EPA’s Clean Power Plan: A Brief Overview for the ERC Region

(Jump to: Emission Targets in the ERC; Related EPA Documents; Additional Resources)

On August 3, the Obama administration finalized the Clean Power Plan, the first-ever national rule mandating reductions in carbon pollution from existing power plants. The U.S. Environmental Protection Agency (EPA) also issued final carbon pollution standards for new, modified, and reconstructed power plants, and proposed a federal plan and model trading rules to assist states in implementing the Clean Power Plan. In announcing the plan at the White House, President Obama called it “the single most important step America has ever taken in the fight against global climate change.”

The final rule was developed under Section 111 (d) of the Clean Air Act, and includes a number of modifications to the draft rule released two years ago, which received more than four million comments from state and federal officials, utilities, energy producers, nongovernmental organizations and others. It calls for a 32 percent reduction in carbon pollution from existing power plants by 2030, based on 2005 levels, and assigns each state a specific emission-reduction goal based on that state’s energy mix. EPA will provide guidance to states but leaves much of the design for the emissions reductions to them. The agency anticipates that allowing states the flexibility to devise cost-effective plans to meet their targets will help lower costs to consumers, and spur private investments in renewable energy and energy efficiency technologies. States have until 2016 to craft a draft plan for complying and until 2018 to submit a final plan.

States can use EPA’s model trading rules or create their own plan to achieve the required cuts. States have significant leeway to develop and implement plans that ensure that the power plants in their state – either individually, together or in combination with other measures – achieve carbon-dioxide (CO2) emissions performance rates over the interim compliance period, from 2022 to 2029, and the final emission performance rates, rate‐based goals or mass‐based goals by 2030.

The final rule also gives states the option of working with other states on multi‐state approaches to address carbon pollution.

Fossil fuel-fired power plants represent roughly one-third of CO2 emissions in the U.S., the largest source of such pollution. EPA projects the rule will lead to a dramatic decline in other harmful pollutants as well, and benefit public health. Emissions of soot- and smog-forming sulfur dioxide are expected to drop by 90 percent, and nitrogen oxides, by 72 percent. The agency calculates the rule will produce net climate and health benefits totaling $26 billion to $45 billion, and avoid 3,600 premature deaths each year. It also projects that it will lower electric bills by $7 per month by 2030.

The final rule includes a number of changes to the draft rule that EPA released in September 2013, including:

Steeper Emissions Cut: EPA’s requirement for a 32 percent reduction in emissions is more stringent than the 30 percent goal contained in the draft rule released in September 2013. On a call with reporters, U.S. EPA air chief Janet McCabe said the rule would achieve these extra emissions savings because the agency found that renewable energy and interstate cooperation allow for even more reductions than were assumed in the draft proposal, based on federal data showing that wind and solar are growing at a faster rate than was believed when the draft rule was released, E&E News reported.

Revised State Goals, Relaxed Interim Compliance Period: The final rule has slightly altered the formula it uses to determine state goals from its draft proposal, and will give states two additional years to begin to comply with their interim goals — until 2022 instead of the 2020 date included in the proposed plan.

Removal of Energy Efficiency Building Block: EPA devised its emissions reduction target for each state by determining a carbon emissions baseline. The baseline calculation uses 2012 data for each state’s emissions of CO2 from fossil-fuel-powered plants, divided by its total electricity generation. The targets are based on a state’s capacity to slash emissions using three principal building blocks for lowering the carbon intensity of electricity generation: improving the efficiency of coal-burning plants; shifting generation from coal-fired plants to cleaner-burning natural gas; and boosting generation from renewable sources like solar and wind. The proposed rule had included demand-side efficiency as a fourth building block, but it was removed from the final rule. Nevertheless, EPA noted that “due to its low costs and potential in every state, demand‐side EE will be a significant component of state plans under the Clean Power Plan.”

Rate-Based and Mass-Based Goals: The rule has expressed each state’s goals in two ways — rate-based goals (CO2 lbs. per megawatt-hour) and mass-based goals (total CO2 metric tons) — that caps the amount of CO2 that plants can emit. Each state can choose which goal to use in its state plan. The mass-based goal was included to enable states to take part in emissions-trading schemes.

Trading‐Ready Mechanisms: In comments that EPA received on its proposed rule, it was told that requiring formal, up‐front agreements between states on trading programs would deter their use as a compliance mechanism. The final rule gives states the opportunity to design rate‐based or mass‐based state plans that will make their units “trading ready,” allowing individual power plants to use out‐of‐state reductions to achieve required CO2 reductions, without the need for up‐front interstate agreements.

