- 0 .7 %
- 0 .3 2
- 1 .3 %
- 0 .4 3
- 1 .7 %
- 0 .8 1
- 3 .2 %
- 0 .0 5
- 0 .2 %
T rib a l
- 0 .1 7
- 0 .7 %
- 0 .3 2
- 1 .3 %
- 0 .4 3
- 1 .7 %
- 0 .8 1
- 3 .2 %
- 0 .0 5
- 0 .2 %
A ve r a g e
- 0 .1 8
19
- 0 .3 2
- 0 .4 2
- 0 .8 0
- 0 .0 4
Volume II
Wholesale Electricity Price Impacts
2018
S ta te
M i n o r i ty
1 9 9 7 m ills
MTF
EPA
E n vi r o n m e n ta l
p e rc e n t 1 9 9 7 m ills
p e rc e n t 1 9 9 7 m ills
p e rc e n t
1 9 9 7 m ills
/k W h
ch a n g e
/k W h
ch a n g e
/k W h
ch a n g e
AZ
0 .1 8
0 .7 %
0 .3 1
1 .3 %
0 .4 1
CA
0 .2 9
1 .1 %
0 .5 0
2 .0 %
CO
0 .1 8
0 .7 %
0 .3 1
ID
0 .2 4
1 .0 %
NM
0 .2 6
NV
C o m m a n d & C o n tr o l
p e rc e n t 1 9 9 7 m ills
p e rc e n t
/k W h
ch a n g e
ch a n g e
1 .7 %
0 .9 6
3 .9 %
-
0 .0 %
0 .6 3
2 .5 %
1 .2 2
4 .8 %
0 .0 5
0 .2 %
1 .3 %
0 .4 1
1 .7 %
0 .9 6
3 .9 %
-
0 .0 %
0 .3 7
1 .5 %
0 .5 1
2 .0 %
1 .1 2
4 .5 %
0 .0 3
0 .1 %
1 .0 %
0 .3 9
1 .5 %
0 .5 3
2 .1 %
1 .1 6
4 .6 %
0 .0 4
0 .2 %
0 .2 4
0 .9 %
0 .4 1
1 .6 %
0 .5 2
2 .1 %
1 .0 9
4 .4 %
0 .0 3
0 .1 %
OR
0 .2 6
1 .0 %
0 .3 9
1 .5 %
0 .5 3
2 .1 %
1 .1 6
4 .6 %
0 .0 4
0 .2 %
UT
0 .2 2
0 .9 %
0 .3 7
1 .5 %
0 .4 8
1 .9 %
1 .0 4
4 .2 %
0 .0 2
0 .1 %
WY
0 .1 8
0 .7 %
0 .3 1
1 .3 %
0 .4 1
1 .7 %
0 .9 6
3 .9 %
-
0 .0 %
T rib a l
0 .1 8
0 .7 %
0 .3 1
1 .3 %
0 .4 1
1 .7 %
0 .9 6
3 .9 %
-
0 .0 %
A ve r a g e
0 .2 2
20
0 .3 7
0 .4 8
1 .0 6
/k W h
0 .0 2
Volume II
Fuel Mix Impacts in REMI
Fuel Production and Consumption
• Changes in the value of coal produced
• Changes in the value of gas consumption by the electric utility and non-utility sector
• Changes in fuel expenditures by sector and region is modeled as a change
in dividends for public-utility sector companies and as production costs for nonpublic utility sector Companies
Coal
Gas
• Change in the value of coal produced affects
the mining sector in REMI
• REMI determines the share of gas consumption
that is produced within a particular region
21
Volume II
Fuel Production & Consumption
 Regional coal production is a key driver to the REMI
model and is based on changes in coal production by
state as projected by IPM.
 A coal producer experiences revenue losses (gains)
when less (more) coal is produced and coal prices
decrease (increase) due to lower (higher) quantity of
coal demanded.
 Changes in coal production have been valued at the
market clearing mine-mouth price based on IPM
projections.
