Resources on Clean Power Plan

Yesterday President Obama announced his administration's "Clean Power Plan," the U.S. Environmental Protection Agency's new regulations limiting power plant carbon emissions under Section 111(d) of the Clean Air Act.

EPA's final Clean Power Plan rule establishes emission guidelines for states to follow in developing plans to reduce greenhouse gas  emissions from existing fossil fuel-fired electric generating units. 

Here are some quick resources I've compiled as a guide to the Clean Power Plan and its release:

• Clean Power Plan Final Rule (PDF) (1560 pages)
• EPA's Regulatory Impact Analysis of the final rule 
• EPA's press release,  "Obama Administration Takes Historic Action on Climate Change/Clean Power Plan to protect public health, spur clean energy investments and strengthen U.S. leadership."
• EPA's overall Clean Power Plan website
• EPA's "key topics" handout
• EPA, DOE, FERC memorandum on coordination in implementing the Clean Power Plan
• EPA fact sheets:
• Overview of the Clean Power Plan: Cutting Carbon Pollution from Power Plants 
• Clean Power Plan: Key Changes and Improvements
• By the Numbers: Cutting Carbon Pollution from Power Plants
• Benefits of a Cleaner, More Efficient Power Sector
• Components of the Clean Power Plan: Setting State Goals to Cut Carbon Pollution
• The Role of States: States Decide How to Meet Their Goal
• Built on a Solid Legal and Scientific Foundation
• Clean Energy Now and in the Future
• Clean Energy Incentive Program
• Keeping Energy Affordable and Reliable
• Resources about the 2014 draft Clean Power Plan:
• A look at EPA's cost/benefit analysis
• Early questions about the Clean Power Plan
• FERC plans conferences about the Clean Power Plan
  

Supreme Court rules on EPA power plant regulations

The Supreme Court of the United States has ruled that the U.S. Environmental Protection Agency acted unreasonably in developing new regulations on hazardous air emissions from power plants without considering the cost impact of those regulations.  This ruling reinjects uncertainty into EPA's "Mercury and Air Toxics Standards" and other efforts to regulate power plant emissions under the Clean Air Act.

The federal Clean Air Act was designed to improve environmental quality and human health, among other goals.  It broadly allows federal regulation of air emissions of pollutants of various types and from various sources.

Because certain specific provisions in the Clean Air Act applied specifically to power plants, Congress placed a special restriction on EPA's regulation of power plant emissions under Section 7412(n)(1)(A) of the Clean Air Act.  That provision allows EPA to regulate emissions of hazardous air pollutants from power plants under Section 7412 only if it “finds such regulation is appropriate and necessary.”  In 2000, after a study, EPA concluded that regulating power plants under Section 7412 was "appropriate and necessary."  EPA reaffirmed this finding in 2012, and promulgated standards for emissions from power plants.

Along with those standards, EPA issued a “Regulatory Impact Analysis” estimating that the regulation would force power plants to bear costs of $9.6 billion per year.  That analysis also found that while benefits were hard to fully quantify, estimated benefits were worth $4 to $6 million per year.  Based on this analysis, compliance costs to power plants were thus between 1,600 and 2,400 times as great as the quantifiable benefits from reduced emissions of hazardous air pollutants.  At the same time, EPA argued that it did not have to consider costs in establishing its standards.

Following the issuance of these standards, 23 states sought review of EPA’s rule in the D. C. Circuit Court of Appeals in a series of cases which were later consolidated.  The D.C. Circuit upheld EPA's refusal to consider costs in its decision to regulate, at which point petitioners appealed to the Supreme Court. As my partner Jeff Talbert explains, in a 5-4 decision issued June 29, the Supreme Court held that EPA interpreted §7412(n)(1)(A) unreasonably when it deemed cost irrelevant to the decision to regulate power plants.

