On August 3, 2015, President Obama and EPA Administrator McCarthy released the agency’s Clean Power Plan, regulations designed to significantly reduce CO₂ emissions from power plants, as well as promoting low-emitting power sources and energy efficiency. These sweeping new rules may revolutionize the nation’s power generation system, and will be challenged vigorously in federal court.

The final rule regulates existing fossil-fueled electric steam generating units and natural gas-fired combined cycle generating units under Section 111(d) of the Clean Air Act. Additionally, the rulemaking establishes Carbon Pollution Standards for new, modified, and reconstructed power plants under Section 111(b). Finally, the EPA proposed a Federal Implementation Plan (FIP) and model trading rules as a “backstop,” should the plans developed by states fail to meet required emission reductions. 

The new regulations, along with supporting technical analysis, comprise about 3,000 pages—while the proposed FIP and model rules cover almost 1,000 pages. All of these documents can be found at: http://www2.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants.

Links to key documents

EPA’s final rule for existing power plants under Section 111(d)

EPA’s Clean Power Plan Fact Sheet

EPA’s Key Changes and Improvements document 

EPA’s State-Specific Fact Sheets

EPA’s final rule for new, modified, or reconstructed plants under Section 111(b)

EPA’s proposed Federal Implementation Plan and model trading rules

Highlights from EPA’s Fact Sheets Related to Existing Sources

Although it will take time to read and digest the details of such wide-ranging regulations, the EPA made some key points clear in its fact sheets accompanying the final rules.

National reductions. The Clean Power Plan would reduce CO₂ emissions from the power sector nationally by 32% from 2005 levels by 2030—more strenuous than the 30% reductions called for in EPA’s proposed rule.

State reductions. The manner is which EPA calculated the state-specific reductions changed significantly in the final rule, with the agency foregoing the use of energy efficiency as the fourth “building block” to compute each state’s CO₂ emission targets. (However, see the discussion below about incentives for energy-efficiency measures.) The EPA, therefore, modified and relied on its first three original “building blocks”—improvements in coal-fueled power plants’ heat-rates, an increase in natural gas usage, and added use of renewables technologies—potentially resulting in more stringent reductions for states choosing to utilize those options than would have been required under the original proposal.

Further, the final regulations adjusted the emission cuts set out in the proposed rule for some states. According to EPA’s State-Specific Fact Sheets:

• West Virginia must cut its CO₂ emissions by 29% from 2012 levels on a mass-based computation, a more challenging constraint than the reductions found in the proposed rule. West Virginia’s reductions would be even greater—37%—on a rate-based calculation. (EPA’s State-Specific Fact Sheets use a 2012 CO₂ emission baseline, rather than the 2005 baseline the agency uses for national emission reductions.)

• Likewise, CO₂ emission reductions in Kentucky, Indiana, and Ohio became more stringent in the final rule.

• Some states, however, received relaxed CO₂ emission cuts in the final rule, including Pennsylvania, Texas, and Colorado.

Forms of state goals. The Clean Power Plan calculated the interim and final state-specific emission reduction goals in three ways: rate-based (lb/MWh), mass-based (total short tons of CO₂), and mass-based (new source complement measured in total short tons of CO₂.)

Types of state plans. In the final rule, the EPA designed these two types of plans from which states must choose:

• an emission-standards plan requiring “all affected power plants within the state to meet their required emission performance rates or state-specific rated based or mass-based goal”, or

• a state-measures plan allowing a combination of actions, including renewable energy standards and programs to enhance residential energy efficiency. This second alternative must include federally-enforceable standards that would kick in if the state plan does not achieve the mandated cuts in CO₂ emissions.

States also have the option of joining in multi-state plans, including emissions trading, or they could initiate in-state trading.

Interim targets. States must meet specified, interim emission reductions by 2022, two years later than required in the proposed rule. However, the EPA added a provision to the final rule creating a “reliability safety valve” that would allow states to petition the agency for extraordinary relief from the required emission reductions if an “affected power plant must provide reliability-critical generation.”

Filing state plans. Each state (except Alaska and Hawaii) must submit a final plan to EPA no later than September 6, 2016. Alternatively, a state may file an interim plan by this date and request an extension; provided, the final state plan must be submitted by September 6, 2018.

Renewables and energy efficiency. The final rule creates a Clean Energy Incentive Program that will make allowances or emission rate credits available to states that invest in wind and solar technologies, along with demand-side energy efficiency programs in low-income communities.

Federal Implementation Plan and model trading rules 

The EPA also proposed a Federal Implementation Plan (FIP) and model trading rules in the final Clean Power Plan, designed to realize the same emission reductions. The agency will impose the FIP in states that do not submit an approved State Implementation Plan to carry out these regulations.

EPA will accept comments on the proposed FIP and model trading rules for 90 days after these proposed regulations are published in the Federal Register. (Comments can be emailed to the EPA at a-and-r-Docketa@epa.gov, attention Document ID No. EPA-HQ-OAR-2015-0199, or transmitted by other means.) The agency intends to finalize these proposed rules next summer.

New, Modified, or Reconstructed Plants

Final regulations released under the Clean Power Plan additionally establish that new, modified, or reconstructed natural gas power plants cannot emit more than 1,000 pounds of CO₂ per megawatt-hour of electricity generated. For similar coal-fueled power plants, the standard is 1,400 pounds of CO₂.

Going forward

Within moments after President Obama concluded his remarks at the White House yesterday, the West Virginia Attorney General was joined by several other state attorneys general in committing to move forward immediately with litigation challenging the Clean Power Plan. Additionally, numerous members of Congress reiterated their pledge to block the imposition of these regulations. On the other side, supporters of the rules have enlisted to support their full implementation.

The battle lines are drawn, as the fight moves to the courtroom again in the days ahead. We look forward to continuing our assessment of these regulations, as well as to working with clients and others in the development of strategies for responding.