EPA Announces Landmark Rule on Carbon Emissions

 With this week’s announcement of the new EPA rules for existing power plants and carbon emissions, some are calling June 2nd, 2014 the most important day of President Obama’s second term. What makes the new proposed rule on carbon pollution emission guidelines so note-worthy?


Under direction of the President’s Climate Action Plan, the EPA has proposed a suite of carbon reduction rules targeting the power sector, specifically coal- and natural gas-fired electric generating units. In the first proposed rule, emissions caps are set on newly constructed power plants. On June 2nd, the EPA proposed rules for existing and modified and reconstructed power plants, now called the Clean Power Plan.

Summary of the “Clean Power Plan”

The Clean Power Plan will cut carbon pollution from existing electric generating units in the power sector by 30 percent from 2005 levels by setting emission goals for individual states. The Clean Power Plan has two main parts: state-specific goals to lower carbon pollution from power plants and guidelines for states to develop plans for meeting the goals. States must meet their goal by 2030, while showing progress by 2020. Once a state submits a complete plan, EPA will review the plan and make a determination, within 12 months, to approve or disapprove the plan through a notice-and-comment rulemaking process.

Impact on Wisconsin

Wisconsin’s Reductions: Wisconsin’s Interim Goal is 1,281 Lbs CO2/MWh, Net while Wisconsin’s Final Goal is 1,203 Lbs CO2/MWh Net. This is a reduction of about 34% below Wisconsin’s 2012 emission rate of 1,827 Lbs CO2/MWh Net.

Impact on Rates and Bills: The EPA projects that average nationwide retail electricity prices are projected to increase 6 to 7 percent in 2020, and by roughly 3 percent in 2030, compared to base case price estimates. Average monthly electricity bills are anticipated to increase by roughly 3 percent in 2020, but decline by roughly 9 percent by 2030 because increased energy efficiency will lead to reduced usage. The EPA also projects that the retail price of natural gas will increase by 9 to 12 percent in 2020, and slight changes by 2030, relative to the base case. Wisconsin (MORE & MROW) would see between 4 and 7 percent increase over the same time period. The EPA does not provide bill impacts by region or state.

Midwestern states, including Wisconsin, will likely be disproportionately impacted in terms of compliance costs, employment, electric rates and bills, amongst other categories. While this rule may have negligible impacts in other states, Midwestern states, including Wisconsin, will take a heavy economic toll. Midwestern manufacturing, small business, and low-income and middle-income families will face a disproportionate share this rule’s cost as large energy users and those families with little disposable income are more impacted by cost of energy increases.

One of the key reasons for the disproportionate impact of this rule on Wisconsin and other Midwest states, is our robust manufacturing sector. Paper producers, food processors, and manufacturers all are large energy users in Wisconsin. Many of these industries may be in line for future regulation as the EPA considers new GHG regulations for refineries, pulp and paper, landfills, iron and steel production, livestock operations, and cement manufacturing. Within EPA’s FY 2015 activities they state “finalizing standards of carbon dioxide emissions from existing power plants and evaluating petitions seeking the establishment of GHG emissions standards for a variety of industrial sectors and mobile source categories.”

Wisconsin experienced one of the coldest winters in recent history putting unprecedented stress on the electricity grid. With over half of Wisconsin’s electricity coming from coal, these newly proposed rules threaten reliability and the potential for brownouts and blackouts.

Expect to hear more about the new rule’s effects on Wisconsin in the coming weeks. As industries and organizations process the rule, we’ll find out more through commentary and studies on how Wisconsin businesses and citizens will be affected.