So what does the Supreme Court's ruling mean for U.S. power plants?  Uncertainty -- but not necessarily freedom from regulation.  The Supreme Court remanded the case back to the D.C. Circuit for further consideration.  The D.C. Circuit could uphold the rule again (on new grounds, compliant with the Supreme Court's decision) -- or it could invalidate the rule based on the Supreme Court ruling.  If that happens, EPA will likely have to resume the process of developing new regulations for hazardous air emissions from power plants under Section 7412.

EPA carbon rule: how it works

Last week, the U.S. Environmental Protection Agency issued a groundbreaking proposed rule to limit carbon emissions from power plants.  EPA's Clean Power Plan would require each state to develop a plan to limit the amount of carbon dioxide its power plants produce per unit of electricity generated.  By reducing the carbon intensity of electric generation, EPA projects that the Clean Power Plan would would achieve a 30 percent reduction in CO2 emission from the nation's power sector below CO2 emission levels in 2005, resulting in net climate and health benefits of $48 billion to $82 billion.  Importantly, the Clean Power Plan would rely on federal and state cooperation to achieve this goal.

Public Service of New Hampshire's Schiller Station, in Portsmouth, NH, can burn coal, oil, and wood chips.

EPA proposed the carbon rule pursuant to its authority under Section 111(d) of the Clean Air Act.  As with other Section 111(d) regulations, the Clean Power Plan relies on a combination of federal emission limits and state implementation plans.  First, EPA proposed state-specific carbon dioxide emission goals, stated as an emission rate of pounds of CO2 emitted per net megawatt-hour of electricity generated.  Second, EPA offered states guidelines for how to develop, submit, and implement their own plans to reach those emission goals.

At the federal level, EPA set a carbon emissions rate limit for each state based on the agency's evaluation of how much the state could feasibly reduce emissions by adopting the "best system of emission reduction", or BSER.  Effectively, EPA considered each state's portfolio of electricity generating resources as well as how hard it would be to reduce its carbon intensity.

At the state level, EPA expects each state to propose a plan based on a combination of four "building blocks" or types of measures:

• Reducing the carbon intensity of generation at individual affected fossil-fired electric generating units (or EGUs) through heat rate improvements
• Reducing emissions from the most carbon-intensive affected EGUs by substituting generation at those EGUs with generation from natural gas combined cycle power plants and other less carbon-intensive fossil-fired units
• Reducing emissions from affected EGUs by substituting generation at those EGUs with expanded low- or zero-carbon generation
• Reducing emissions from affected EGUs through demand-side energy efficiency measures 

State plans would be subject to EPA approval, based on their enforceability, ability to achieve emission performance, verifiability, and reporting process.  EPA suggested that states may develop collaborative multistate programs.  States may also incorporate existing CO2 emissions reduction programs such as the Regional Greenhouse Gas Initiative or California's carbon market into their plans.  Procedurally, EPA expects that states would submit their plans by June 30, 2016, for review and approval, with the possibility of a one-year extension of this deadline.

EPA is now taking public comment on its proposed Clean Power Plan rule for 120 days, and will hold public hearings on the proposal in July and August.  EPA projects that it would issue its final Clean Power Plan rule in June 2015.

EPA carbon rule: cost and benefit

Monday, the U.S. Environmental Protection Agency proposed a rule aimed at reducing carbon dioxide emissions from power plants.  Part of the EPA's "Clean Power Plan", the rule would rely on states developing and implementing their own plans to reduce the amount of carbon emitted by the electric power sector per unit of electricity generated.  EPA projects that if fully implemented, meeting this goal would reduce the power sector's carbon emissions to 30% below 2005 levels by 2030.  But what will this cost -- and what will the benefits be?

Steam rises from the Con Edison power plant at 14th Street and Avenue C, in New York City.  The plant can burn fuels including oil and natural gas.

Power plants represent the largest source of carbon dioxide emissions in the U.S., accounting for about one-third of the nation's greenhouse gas emissions.  Building on President Obama's 2013 Climate Action Plan and the May 2014 release of the third National Climate Assessment, the Clean Power Plan is premised upon the finding that greenhouse gas pollution "threatens the American public by leading to potentially rapid, damaging and long-lasting changes in our climate that can have a range of severe negative effects on human health and the environment."  The proposed rule targets carbon dioxide because is the most prevalent greenhouse gas, accounting for 82% of U.S. greenhouse gas emissions.

