On June 2, 2014, Environmental Protection Agency (EPA) Administrator Gina McCarthy announced proposed standards to address carbon dioxide (CO2) emissions from existing fossil fuel-fired power plants under § 111(d) of the Clean Air Act (CAA). This proposal, titled the “Clean Power Plan”, tasks states with lowering nationwide CO2 emissions from the power sector by 30% below 2005 levels. The proposed Clean Power Plan, along with proposed rules for new, modified, and reconstructed power plants, are expected to significantly alter the country’s power sector. The economic consequences of the suite of proposed power plant rules are largely unexamined, however, EPA’s interpretation of the CAA will certainly bring forth legal challenges once the rule is finalized.

Background

In June 2013, President Obama issued a Presidential Memorandum on Power Sector Carbon Pollution Standards directing EPA to issue final rules for new power plants and issue proposed rules for modified, reconstructed, and existing power plants by June 1, 2014 with final rules to be issued June 1, 2015. EPA proposed rules for new power plants in January 2014 and released proposed rules for modified and reconstructed power plants on June 2, 2014 along with the Clean Power Plan.

Contents

The Clean Power Plan is designed to reduce greenhouse gas (GHG) emissions from the power sector by a national average of 30% below 2005 levels by 2030. EPA is proposing state-specific rate-based goals for CO2 emissions from the power sector based on their determination of the best system of emission reduction (BSER), in addition to guidelines for states to follow when developing state plans to achieve the goals.

The proposed state goals were calculated by EPA’s determination of the BSER based on an analysis of four measures or “building blocks”, including:

• Reducing the carbon intensity of generation at individual affected electric generating units (EGUs) through heat rate improvements.
• Reducing emissions from the most carbon-intensive affected EGUs in the amount that results from substituting generation at those EGUs with generation from less carbon-intensive affected EGUs (including NGCC units under construction).
• Reducing emissions from affected EGUs in the amount that results from substituting generation at those EGUs with expanded low- or zero-carbon generation excluding hydro.
• Reducing emissions from affected EGUs in the amount that results from the use of demand-side energy efficiency that reduces the amount of generation required.

After the rule is finalized, currently on track for June 2015, states will be required to submit state plans outlining how they plan to achieve an emissions performance level that correspond to their state-specific goal. Amongst other things, state plans must establish standards of performance for the affected EGUs and include measures that implement and enforce those standards. Measures may include the building block categories EPA used to calculate the state goals but states may also use other measures as long as the state plan meets the emission reduction goal.

Find state-specific proposed and alternative goals in EPA’s Goal Computation Technical Support Document starting on page 21.

EPA’s Regulatory Impact Analysis (RIA) projects up to a $7.4 billion compliance cost in 2020 and $8.8 billion in 2030. EPA also notes “given the wide range of approaches that may be used, quantifying the associated employment impacts is difficult.” As such, the EPA does not provide state or regional employment impact estimates associated with the adoption of this rule. The EPA does estimate that average nationwide retail electricity prices will increase 5.9% to 6.5% 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 8.5 percent by 2030 because increased energy efficiency will lead to reduced usage.

Studies conducted by the U.S. Chamber, Heritage, and NERA Economic Consulting are also included within the in-depth article linked below.

Click here for more information including an in-depth summary of the proposed rule, legal background, potential changes to the rule, potential legal challenges, and information how to comment on the rule by the October 16, 2014 deadline. Also included, a look into EPA’s proposed rule for modified and reconstructed power plants.

Click here for more information including an in-depth summary of the proposed rule, legal background, potential changes to the rule, potential legal challenges, and information how to comment on the rule by the October 16, 2014 deadline. Also click here for a look into EPA’s proposed rule for modified and reconstructed power plants.