 Changes in gas consumption, based on IPM
projections, also feed into the REMI model.
22
Volume II
Impacts on Coal Markets
 Coal prices and coal production in IPM are
endogenously determined in IPM and are based on
coal supply curves.
 Coal revenues increase under the trading
scenarios. The total increase in the GCVTC region
is less than a percent (0.7 %) in 2018 under the
Environmental scenario.
 Coal revenues decline under the Command &
Control scenario. The total decline in the GCVTC
region is less than a percent (0.5 %) in 2018.
23
Volume II
Impacts on Coal Markets
Trading Scenarios
 Although coal-based generation (and coal
consumption) decreases in the 9 states GCVTC
region in the Trading scenarios, coal production in
the same 9 state region increases.
 Revenues from coal production from the 9 states
region increases as the SO2 reduction requirement
becomes more stringent across the trading
scenarios.
 Increase in coal revenues is largely due to
increased exports of western coals to other parts of
the country.
24
Volume II
Impacts on Coal Markets
Trading Scenarios (Continued)
 Increased demand for western coals is offset by
decreased demand for coal from other regions of the
country, predominantly the mid-west.
 Increased export of western coal to other parts of
country reflect:
– Decreased demand for coal in the GCVTC region.
– Less stringent national SO2 cap due to SO2
reductions in the GCVTC region. This leads to
increased coal generation in the rest of the country.
25
Volume II
Impacts on Coal Markets
Command & Control Scenario
 Under the command and control scenario coal
revenues in the GCVTC region declines.
 Command & control is a capital intensive program
that does not lower coal purchases in the GCVTC
region:
– Coal consumption increases slightly in the
GCVTC region.
– Increased coal demand in the 9 state region is
largely the result of additional new coal capacity.
26
Volume II
Impacts on Coal Markets
Command & Control Scenario
(Continued)
 Increased coal demand in GCVTC region:
– Puts upward pressure on western coal prices
and plants capable of receiving non-western coal
switch away from western coal.
– Decline in export of western coal to other parts
of the country leads to a decline in coal
production in the western states.
 Production cuts in the western states are balanced
by production increases in the Appalachian region.
27
Volume II
Coal Revenue Impacts by State in
2013
(millions 1997$)
S tate
M TF
EPA
Com m and
m ental
& C o n t ro l
AZ
-
-
-
-
-
CA
-
-
-
-
-
CO
-
-
-
-
-
ID
-
-
-
-
-
NM
-
-
-
-
NV
-
-
-
-
-
OR
-
-
-
-
-
UT
-
-
-
-
WY
Trib a l
To t a l
28
M in o rit y
E n viro n -
2.87
2.87
2.93
2.93
2.95
2.95
2.85
2.85
-0 . 0 1
-0 . 3 1
-3 0 . 7 0
-0 . 1 2
-3 1 . 1 4
Volume II
Coal Revenue Impacts by State in
2018
(millions 1997$)
S tate
M TF
EPA
Com m and
m ental
& C o n t ro l
AZ
-
-
-
-
-
CA
-
-
-
-
-
CO
-
-
-
ID
-
-
-
NM
-
NV
-
-
-
-
-
OR
-
-
-
-
-
UT
-
21.02
30.20
52.08
-
WY
4.65
-6 . 8 0
-6 . 3 0
-3 0 . 5 8
-1 2 . 6 8
Trib a l
-
-0 . 1 2
-6 . 2 5
-1 9 . 0 3
-0 . 1 2
To t a l
29
M in o rit y
E n viro n -
4.65
-0 . 0 1
14.09
0.00
17.65
13.40
-0 . 2 2
15.65
-0 . 0 1
-1 2 . 8 1
Volume II
Gas Consumption
 Change in gas consumption is relatively small under
the Command & Control scenario because the policy
does not create incentives to shift to natural gas.
 Gas consumption increases with the stringency of the
trading program because increased generation from
gas is a significant compliance strategy.