The Clean Power Plan requires states to develop plans to reduce the carbon intensity, or amount of carbon emitted per unit of useful energy, of their power plants.  Each state is allowed to select the measures it wishes to use to reach its carbon intensity goal.  This allows states flexibility to craft policies to reduce carbon pollution that:

1) continue to rely on a diverse set of energy resources, 2) ensure electric system reliability, 3) provide affordable electricity, 4) recognize investments that states and power companies are already making, and 5) can be tailored to meet the specific energy, environmental and economic needs and goals of each state .

The economic impacts of the Clean Power Plan will form a key theme in the debate over its implementation.  The flexibility afforded states makes projections of costs and benefits hard to quantify, even before consideration of the global social cost of carbon or economic concepts like the appropriate discount rate to apply to future costs and benefits.  With those caveats stated, EPA has analyzed two illustrative cases: a collaborative, regional compliance approach (perhaps along the lines of the Regional Greenhouse Gas Initiative) and a state-by-state approach.

Under EPA's analysis as stated in its proposed rule documents, the Clean Power Plan will produce economic benefits far in excess of its costs.  In 2020, EPA projects the regional compliance approach would have total costs of $5 billion, climate benefits of approximately $17 billion, and health co-benefits associated with reduced particulate matter and other emissions -- mostly in the form of reduced premature fatalities -- of between $16 billion and $37 billion.  In this scenario, the Clean Power Plan would yield net economic benefits of between $28 billion and $47 billion by 2020.  EPA's analysis of a state-by-state approach yields similar costs and benefits: a cost of $7.5 billion by 2020, climate benefits of approximately $18 billion, and health co-benefits of between $17 billion and $40 billion.  Under either case, net benefits continue to grow through 2030, reaching between $48 billion and $84 billion.

EPA also projects "job gains and losses relative to base case for the electric generation, coal and natural gas production, and demand side energy efficiency sectors."  In 2020, EPA projects job growth of 25,900 to 28,000 job-years in the power production and fuel extraction sectors, and an increase of 78,000 jobs in the demand-side energy efficiency sector.

What the ultimate costs and benefits of the Clean Power Plan will be remains uncertain, as does EPA's adoption of a final rule implementing the plan.  In the meantime, electric generators, consumers, and policymakers are taking close looks at the plan to ascertain its impacts.

EPA issues draft permits for carbon sequestration

The U.S. Environmental Protection Agency has issued the first draft permits for injecting and storing carbon dioxide in underground rock formations, which could advance carbon capture and sequestration efforts.

EPA promotes carbon capture and sequestration for its expected ability to reduce greenhouse gas emissions, while enabling low-carbon electricity generation from power plants.  The process entails capturing and compressing carbon emissions at their source, piping the gas to injection wells, and injecting the gas into geologically stable rock formations capable of holding the gas for long periods of time.

EPA's simplified schematic of deep geologic carbon sequestration, available from EPA at http://www.epa.gov/climatechange/ccs/.

Under the federal Safe Drinking Water Act, EPA regulates most injections of waste and other materials into the ground.  EPA has developed a series of programs to manage such injections, including a "Class VI" geologic sequestration program.  While oil producers have long injected carbon dioxide into their wells to enhance oil recovery, EPA has not previously issued any permits under its Class VI program.  This lack of Class VI activity is largely because carbon capture and sequestration in the U.S. remains in its infancy, but some industry observers have expressed concerns that EPA's regulatory process is too restrictive to allow the technology to flourish.  The record of permit applications shows some support for these concerns: for example, Christian County Generation, LLC of Taylorville, IL withdrew its applications for two Class VI sequestration wells for the Taylorville Energy Center on July 9, 2013, and Archer Daniels Midland's applications for Class VI permits for two injection wells to store carbon emissions from its Decatur, Illinois agricultural products and biofuel production facility have remained pending since 2011.

