EPA Releases Clean Power Plan

August 5, 2015

pic-energy-solarOn Aug. 3, President Barack Obama and Environmental Protection Agency (EPA) Administrator Gina McCarthy released the agency’s Clean Power Plan, regulations designed to significantly reduce carbon emissions from power plants, as well as promoting low-emitting power sources and energy efficiency. The final rule calls on each state to craft its own plan based on policy and resources of its choosing, and is intended to provide flexibility in meeting goals set by the EPA, which vary by state.

The rule in effect reshapes energy policy nationwide by setting state-by-state carbon emission standards that all states must achieve through a combination of producing energy more efficiently, reducing energy demand, shifting away from coal-fired generation toward natural gas, nuclear power, and renewable energy, and encouraging state and regional policies such as renewable portfolio standards and cap-and-trade programs.

The final rule contains significant changes from the version proposed in 2014, including backing down from an initial earlier deadline for compliance, eliminating energy efficiency as the fourth “building block” for state targets, increasing the targeted greenhouse gas reductions to 32 percent below 2005 levels by 2030 (up from 30 percent), and using uniform carbon emissions rates for similar types of power plants.

Specifically, some of the most significant changes in the final rule include:

  • Increasing targeted carbon reductions to 32 percent below 2005 levels by 2030, up from the originally planned 30 percent in reductions.
  • Delaying the date for meeting interim emission reduction targets from 2020 to 2022, but retaining the requirement that the final targets be attained by 2030. This extension accommodates state and industry concerns regarding the significant costs and potential inability to meet the targets in some cases.
  • Adjusting specific state emission reduction targets that some states believed reflected unfair assumptions made by EPA regarding each state’s access to renewable energy sources, ability to switch to natural gas fired power plants, and the carbon-intensity of historic energy mixes.
  • Applying a uniform carbon emissions rates for similar types of power plants to bring state goals closer together.
  • Removing efficiency standards, which assumed that states across the country had the capacity to improve their demand-side efficiency by 1.5 percent per year after 2020. The rule as originally proposed assigned all states reduction responsibilities based on that assumption, though it gave some states more time than others to make the cuts. Due to the legal problems that would have added to the rule’s vulnerability upon challenge, this building block is now not explicitly part of the Clean Power Plan, though many stakeholders believe it will still play a significant role as a compliance option.
  • Adopting a mass-based standard, allowing states to convert their rate-based goals (the rate of carbon emissions from fossil fuel-fired EGUs per MWh of electricity generated) to mass-based goals to better facilitate cap-and-trade programs.
  • Incentivizing early action to build renewable energy.
  • Giving states credit for nuclear plants under construction and increases in existing nuclear generation, but no longer counting them toward state targets.
  • Incorporating grid reliability assurances, including measures such as longer compliance periods, phased-in reduction requirements, and a flexible design that allows for state-specific approaches to reaching environmental goals.
  • The final plan also provides mechanisms for states to seek plan revisions where “unanticipated and significant” reliability challenges arise, and includes a reliability “safety valve” for individual sources facing “extraordinary” and “unanticipated” reliability events. States must demonstrate in their final plans that they have considered reliability issues in developing their plans. The Department of Energy and Federal Energy Regulatory Commission (FERC) will monitor the rule’s implementation to ensure that grid reliability is maintained.

All of the documents related to the Clean Power Plan can be found here.