30
Volume II
Gas Consumption by State in 2013
(millions 1997$)
S tate
31
E n viro n -
Com m and
M in o rit y
M TF
EPA
m ental
& C o n t ro l
AZ
9
20
26
53
0
CA
2
-2 5
-4 2
-1 0 0
0
CO
-3
-6
-9
-1 8
6
ID
0
1
2
5
-2
NM
4
12
16
33
-2
NV
-8
-2 0
-2 6
-5 3
5
OR
-6
-6
-6
-6
-3
UT
4
11
14
27
0
WY
8
21
30
60
44
Trib a l
6
14
19
37
0
To t a l
16
22
24
38
48
Volume II
Gas Consumption by State in 2018
(millions 1997$)
S tate
Com m and
M in o rit y
M TF
EPA
m ental
& C o n t ro l
AZ
7
17
24
92
0
CA
5
-1 6
-2 7
-4
-1
CO
7
16
22
59
0
-1
-1
-1
0
0
NM
3
6
9
29
0
NV
1
4
6
11
0
OR
-6
-6
-6
-6
-3
UT
3
8
12
39
0
WY
7
16
22
188
47
Trib a l
5
12
16
48
0
31
56
77
456
43
ID
To t a l
32
E n viro n -
Volume II
Permit Trading Impacts in REMI
Revenue Impacts from Allocations
• Allowance allocation is compared to projected emissions to determine net allowance
position by sector and geographic area
• Revenue impacts from allocation depend on net allowance position and permit price
Non-Tribal
Tribal
• Revenue impacts from allocations for sectors
that compete regionally flows through as
changes in dividends for shareholders
• Revenue impacts from allocation to tribal areas
flow through as changes in tribal government
expenditures.
• Revenue impacts from allocations for sectors
that compete nationally flow through to the
production cost of that sector
33
Volume II
Allowance Allocation Revenues
 Revenues (or expenses) from net allowance sales (or
purchases) represent the net position of each state
given the initial distribution of allowances and
projected emissions.
 Data on the distribution of allowances by sector and
state were provided by MTF participants.
 Allowance prices and the emissions in each state were
projected by IPM.
 A state sells allowances if its allocation exceeds its
emissions and buys allowances if its emissions
exceeds its allocations.
34
Volume II
Allowance Revenue Impacts in
2018 (millions 1997$)
M in o rit y
M TF
EPA
E n viro n m e n t a l
AZ
3.5
3.2
6.5
17.8
CA
-0 . 4
-4 . 1
-7 . 5
-2 4 . 8
CO
-5 . 3
2.9
-0 . 4
5.9
1.6
-0 . 4
-2 . 0
-1 1 . 4
NM
-2 . 6
-2 . 9
-2 . 4
-3 1 . 0
NV
-7 . 6
-1 2 . 6
-1 7 . 8
-2 0 . 3
OR
-2 . 0
-5 . 5
-9 . 0
-2 2 . 1
UT
-9 . 1
-8 . 6
-1 3 . 7
-2 4 . 1
WY
7.6
6.8
14.4
47.6
14.2
22.4
30.7
61.9
ID
Trib a l
N u m b e rs m a y n o t t o t a l d u e t o ro u n d in g
35
Volume II
Detailed Discussion of Economic
Impacts
36
Volume II
Economic Impacts
 For the purposes of this analysis, three indicators of
economic impacts are reported:
– Employment,
– Gross regional product, and
– Real personal disposable income.
37
Volume II
Review of Key Assumptions
 Sectors that compete regionally are able to flow through changes
in production cost to prices.
 Sectors that compete nationally are unable to flow through
production cost increases to price and pass-through these
changes to shareholders (as changes in profits).
 Electric utility sector operates in a competitive regional market. To
the extent that price increases are reflected in wholesale electric
prices, they are recovered. Excess recovery or under-recovery
are flowed through to shareholders.
 Shareholders are distributed across the country and are
approximated by the distribution of personal income. On this
basis, approximately twenty percent of the shareholders are
estimated to be located in the nine western states and tribal
region.