Carbon capture and sequestration's future may be brightening, as on March 31, 2014, EPA issued four draft Class VI permits to FutureGen Industrial Alliance, Inc. for its proposed FutureGen 2.0 project.  The Alliance is a non-profit organization whose membership includes major coal producers, coal users, and coal equipment suppliers, including Alpha Natural Resources, AngloAmerican, JoyGlobal Inc., Peabody Energy, and Xstrata Coal Pty. Limited.  The FutureGen 2.0 project is designed to capture over 90 percent of the carbon emissions from a 168 megawatt power plant in Meredosia, Illinois, and to inject them into four nearby wells for deep geologic sequestration.

EPA's draft permits now face a public hearing on May 7 and public comments through May 15.

FERC directs standards requiring utility hardening against physical threat

In the wake of last year's sniper assault on a California electrical substation, federal regulators have initiated a process to require utilities to demonstrate that they have hardened their power plants, transmission lines, and other infrastructure against physical attacks.  Last week the Federal Energy Regulatory Commission ordered the North American Electric Reliability Corporation, or NERC, to develop reliability standards requiring utilities to address risks due to physical security threats and vulnerabilities.  If NERC adopts reliability standards to protect against physical threats, will the standards improve electric reliability -- and if so, at what cost?

Stacks from a power plant subject to NERC standards rise above a cove in Salem, Massachusetts.

NERC, a not-for-profit entity whose mission is to ensure the reliability of the bulk power system in North America, has been designated as the United States' electric reliability organization.  To carry out this mission, NERC develops and enforces reliability standards for owners and operators of critical electrical infrastructure.  NERC's existing standards span 1,778 pages, and cover issues ranging from personnel training and emergency preparedness to protection against hacking and cyberterrorism. 

Following the April 16, 2013, destruction by intense gunfire of a PG&E Corp. substation in San Jose, California, much attention has fallen on the protection of the U.S. electrical grid against physical threats.  At the federal regulatory level, this attention led the FERC to issue an order on March 7, 2014, directing NERC to adopt additional standards for physical security.  That order prescribes the creation of new standards requiring owners and operators of the so-called Bulk-Power System to take at least three steps to protect physical security:

• First, owners and operators must perform a risk assessment of their system to identify their "critical facilities".  Critical facilities are defined as those that, if rendered inoperable or damaged, could have a critical impact on the operation of the interconnection through instability, uncontrolled separation, or cascading failures of the Bulk-Power System.


• Second, owners and operators of critical facilities must evaluate potential threats and vulnerabilities to those facilities.


• Third, owners and operators must develop and implement a security plan to address potential threats and vulnerabilities.

The order directing physical protections standards has prompted at least two sets of questions in the utility industry.  First, will these standards lead to improved reliability?  While the efficacy of the standards will likely only be proven in retrospect, if at all, fears brought to life by the California attack and others have convinced a majority of the Commission that the standards are necessary.

Other questions have arisen about the cost of implementing the standards.  While some defenses against physical threats may be adopted relatively inexpensively -- for example, opaque fencing around critical facilities -- others may prove expensive.  When the possible scope and extent of critical facilities are taken into account, some estimates of the potential cost -- including that of concurring FERC Commissioner John Norris -- rise into the billions.

Under the Commission's order, NERC has until June 5, 2014, to prepare and submit its proposed new reliability standards.

Obama's climate action plan

Today President Obama unveiled his climate change action plan.  The outline of his plan was set forth in a 21-page written document, couldpled with a speech delivered at Georgetown University and broadcast online at whitehouse.gov/live, presents his vision for a unilateral approach to controlling carbon emissions and mitigating the effects of climate change.

The Washington Monument.

