Reducing Carbon Emissions from Power Plants Goes National (but stays local)

by Manatt, Phelps & Phillips, LLP

Yesterday, U.S. EPA released the long-awaited greenhouse gas (GHG) proposed rule for existing power plants across the nation. The proposed rule establishes state-by-state 2030 GHG goals (except for Vermont, which doesn’t have any fossil-fuel-fired power plants). The three most important questions about how U.S. EPA would handle the regulation were 1) what the baseline year would be, 2) how deep the reductions would cut, and 3) what alternatives would be counted toward that reduction. In sum, the proposed regulations call for carbon emissions cuts from the power sector of 30 percent below 2005 levels by no later than 2030 and virtually all existing state programs to reduce GHG should be able to be counted toward the reductions.

The program is to be administered under EPA’s authority under Section 111 (d) of the Clean Air Act. Accordingly, EPA is not proposing emissions rate goals or guidelines for the four affected sources located in Indian country at this time, but rather has committed to working with those Tribes and sources in the future. This action is a continuation of the Obama Administration’s pledge to use executive powers under existing Clean Air Act authority to implement his Climate Action Plan. Combining a state-by-state approach with a broader “outside the fence line” view of GHG reductions, U.S. EPA has attempted to craft a reduction scheme which flexibly addresses the wide variety of emission profiles in the nation’s power sector, but inevitably requires reduction from coal burning power plants. The four main reduction components to the plan are:

  • 1. Reducing the carbon intensity of generation at individually affected EGUs (Existing Generation Units) through heat rate improvements. [On-site efficiency improvements]

  • 2. Reducing emissions from the most carbon-intensive affected EGUs in the amount that results from substituting generation at those EGUs with generation from less carbon-intensive affected EGUs (including Natural Gas units under construction). [Grid management]

  • 3. Reducing emissions from affected EGUs in the amount that results from substituting generation at those EGUs with expanded low- or zero-carbon generation. [Increased renewables and nuclear]

  • 4. Reducing emissions from affected EGUs in the amount that results from the use of demand-side energy efficiency that reduces the amount of generation required. [Increased energy efficiency, or reduction in electricity demand]

One of the main questions leading up to this release was “What would the federal government do with existing state GHG programs?” Turns out they listened to the hundreds of stakeholders who commented.

“EPA . . . heard from a wide range of stakeholders that the EPA should authorize state plans to include a portfolio of actions... Plans that do directly assure that affected EGUs achieve all of the required emission reductions (such as the mass-based programs being implemented in California and the RGGI states) would also be approvable provided that they meet other key requirements, such as achieving the required emission reductions over the appropriate timeframes.”

So bottom line is that U.S. EPA will let California, and the Northeast’s RGGI program, submit existing Cap and Trade Programs as part of their statewide or multi-state strategies. Each state will have to put together a plan similar to what has been historically done for traditional air pollution cleanup—think smog plans. These plans must then be approved by U.S. EPA. The proposal established June 2016 for submission of the plans (disregarding any successful legal challenges), with a 15 year implementation timeframe.

The statewide goal of a 30 percent reduction is from a 2005 baseline. To put some perspective around that number for California, see below (all units in lbs CO2/MWhr):

  • U.S. EPA Proposed 2030 Standard for California: 537

  • California Grid Average in 2005: ~750

  • California Projected Grid Average in 2020 ~506

  • PG&E’s 2005 GHG intensity : 489

  • PG&E’s 2016 Projected GHG intensity: 370

  • LADWP’s 2005 GHG intensity : < 1200*
    *LADWP projects GHG emissions reductions of over 55% by 2030

With each California utility already subject to the AB 32 Cap-and-Trade Program, California’s Renewable Portfolio Standard (RPS), energy efficiency mandates, and other GHG reduction programs, it can be anticipated that a state-submitted plan will be a very complex compilation of existing programs to demonstrate California already has the programs in place to achieve the required reductions.

A 120 day comment period will begin upon publication in the Federal Register, as requested by Congress. U.S. EPA will also hold public workshops on the proposal throughout the country in the near future.

  • Week of July 28, 2014 – Public hearing will be held in Washington, D.C. (time and location TBD)

  • July 29, 2014 – Public hearing will be held in Atlanta, Georgia and Denver, Colorado

  • July 31, 2014 – Public hearing will be held in Pittsburgh, Pennsylvania

  • June 1, 2015 – EPA will finalize rule

Therefore, this proposal is really just a milepost in a long regulatory process. So let the debate continue.




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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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