38
Volume II
Economic Impacts for GCVTC
States in 2013
Changes
Employme nt
Minority
MTF
EPA
Environ-
Command
mental
& Control
1,965
3,738
4,180
7,801
4,473
127
241
264
489
244
94
172
217
410
84
GRP (Million 92$)
Re a l Disp Pe rs Inc (Million 92$)
Note: Totals might not match due to rounding.
E n viro n - C o m m a n d
% Change
M in o rit y
M TF
EPA
m ental
& C o n t ro l
Em p lo ym e n t
0.005
0.010
0.012
0.022
0.012
GRP
0.006
0.012
0.013
0.023
0.012
R e a l D i sp P e r s I n c
0.007
0.013
0.016
0.030
0.006
39
Volume II
Economic Impacts for GCVTC
States in 2018
Environ- Command
Changes
Minority
MTF
EPA
mental
& Control
-926
-1,418
-1,434
-7,918
-625
GRP (Million 92$)
-29
-43
-22
-271
-42
Real Disp Pers Inc (Million 92$)
-78
-133
-159
-525
-44
Employment
Note: Totals might not match due to rounding.
% Change
Employment
GRP
Real Disp Pers Inc
40
Minority
-0.002
-0.001
-0.005
MTF
-0.004
-0.002
-0.009
EPA
-0.004
-0.001
-0.011
Environ- Command
mental & Control
-0.021
-0.002
-0.012
-0.002
-0.036
-0.003
Volume II
Regional Economic Impacts
 Changes in the three economic indicators are positive
in 2013 and negative in 2018 by a similar order of
magnitude.
 The magnitude of the changes in the three economic
indicators are all very small, with no change in an
economic indicator being larger than 0.05 percent at
the regional level.
 Impacts on the three economic indicators are relatively
small because the cost of the SO2 reduction policies
are all relatively small. Even the highest cost of $274
million to all sectors is well under one percent of the
total production cost of the electric utility sector alone.
41
Volume II
Command & Control Scenario
 Economic impacts from the command and control
scenario are positive in 2013 and comparable to the
EPA trading scenario.
 Increased economic activity in 2013 under the
command and control scenario reflects the surge in
capital investment that begins in 2013.
 The one-time surge in employment in 2013 is primarily
due to capital investments under the command and
control scenario. Employment levels decline with
some lag.
42
Volume II
Command & Control (Continued)
 Economic impacts in 2018 under the command and
control scenario, however, are negative, but of a more
modest magnitude.
 Command and control scenario is a capital intensive
program primarily affecting the electric utility sector.
 Because under the command and control scenario
most costs impacts are capital, electricity price impacts
in competitive markets are relatively small.
43
Volume II
Command and Control
 Declines in gross regional product and real personal
disposable income occur in 2018 under the command
and control scenario after positive impacts in 2013.
 For the command and control scenario, the longer-
term economic equilibrium would be expected to
approach pre-policy levels due to the fact that the
policy reflects a one-time shock to the region that does
not systematically alter the non-utility sectors.
 Shareholders of the utility sector continue to bear the
costs of the policy. However, these effects are
distributed nationally, with, of the nine state area, only
California bearing a significant share of this impact.
44
Volume II
Trading Scenarios
 All trading scenarios yield an overall increase in all
three economic indicators in 2013, and an overall
decrease in the economic indicators in 2018.
 The dampened decline in gross regional production in
2018 under the EPA scenario represents the lagged
effects of 2013. EPA trading scenario, unlike the other
trading scenario, has no incremental cost in 2013.
45
Volume II
Trading Scenarios Impacts
(Continued)
 Economic impacts from the environmental scenario
are greater than the other trading scenarios because
in these scenarios nationally competing, non-utility
sectors bear a larger portion of the compliance cost
relative to the other trading scenarios.
 Thus, they loose competitiveness and market share
with attendant impacts on employment, wage rates,
and household income.
 The Environmental Scenario also has the lowest level
of capital investment, lower than the Base Case, thus
employment impacts are largest.
