Summary

The Environmental and Energy Study Institute (EESI) held a briefing examining key policy and legal issues associated with the Environmental Protection Agency’s proposed rules to limit carbon dioxide (CO2) emissions from existing power plants, which account for 38.7 percent of domestic carbon emissions. According to the EPA, its proposed Clean Power Plan (CPP) would lead to a 30 percent cut in carbon emissions from the power sector by 2030, compared to 2005 levels. How will these cuts be implemented? And will the CPP hold up in court?

BRIEFING HIGHLIGHTS:

  • Michael Burger, Executive Director, Sabin Center for Climate Change Law; Lecturer-in-law, Columbia Law School, began by pointing out some fundamental shortcomings of the Clean Air Act (CAA) in relation to climate change. Enacted in 1970, it was designed to deal with local and regional air quality issues, not global climate change, and so it is not an ideal tool for limiting greenhouse gases. The numerical thresholds referred to in certain provisions of the Act are far too small to set meaningful limits on regulating the carbon dioxide emissions that contribute to global climate change.
  • Performance and technology standards under the Clean Air Act are also not an ideal fit, in part because they are primarily aimed at pollution reduction, not at increasing alternative power generation or reducing consumption (which are available as compliance strategies under the Clean Power Plan).
  • In addition, the statute was written to primarily address new sources, and has limited provisions that address existing sources of pollution. It has no provisions for land use changes, and no dedicated funding to deal with climate change.
  • EPA originally chose not to issue an endangerment finding for greenhouse gases (GHG). A finding that GHGs endangered human health, would trigger a requirement under the Clean Air Act to regulate GHG emissions. The Massachusetts v. EPA Supreme Court decision in 2007 forced EPA to re-examine whether greenhouse gases deserved an endangerment finding. Upon reconsideration, EPA found in 2009 that greenhouse gases were in fact a danger to human health, and began regulating them.
  • EPA first addressed GHG emissions from motor vehicles. The agency then sought to regulate the carbon emissions of new stationary sources using the Prevention of Significant Deterioration (PSD) program in the Clean Air Act. This program requires states to ensure that new and modified sources of pollution (e.g., new power plants) do not cause air pollution to exceed certain maximum allowable concentrations and to to impose technology-based standards on those sources.
  • But the PSD, when applied to stationary sources, would have regulated a staggering amount of sources. To make the regulation more reasonable, in 2010 EPA issued a "Tailoring Rule" which phased in stationary source GHG regulation on sources that either would be regulated anyway or were emitting large amounts of GHG. EPA said it would eventually consider regulating smaller sources of GHG under a future rule.
  • In addition to using PSD to prevent new sources from significantly deteriorating air quality with GHG emissions, EPA sought to reduce their emissions. It based its rule-making on the New Source Performance Standards (NSPS) for new power plants, under section 111(b) of the CAA. These rules are expected in summer of this year. The proposed rule sets separate standards for natural gas and coal plants, and requires carbon capture and sequestration for all new coal plants.
  • As early as 2012, there were challenges to this use of 111(b). The two main cases filed, one in the DC Circuit Court and one in the District of Nebraska, were both dismissed, as the rule had not been finalized yet.
  • The NSPS guidelines for existing power plants (aka the Clean Power Plan) are also to be finalized this summer. They derive their authority from section 111(d) of the CAA. The EPA proposal requires states to create compliance plans similar to, but not the same as, the state implementation plans (SIPs) outlined in section 110 of the CAA. States must submit plans by summer 2016, although they can receive one-to-two year extensions under certain circumstances.
  • Opponents of the Clean Power Plan have raised the following, significant challenges: 1) EPA cannot regulate beyond the fence line (e.g., EPA can only regulate a power plant itself, and not count energy efficiency measures and renewable energy development as compliance); 2) EPA’s best system of emissions reduction (BSER) determinations are “unreasonable” because they look outside the fence line; 3) EPA cannot regulate these sources, because they are already regulated under section 112 and the hazardous air pollutants program; and 4) EPA is not the energy regulator.
  • Burger examined the 2014 Murray Energy Corp v. EPA court case, for which Harvard Law professor Lawrence Tribe gave Constitutional arguments against the Clean Power Plan as the attorney for intervenor Peabody Energy. Tribe later re-affirmed these arguments in testimony to Congress. Burger explains that Tribe’s argument that the Clean Power Plan violates the 10th Amendment (which states that the federal government only has the powers specifically delegated to it by the Constitution) is false, because Section 111 plans are analogous to section 110’s State Implementation Plans and Federal Implementation Plans, and the Clean Power Plan does not force any specific state action. Burger also says Tribe’s concern that the Clean Power Plan’s burden on coal-fired power plants amount to an unconstitutional “taking” is mistaken. Coal will remain a part of the energy mix under the Plan and, in any event, businesses are not insulated from future regulation by the takings clause in the 5th Amendment.
  • Burger suggested that the states should just say no to the “Just Say No” campaign launched by Senate Majority Leader Mitch McConnell, who called on them to refuse to comply with the Clean Power Plan. Burger said Sen. McConnell’s rhetoric lacks legal merit. Burger added that states are likely to be worse off if they do not submit their own tailored plan for their unique energy needs and capabilities.
  • Michael Burger concluded with the assurance that even if states manage to disrupt the proposed Clean Power Plan through lawsuits, EPA will likely come back with another rule later on. “Climate change is not going away,” said Burger. .”The Supreme Court has said EPA has the authority to regulate under the Clean Air Act.”
  • Ken Colburn, Senior Associate, U.S. Program, The Regulatory Assistance Project said no one (outside of EPA) knows precisely what the Clean Power Plan rule will look like. However, he explained that once the rule is final, EPA must step back and let states make their own decisions about how they plan to comply with the Clean Power Plan. After the states develop and submit their plans, EPA then goes into “approval mode (or not),” and may impose a federal compliance plan where necessary.
  • In agreement with Burger, Colburn believes that a state will be worse off if it refuses to submit a compliance plan to EPA, though he also expects that states may face challenges formulating their own plans: “EPA has provided more flexibility than the states normally have under the Clean Air Act, so the states are on unfamiliar ground and are understandably asking for more guidance and direction regarding approvable plans. The Act compels EPA to step back, however, and let states come forward with their preferred plans, so any direction the agency provides could be construed as interfering with state’s rights.”
  • Colburn stressed that 111(d) compliance plans, whether submitted by individual states, groups of states, or put in place by EPA, are NOT the same as traditional State Implementation Plans (SIP) or Federal Implementation Plans (FIP) under Section 110 of the Clean Air Act:
    • While they are similar, they are not identical. States may pursue their 111(d) compliance planning as if it were a SIP, but if they do so they are likely to enjoy fewer options and less innovation, and thus may experience higher costs. States also have the option to develop and submit multi-state compliance plans, which they do not have under Section 110.
    • Colburn analogized SIPs in the regulatory world to bonds (as compared to stocks) in the financial world—they may represent a clearer, safer path, but they offer less flexibility and provide lower financial returns.
  • Colburn said that while states are likely to undertake some action in most if not all of the four building blocks offered by EPA (known as the “best system of emissions reduction” or BSER), he suggested that states should “think outside of those boxes” to consider numerous other ways available to reduce greenhouse gases emissions from the power sector as well. Over 20 such options will be detailed in a National Association of Clean Air Agencies (NACAA) publication to be released later this spring.
  • Colburn also noted that as far as state compliance strategies go, “There aren’t just rate-based approaches and mass-based approaches; there are also price-based approaches,” such as carbon adders (that would be applied in dispatching power plants) and carbon taxes, that states could also pursue in their state 111(d) compliance plans.

