ICF International Forecasts That Power Sector Will Bear Primary Burden for GHG Reductions

FAIRFAX, Va.--(BUSINESS WIRE)--With consensus building among the Obama administration, members of Congress, and industry to support a long-term, economy-wide greenhouse gas (GHG) reduction goal of 80 percent, all stakeholders must assess the impact that proposed emission reduction requirements will have on the energy and allowance markets. In its recently released U.S. Emission and Fuel Markets Outlook, 2009 edition, ICF International (NASDAQ:ICFI), a leading energy and environmental analysis firm, projects that adoption of these measures could place the burden for two-thirds of the required reductions squarely on the electric power sector. The cost and market impacts of such a program depend largely on the design of the program and the cost and availability of new technology and emission offsets, which are examined through multiple scenarios in the report.

“By providing an integrated analysis, Outlook provides a comprehensive picture of the impact of carbon policy on gas and coal markets, all crucial factors in understanding the economics of power generation going forward”

The U.S. Emission and Fuel Markets Outlook examines the U.S. energy and environmental market dynamics of conventional air regulations and GHG emission control programs and their impacts on the power, transportation, residential, commercial, and industrial sectors. It is designed to help industry and government decision-makers understand new market fundamentals in the context of increasingly complex energy markets from both supply and demand perspectives. The study is based on the firm’s 30 years of forecasting experience and intimate knowledge of energy and power markets, as well as insights gained through use of the company’s own proprietary modeling tools.

Most congressional and industry recommendations for GHG regulation, including those proposed by Sens. Lieberman and Warner, Reps. Dingell and Boucher, the U.S. Climate Action Partnership (USCAP), and the Edison Electric Institute (EEI), call for multi-sector cap and trade programs to achieve GHG reductions. Cap and trade programs are designed to allow companies to make emissions reductions in the most cost-effective manner while still meeting environmental goals. Over time, the legal limits become tighter, allowing fewer emissions, until reduction goals are finally met. ICF anticipates that emissions “offsets,” emissions reductions that take place outside of the capped sectors, will play a critical role in reducing the cost to capped industries as a whole.

Although there is growing consensus regarding the need for these reductions, there are constraints to achieving them. “Electric power providers are locked into capacity that was built long before the development of GHG regulation,” said Steve Fine, ICF vice president. “It takes time to develop, site, and build new lower emitting plants as well as retrofit existing ones. Offset reductions from both domestic and international sources are critical compliance tools but are limited by the availability of quality offsets and by the competing demand from other countries, many of which have already implemented GHG reduction requirements.”

The report provides a comprehensive, integrated view of coal, natural gas, and U.S. allowance markets across all sectors of the economy. “By providing an integrated analysis, Outlook provides a comprehensive picture of the impact of carbon policy on gas and coal markets, all crucial factors in understanding the economics of power generation going forward,” stated Chris MacCracken, ICF senior manager.

ICF’s Outlook also examines alternative requirements for sulfur dioxide (SO₂), nitrogen oxides (NO_x), and mercury reductions. Last year, the U.S. Court of Appeals for the D.C. Circuit vacated the U.S. Environmental Protection Agency’s Clean Air Interstate and Clean Air Mercury rules, throwing the SO₂ and NO_x markets into disarray and wiping out the nascent mercury market. The study forecasts the impacts on SO₂ and NO_x allowance prices and control decisions of a number of possible outcomes, including a more stringent second phase cap on SO₂and NO_x, as well as the possibility of a command and control regulatory regime.

Further information on the U.S. Emission and Fuel Markets Outlook, 2009 edition, is now available at http://www.icfi.com/emissions.

About ICF International

ICF International (NASDAQ:ICFI) partners with government and commercial clients to deliver consulting services and technology solutions in the energy, climate change, environment, transportation, social programs, health, defense, and emergency management markets. The firm combines passion for its work with industry expertise and innovative analytics to produce compelling results throughout the entire program life cycle, from analysis and design through implementation and improvement. Since 1969, ICF has been serving government at all levels, major corporations, and multilateral institutions. More than 3,000 employees serve these clients worldwide. ICF’s Web site is www.icfi.com.

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