46
Volume II
Trading Scenarios Impacts
(Continued)
 California bears a large share of the impacts in employment, GRP
and income relative to other states.This is primarily due to its
relative size. California is the largest of the nine states, in terms of
employment, income and output.
– Income was used as the proxy for shareholder distribution.
Sixty-six percent of GCVTC utility shareholders are assumed
to be located in California.
– GCVTC electric utility shareholders realize a loss in income
when increased electric utility expenditures due to the policy
are not recovered through electric prices.
– California experiences a larger than average increase in
electric prices which increases the cost of production for all
other industries.
47
Volume II
Trading Scenarios Impacts
(Continued)
 In addition, the mix of industry in California affects the
relative impacts.
– Many of the industries located in California compete nationally
and are not able to pass through the increased production
cost from higher electricity prices.
– These industries because less competitive as a result of the
the increased production cost from electric price increase.
– Loss of competitiveness leads to lower output, resulting in
lower employment, reduced income and lower gross regional
product.
48
Volume II
Impact on Gross Regional Product
in 2013
(millions 1992$)
State
AZ
CA
CO
ID
NM
NV
OR
UT
WY
Tribal
Total
49
Minority
18
48
21
2
0
6
6
7
12
7
128
MTF
40
73
32
4
17
7
11
14
26
18
242
EPA
48
64
41
4
18
3
14
18
32
23
265
Environmental
90
113
75
7
32
9
29
32
58
45
490
Command
& Control
61
79
31
8
1
-9
24
13
33
2
244
Volume II
Impact on Gross Regional Product
in 2018
(millions 1992$) E n viro n S tate
50
M in o rit y
M TF
0.2
Com m and
EPA
m ental
& C o n t ro l
4
-7 5
7
AZ
-4
CA
-5 3
-1 0 2
-1 2 6
-2 5 9
-2 5
CO
13
39
47
76
-5
ID
-4
-7
-9
-6 1
0
NM
1
1
1
-2 7
1
NV
4
-8
19
37
-1 1
OR
-9
-1 7
-2 6
-7 4
-1
UT
-3
20
28
24
0
WY
16
13
18
65
-9
Trib a l
11
19
20
21
1
To t a l
-2 9
-4 3
-2 2
-2 7 1
-4 2
Volume II
Impact on Employment in 2013
(Number of Workers)
State
AZ
CA
CO
ID
NM
NV
OR
UT
WY
Tribal
Total
51
Minority
298
762
376
44
-43
110
74
117
132
100
1,969
MTF
688
1,135
518
79
244
147
205
215
268
247
3,745
EPA
850
1,078
682
79
251
58
249
270
351
314
4,183
Environ- Command
mental & Control
1,595
1,041
1,906
1,027
1,253
746
150
120
411
19
185
-173
579
377
486
279
618
1,005
618
30
7,801
4,471
Volume II
Impact on Employment by State in
2018
(Number of Workers)
State
AZ
CA
CO
ID
NM
NV
OR
UT
WY
Tribal
Total
52
Minority
-125
-963
165
-80
-25
42
-167
-101
132
198
-801
MTF
-104
-1,775
585
-135
-36
-162
-314
106
109
312
-1,413
EPA
-88
-2,197
679
-186
-74
265
-466
140
126
371
-1,429
Environ- Command
mental & Control
-1,708
108
-4,285
-459
641
-45
-1,247
1
-653
22
439
-193
-1,281
-34
-307
11
133
-48
346
15
-8,895
-622
Volume II
Impact on Real Disposable
Personal Income by State in 2013
(millions 1992$)
E n viro n - C o m m a n d
S tate
53
M in o rit y
M TF
EPA
m ental
& C o n t ro l
AZ
13
30
39
72
23
CA
31
48
48
91
20
CO
21
41
56
104
11
ID
2
3
3
6
4
NM
0
7
8
14
1
NV
9
7
19
38
-8
OR
6
11
14
29
9
UT
5
9
11
21
6
WY
4
8
10
17
16
Trib a l
3
8
10
19
1
To t a l
94
172
217
410
84
Volume II
Impact on Real Disposable
Personal Income by State in 2018
(millions 1992$)
E n viro n - C o m m a n d
S tate
54
M in o rit y
M TF
EPA
m ental
& C o n t ro l
AZ
-7
-1 1
-1 2
-9 7
3
CA
-5 2
-9 7
-1 2 1
-2 1 3
-2 9
CO
2
11
13
8
-2
ID
-6
-8
-1 1
-1 0 9
0
NM
-2
-3
-5
-2 4
0
NV
-1
-1 0
2
3
-7
OR
-1 3
-2 2
-3 1
-6 9
-2
UT
-5
-1
-1
-1 8
0
WY
4
3
3
-6
-5
Trib a l
3
5
5
1
0
To t a l
-7 8
-1 3 3
-1 5 9
-5 2 5
-4 4
Volume II
Sensitivity Analysis
 Regional economic impacts are sensitive to assumptions about
the recovery from ratepayers of compliance cost borne by the
electric generating industry.
