Big Move on Climate Change: EPA Proposes Carbon Regulations for Existing Power Plants

Today, the Environmental Protection Agency (EPA) released a proposal for long-awaited and groundbreaking regulations on carbon pollution from existing power plants. This is the first time the government has offered a proposed regulation to regulate carbon emissions from existing power plants, which account for 38.7 percent of domestic carbon emissions.

The EPA said its proposal, the Clean Power Plan, will provide a 30 percent cut in carbon emissions from the power sector compared to 2005 levels by 2030. The regulation itself offers individualized goals for each state to reduce emissions from its power plants by 2030. Rather than total emissions, the goal sets an emissions rate (pounds of CO2 per net megawatt hour (MWh)). The goals – different for each state – are based on the EPA’s analysis of opportunities within the state to reduce emissions, the carbon policies the state is already using, and on the unique structure of each state’s energy system (its utilities, power plants, electricity demand, etc.).

What is very important about this proposal is that the EPA lets states decide how to reduce their own emissions. The EPA does not target any specific utility or power plant for closure, or require the use of carbon capture and sequestration (CCS) at any location. However, states may decide to close aging, high-emitting coal plants and make up the difference with cleaner power generation in order to move closer to their emissions rate goals.

The states are given interim goals for each year from 2020-29, and a final target for 2030. The EPA offers four “building blocks” which states can use to achieve reductions:

1. Improving the heat efficiency of fossil fuel power plants
2. Substituting more lower emissions power generation, such as natural gas combined cycle plants
3. Installing more zero emissions power generation, such as renewable energy and nuclear energy
4. Increasing end-use energy efficiency, for example, high efficiency lighting in homes and buildings

 

Policy options to reduce power sector carbon dioxide emissions (source: C2ES)

Policy		Description		Examples
Power plant performance standard		Each power plant must achieve a set emissions intensity		California, New York, Washington
Renewable Portfolio Standard		Utilities must deliver a set percentage of renewable electricity		Colorado, Hawaii, Kansas, Missouri, Nevada, Rhode Island, and others
Energy Efficiency Resource Standard		Utilities must cut demand by a set amount by target years		Arizona, Connecticut, Maryland, Minnesota, Texas, and others
Decoupling		Reduce utility incentive to deliver more electricity by decoupling revenue and profit		California, Idaho, Massachusetts, Michigan, Oregon, and others
Net Metering		Encourage residential solar by paying homeowners to put excess electricity back on grid		Arkansas, Colorado, Georgia, Louisiana, and others
Cap & Trade		Issue a declining number of carbon allowances, which must be surrendered in proportion to each plant’s emissions		California, Regional Greenhouse Gas Initiative
Carbon Tax		Charge a tax for emitting carbon		British Columbia
Grid Operator Carbon Fee		Add a carbon price to grid operator decision over which power plants to run		None currently
Appliance Efficiency Standards		Require new appliances sold to meet set electricity consumption standards		California, Florida, New Jersey, and others
Commercial & Residential Building Codes		Require new buildings to include electricity saving measures		California, Illinois, Maryland, Mississippi, and others

Table used with permission from the Center for Climate and Energy Solutions.

 

All of these components are important parts of realizing significant emissions reductions. The EPA assumes that every coal-fired plant can become 6 percent more efficient (building block 1), and notes that retrofits to improve the heat efficiency of power plants cost on average $100 per kilowatt – a bargain compared to other kinds of retrofits. In addition, states are free to choose to use a carbon trading program, such as the Regional Greenhouse Gas Initiative (RGGI) in the Northeast, to allow power plants to mitigate the capital costs of compliance.

The EPA estimates the rule offers public health and climate benefits valued at $55 billion to $93 billion annually by 2030, while costing $7.3 billion to $8.8 billion. Reducing carbon emissions will lower exposure to particle pollution and ozone, which is projected to avoid 140,000 to 150,000 cases of asthma in children, and 2,700 to 6,600 premature deaths by 2030. Overall, the EPA says for every dollar invested in this rule, there will be a $7 return in health benefits.

The EPA has the authority to regulate greenhouse gas emissions under the Clean Air Act, section 111(d). The EPA was ordered to regulate carbon dioxide and other greenhouse gases by the Supreme Court in its 2007 decision, Massachusetts v. EPA. While that decision concerned greenhouse gas emissions from vehicles, the EPA said that once the Supreme Court ordered them to regulate vehicle emissions, it triggered complementary regulations of stationary sources, such as power plants. In June 2013, President Obama sped up the EPA’s regulatory process by announcing the Climate Action Plan, which included a Presidential Memorandum directing the EPA to release standards for the power sector expeditiously.

Before producing this draft rule, the EPA conducted extensive outreach with interested groups and citizens across the country. The EPA will accept comments on the rule for 120 days, as well as hold four public hearings the week of July 28. The final rule will be released in one year, barring action from Congress or the courts. After the final rule is issued in 2015, states will have until June 30, 2016, to produce their state implementation plans (SIPs), mapping out how they plan to comply with the regulation. States do have an option for a one-year extension, and states which want to engage in multi-state plans can ask for a two-year extension.

These regulations are a historic step in U.S. climate policy, as they target some of the biggest and dirtiest polluters. They are also an important signal to other nations, which will also need to act if we are to mitigate climate change. According to AFL-CIO President Richard Trumka, “If other nations don’t act, our economy could wind up at a cost disadvantage, shifting jobs and emissions overseas. Still, President Obama is right to lead on this issue, since other nations won’t act if the United States does not. Acting first can confer long-term advantages -- if we do it right.”

See EESI's press release in anticipation of the release of EPA's new rules.