Over the past few weeks, we’ve written about ten things to look for (see the links below) when EPA releases its final Clean Power Plan—which the agency did today. In the days and weeks to follow, you can expect a great deal more commentary from RFF here and elsewhere. For now, let’s take a quick look at how the ten issues we highlighted were addressed in the final rule.
RFF’s Dallas Burtraw and I wrote that the agency might consider changes to the plan’s compliance timeline, suggesting that “easing states’ timetables for compliance [is] among the easiest ways for EPA to address critics and get on-the-fence states on its side.” EPA apparently agreed. In the final rule, states will have an additional two years to submit plans, and compliance will also be delayed by two years until 2022. Final targets in 2030 are broadly similar to the proposal, however, so emissions reductions will have to be made faster—over 8 years instead of 10.
Also, we suggested that EPA might make adjustments in some states’ goals, and EPA has done so, reducing disparities among states and, in a major change for Georgia and South Carolina, excluding under-construction nuclear plants from state targets. These states will be able to treat the Vogtle and VC Summer nuclear plants as new, zero-carbon generation when/if they come online.
2. Inside the Fence (Cofiring)
Dallas Burtraw also suggested that EPA might impose tighter targets for coal plants: “if biomass or natural gas is used as a means to reduce emissions rates, then goals under the first building block that are substantially greater than identified in the proposed plan may be technically justified.” This would make targets more stringent, or allow them to remain similar even if other building blocks—like energy efficiency—were dropped.
In fact, EPA appears to have reduced its target coal-plant improvements in building block 1, from 6% in the proposal to between 2.1% and 4.3% in the final rule, depending on region. The overall stringency of the plan remains similar, however, despite this reduction and the agency’s decision to drop building block 4 (energy efficiency). More analysis is needed to see where building blocks 2 and 3 have been increased to pick up the slack.
3. The Federal Plan
RFF’s Art Fraas and I discussed EPA’s federal implementation plan, which would be imposed on states that fail to submit adequate plans of their own, and which EPA had promised to propose at the same time as the final rule. As we wrote, “[t]here are at least two general approaches EPA could take … [either a] draconian federal plan”, pushing states to write their own plans “or else”, or a softer approach, creating a model that states could easily adopt.
In its proposed federal plan, EPA has taken the latter approach, with provisions allowing trading and other flexibility. A draconian federal plan would have been much more rigid.
4. Multi-State Compatibility
Perhaps the best illustration of this cooperative approach is EPA’s inclusion in the federal plan of “trading-ready” design elements. As Dallas Burtraw and Karen Palmer discussed, these are “a set of criteria for state plans that, if met, would qualify state authorities to allow” inter-state emissions trading. In essence, states would be “pre-approved” for trading.
5. The New Source Rule
EPA also issued its final rule for new power plants. The proposal had required new coal plants to install carbon capture and storage (CCS) technology. Dallas Burtraw and I speculated that this requirement might be dropped, in favor of either a standard based on gas plants alone, or one based on “ultra-supercritical” coal plants, few of which have been built in the US.
EPA did relax the CCS requirement, but did so simply by requiring less of coal plants’ emitted carbon to be captured. This relaxes the standard a bit, but CCS is still needed or coal plants cannot be built. As we discussed, this may not matter since few expect any new coal to be built in any case.
6. Outside the Fence (Energy Efficiency)
Karen Palmer discussed the challenges states may face in measuring and trading emissions reductions from demand-side energy efficiency, one of EPA’s four building blocks in the proposed plan. As she wrote, “these issues pose serious challenges to the prospects for rate-based interstate trading”.
EPA has dropped the efficiency building block from the final plan; in other words, it no longer assumes states will make such efficiency improvements. This appears to be driven by the practical challenges Karen identifies, rather than legal concerns since the legal issues here are similar to those for renewables, which are still in EPA’s targets. States still may, however, use efficiency programs to meet the targets. To the extent they do so, they will have to confront the challenges Karen identifies.
Critics of the plan have suggested that it will make the lights go out. Karen Palmer discussed these concerns, identifying the real infrastructure challenges the plan will create but calling reliability fears a “mythical beast” due to the trading and other flexibility allowed by the plan. She also suggested EPA might include a “reliability safety valve” allowing emitters to pay a fee or “alternative compliance payment” for emissions that exceed their targets.
EPA did not include such a fee option in its final rule, but it did include another type of reliability safety valve: allowing reliability-critical plants a 90-day waiver if necessary. The rule also allows states to amend their plans if reliability concerns emerge. And the agency characterizes its decision to delay the start of the plan until 2022 as a move aimed at reducing reliability worries, since most such concerns focused on the 2020-2022 timeframe.
8. Legal Challenges
Release of the final rule has unsurprisingly been met with praise and criticism. That criticism will undoubtedly turn into lawsuits. I wrote that EPA could attempt to address some of those legal challenges preemptively in the final rule.
In general, the EPA has stuck to its guns. The agency has not generally reduced the Clean Power Plan’s ambition, and in fact has called it stronger than the proposed plan. It is possible that the agency’s decision to drop demand-side energy efficiency from its target calculations was motivated by legal concerns, but its decision to keep new renewable generation in those calculations will still be challenged. This part of the rule remains severable, however. EPA also includes lengthy defenses of its interpretations of the Clean Air Act in an effort to head off legal challenges—parts of the final rule are, in effect, the agency’s legal brief.
9. Emissions Trading
RFF’s Clayton Munnings and Anthony Paul discussed the complexity of trading between states that choose a mass-based (tons of carbon) target and those that choose a rate-based (carbon per unit of electricity output) target. As Clayton and Anthony expected, the agency continues to encourage trading among states, regardless of which type of target they choose. These practical issues have essentially been kicked down the road, and to a large extent left in the hands of states. States will now, however, have a more time to resolve them before submitting plans.
10. New Power Plants
Finally, Anthony Paul and I discussed the proposed plan’s lack of clarity on when and whether new power plants are included in the plan. Leaving them out leads to absurd results; owners of new plants would have a big advantage over those who own existing plants.
I’m still working through how EPA addressed this issue in the final rule. The agency does indicate that it will reject state plans that result in perverse incentives to build new plants (a form of leakage).