June 26, 2014

The EPA’S Clean Power Plan

Gabe Rozsa

Efforts by Congress to deal with climate change failed in 2009, as the House narrowly passed a “cap and trade” bill that ultimately failed in the Senate. Moderate Democrats, some of whom cast politically tough votes in support of the bill, faced voter anger in Fall 2010 over this, in addition to health care, that would eventually cost many their seat in Congress.

Since then, the President has signaled his intent to move ahead without Congress, using the existing authorities that EPA and other agencies have. Last year, EPA went forward with tougher carbon dioxide standards for future power plants and on June 2nd, they announced plans to tackle “carbon pollution” from existing power plants. This newest proposal is the Clean Power Plan (CPP) and is designed to cut carbon emissions from existing electric power plants by 30% by 2030, compared to 2005 levels.

EPA has highlighted the opportunity for American innovation and employment through the growth of ‘green’ industry and argued that electricity costs would actually drop by 8% by 2030, due to energy efficiency improvements and reduced total energy use caused by near term increases in energy costs. The agency also stressed that the proposed rule would not affect reliability of electricity, a major concern that has been raised by some in the energy community, if coal fired plants are retired without adequate replacement generating capacity.

The plan proposes emission goals, in terms of pounds of carbon emissions per megawatt hours (MWh), of electricity generation for each state based on an assessment of that state’s resources and ability to lower emissions. The proposed rule provides recommendations for methods states can take, such as energy efficiency improvements and switching energy sources, to meet their respective goals. There will be a formal comment period for 120 days on the proposed rule and four public hearings held during the last week of July. The EPA has stated it intends to finalize the rulemaking by June 2015 and is proposing that each state submit its plan by June 30, 2016. The CPP would allow states more time to submit a plan if they notify the EPA by April 1, 2016 and demonstrate progress toward developing an approvable plan. EPA then has twelve months to approve or disapprove the plan through a notice-and-comment rulemaking process, but the consequences of a state failing to develop and implement a plan are not clear. The timeline means that, even under EPA’s most optimistic scenario, the plans would not take effect until a new President takes office, making this likely to become a major issue in the 2016 presidential race.

• Basis of EPA Proposed Rules – The CPP relies on state-specific rate-based goals for carbon dioxide emissions from the power sector, as well as guidelines for states to follow in developing plans to achieve the state-specific goals.

• Expected Impact – Because the plans are state specific, there is a significant difference between the projected impacts of these proposed rules on different states and also confusion and controversy about the stated goal of a 30 percent total cut below 2005 emission levels and the state-by-state emission targets for fossil energy power plants that are measured from 2012 emissions.

• Early Reaction – The reactions from lawmakers have been mixed, with a large portion of the Republican base and moderate, coal-state Democrats very critical of the proposed rule due to concerns about the detrimental effect on jobs and electricity prices.  Notably, on June 19, Senate negotiations on the “Minibus” appropriations bill reportedly broke down, in part, over Senate leadership fears that a majority of the Senate would have supported a GOP amendment aimed at limiting the Obama Administration’s ability to proceed with aspects of the rulemaking process, dealing an early blow to the effort.

It is hard to see a compromise on the horizon given the strong national divisions over climate change. Even if the Obama Administration can keep its regulatory agenda moving forward, opponents will resort to legislative riders and the courts to try to block implementation. Despite polls showing public support for action on climate change, it will likely take either greater Republican acceptance of the need to act and a plan they can live with, or a national referendum – perhaps as part of the 2016 presidential campaign – to force action on the issue.