The CPP sets a customized goal for each state, which takes into account its existing policies and the unique structure of its energy system. The states will have interim goals for 2020-29, and a final target for 2030. The EPA will offer states flexibility to achieve their goals by providing four “building blocks” that states can use to achieve reductions: 1) Improving the efficiency of fossil fuel power plants; 2) Switching to plants that emit less carbon, such as natural gas combined cycle plants; 3) Installing zero-emission plants powered by renewable or nuclear energy; 4) Increasing end-use energy efficiency (for example, by installing high efficiency lighting in buildings). Other options not encompassed by these building blocks could also be used. EPA received nearly 4 million comments on the proposed CPP and has signaled it will adjust the final rule based on this feedback.

Though EPA's rules have yet to be finalized, several parties have already vowed to launch legal challenges against it. In landmark 2007 and 2014 decisions, the Supreme Court found that EPA has the authority to regulate greenhouse gas emissions from mobile sources and most stationary sources under Title II of the Clean Air Act. The CPP is based on a different part of the Act, namely sections 111(b) and 111(d) relating to New Source Performance Standards.

EPA estimates its rule will offer public health and climate benefits of $55 to $93 billion annually by 2030, while costing $7.3 to $8.8 billion per year. Reducing carbon emissions will lower exposure to particle pollution and ozone, thereby preventing 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.

This briefing was the first in a series examining the Clean Power Plan and its implications.