Clean Energy Incentive Program: The program is intended to reward early investments in certain renewable energy and demand‐side energy efficiency projects that generate carbon‐free power or reduce end‐use energy demand during 2020 and 2021.

Glide Paths Instead of “Cliffs”:  The final rule enables states to phase in their interim carbon reductions that are mandated during the 2022-2029 period. This “glide path” enables states to gradually cut the amount of carbon pollution per megawatt-hour generated in three steps during the following years: 2022-2024, 2025-2027 and 2028-2029.

Electric System Reliability Requirement: States must show they have consulted with state reliability or planning agencies in developing their state plans. The rule also includes a reliability “safety valve” to address unforeseen emergencies.

(For additional details, see this EPA Fact Sheet: Key Changes and Improvements from Proposal to Final)

Reactions from Northeastern States

Since the release of the proposed rule in 2013, states have taken widely divergent positions on the Clean Power Plan. In the ERC region, top officials have expressed support for the rule in a number of states, many of which have implemented aggressive carbon-reduction mandates. In addition, nine states in the Northeast participate in the Regional Greenhouse Gas Initiative (RGGI), which reduces carbon emissions from large power plants. During its first three years of operation, from 2009 to 2011, the program produced $1.6 billion in net economic value for its member states, or $33 per capita in net economic benefits. Based on RGGI’s success, many policymakers and energy analysts consider the cap-and-trade program could serve as an important tool for achieving state reductions required by the Clean Power Plan and capturing economic value that can benefit the public.

Immediately after the rule’s release, several governors in the region released statements of support. Connecticut Governor Dannel Malloy cited the state’s success in reducing carbon emissions by 10 percent from 1990 levels and its goal of reducing emissions 80 percent below 2001 levels by 2050. “I commend President Obama and EPA Administrator Gina McCarthy for their ongoing commitment to address climate change and for the Clean Power Plan released today,” he said.

Delaware Governor Jack Markell said “this effort represents exactly the right approach to control emissions from power plants and aggressively address climate change.”

Governor Andrew Cuomo of New York called the plan “a visionary step forward for our nation.”

Pennsylvania Governor Tom Wolf said the plan “sets ambitious but achievable goals for reducing carbon emissions statewide and addressing climate change in fair and smart ways that takes into account legitimate concerns of all parties.”

In a statement, Rhode Island Governor Lincoln Chafee said: “Thank you to the President and the EPA for taking this step forward to reduce pollution from power plants, which nationally is a large source of carbon emissions.”

Emission-Reduction Targets for ERC States

Under the plan, EPA has established interim and final CO2 emissions performance rates for two subcategories of fossil fuel‐fired electric generating units: fossil fuel‐fired electric steam generating units (generally, coal‐ and oil‐fired power plants), and natural gas‐fired combined cycle generating units.

In the final rule, all state goals fall in a range between 771 pounds per megawatt-hour (states that have only natural gas plants) to 1,305 pounds per megawatt-hour (states that only have coal/oil plants). A state’s goal is based on how many of each of the two types of plants are in the state.

The following chart details the interim and final emission goals for states in the ERC.

State Emission Rate-Based Goals in the Eastern Regional Conference* – C02 Rate: (Pounds of CO2 per Net MWh)

*Vermont does not have affected power plants and therefore does not have state goals. Source: Clean Power Plan: State Specific Fact Sheets

Related EPA Documents

EPA Clean Power Plan Web site: Clean Power Plan from Existing Power Plants. Provides links to fact sheets and other materials, including:

Overview of the Clean Power Plan

Key Changes and Improvements from Proposal to Final

The Role of States

Clean Energy Incentive Program

Components of the Clean Power Plan

Additional Resources

(May 28, 2015) The Analysis Group. EPA’s Clean Power Plan Can Positively Impact Regional Wholesale Power Markets with Coordinated State Planning

(May 21, 2015) National Association of Clean Air Agencies. Implementing EPA’s Clean Power Plan: A Menu of Options

(May 2015) National Association of Regulatory Utility Commissioners. Multistate Coordination Resources for Clean Power Plan Compliance

(April 2015) National Association of State Utility Consumer Advocates. Best Practices in Planning for Clean Power Plan Compliance

(July 2014) Analysis Group. EPA’s Clean Power Plan: States’ Tools for Reducing Costs and Increasing Benefits to Consumers

— By Rona Cohen