President Obama's plan has three main focuses.  First, he proposed measures to reduce the emission of carbon dioxide and other greenhouse gases from domestic industry.  These measures include strict standards for carbon emissions from new and existing power plants, promoting investment in renewable energy, and improving energy efficiency in homes, businesses, and industry.  The plan calls for accelerated permitting and development of renewable electricity generation projects on federal lands ranging from Department of Defense properties to lands managed by the Department of the Interior.

Second, he proposed measures to prepare the country for the effects of climate change.  These measures include infrastructure improvements, such as preparing buildings and communities for sea level rise and more intense storms.  These measures are also designed to protect the economy and natural resources, for example conserving land and water resources, preparing for floods and drought, and managing agricultural sustainability.

Third, he called for the U.S. to lead international efforts to address global climate change.  Measures in this category include expanding international use of clean energy and energy efficiency technologies, negotiating global free trade in environmental services and goods, and strengthening global resilience to climate change.

While some of the measures are likely to find widespread support, others such as the power plant emissions standards are controversial.  The plan states that President Obama will issue a Presidential Memorandum directing the U.S. Environmental Protection Agency to "work expeditiously to complete carbon pollution standards for both new and existing power plants.”  The standards, which may be put into place by mid 2015, are likely to hit coal-fired power plants hardest. If they are imposed, the effect may be to force power plants with marginal economics to close or convert to other fuels such as natural gas.  Some fear the impact of new EPA regulations on the cost of electricity, while some proponents of climate action support efforts to price the cost of carbon emissions into electricity produced from coal to encourage a switch to natural gas and other lower-carbon fuels.  Indeed, the plan calls for promoting natural gas as a “bridge fuel” to help domestic and international markets move away from coal and oil, calling for the U.S. to "promote fuel-switching from coal to gas for electricity production and encourage the development of a global market for gas."

Notably, some elements that observers had speculated might be included in the plan were omitted.  For example, the plan does not call for taxing carbon emissions or imposing a federal cap-and-trade regime for carbon.  Likewise, the plan outline does not conclusively address current issues such as whether or not the Keystone XL pipeline or coal export terminals will be approved.  Rather, the outline is relatively bullish about the opportunities to help foreign nations develop projects featuring natural gas, nuclear power, clean coal, and energy efficiency without mentioning the U.S.'s role as importer or exporter.  That said, in his oral remarks, President Obama said that Keystone XL can only be approved if it is found to be in the national interest, including whether or not it exacerbates climate change-related problems.

All eyes are watching whether President Obama is able to implement his plan effectively.  In the coming months, we can expect the federal administration to roll out significant new policies outlined in the plan.  Whether the policies can be put into action, their impacts, and whether they are able to achieve his goals, remains to be seen.

Obama to unveil climate change plan

President Obama is expected to unveil his second-term plan to address climate change tomorrow.  In a video released this past weekend, President Obama announced that he will speak at Georgetown University on Tuesday to present his plan "for the steps we need to take to prepare our country for the impacts of climate change and lead the global effort to fight it."  While the details of his plan are not yet public, its scope and specifics may have a significant impact on both the environment and the economy.

The U.S. House of Representatives.

This is not the first time President Obama has spoken about climate change.  In his second inaugural address, he vowed to "respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations."  Similarly, in his 2013 State of the Union address, he asked Congress to develop a market-based solution, but vowed to take executive action if necessary.

Potential elements of his plan range in scope and impact.  President Obama has already issued an executive order promoting industrial energy efficiency; increasing support for energy efficiency is relatively likely to garner widespread support.  Potentially more impactful -- both in terms of potential to reduce carbon emissions and to increase costs -- are proposals to revise the rules for carbon emissions from existing power plants.  Some Republican Congressional leaders, like House Speaker John Boehner, have already called the climate change plans "absolutely crazy" and certain to increase the cost of energy, driving manufacturing and jobs overseas.

Tomorrow's speech will give us a better sense of Obama's policy direction on carbon emissions and climate change.  It is certain to be followed up a significant dialogue about both the importance of issue and the balancing of costs and benefits that is fundamental to policymaking.  Whether Congress acts, the president uses his executive powers to change policy, or both, remains to be seen.