 We assumed that retail prices reflect competitive prices in
wholesale markets based on marginal energy costs. Thus,
revenues in excess of production costs accrue to shareholders.
 However, an alternate assumption that the electric utility sector
may be able to fully recover its costs through price flow-through to
end user has a more extended impact on the regional economy.
55
Volume II
Sensitivity Analysis (Continued)
 Under this alternate assumption of guaranteed cost
recovery, the production cost of other sectors, using
electricity as an input, increases.
 The following three slides detail the regional economic
impact of a command and control scenario for 2013
and 2018 under these alternate assumptions
regarding cost recovery.
56
Volume II
Economic Impacts by State
Sensitivity Analysis
AZ
CA
CO
ID
NM
NV
OR
UT
WY
Tribal
Total
57
Command & Control Scenario
Changes in Gross Regional Product
2013
2018
Million 92 $
Percent Million 92 $
-2
0.00
-89
63
0.10
-55
-26
-0.02
-100
4
0.01
-3
-4
-0.01
-8
6
0.01
-3
9
0.01
-19
-1
0.00
-22
26
0.13
-21
0
0.00
-3
75
-323
Percent
0.00
0.00
-0.06
-0.01
-0.02
0.00
-0.01
-0.03
-0.10
-0.01
Volume II
Economic Impacts by State
Sensitivity Analysis
AZ
CA
CO
ID
NM
NV
OR
UT
WY
Tribal
Total
58
Command & Control Scenario
Changes in Real Disposable Income
2013
2018
Million 92 $
Percent Million 92 $
-37
-0.03
-76
28
0
-16
-39
-0.03
-80
1
0.01
-1
-2
-0.01
-5
5
0.01
5
2
0
-8
-4
-0.01
-14
11
0.09
-13
-1
-0.01
-1
-36
-209
Percent
-0.06
0
-0.06
0
-0.01
0.01
0
-0.03
-0.11
-0.01
Volume II
Economic Impacts by State
Sensitivity Analysis
AZ
CA
CO
ID
NM
NV
OR
UT
WY
Tribal
Total
59
Command & Control Scenario
Changes in Employment
2013
2018
Persons
Percent
Persons
-93
0.00
-1,400
865
0.00
-873
-310
-0.01
-1,600
49
0.01
-5
-69
-0.01
-124
63
0.00
19
155
0.01
-257
42
0.00
-334
805
0.25
-273
-3
0.00
-3
1,504
-4,850
Percent
-0.05
0.00
-0.05
-0.01
-0.01
0.00
-0.01
-0.02
-0.08
-0.01
Volume II
Conclusions
 Change in employment, gross regional product and disposable
income are by state, and may appear to be more significant if the
economic impacts are concentrated within the certain localities of
a state. The modeling framework was constructed to report at the
state level.
 Employment, gross regional product and disposable income
increase just before a policy takes effect and decrease after the
policy takes effect.
 Changes in employment, gross regional product and disposable
income represent anticipated fluctuations in economic cycle due
to policy.
60
Volume II