Q: What is the Clean Power Plan?

A: The United States Environmental Protection Agency (USEPA) is proposing to regulate greenhouse gas (GHG) emissions from fossil fuel-fired electric generating units (EGUs) through a rule called the Clean Power Plan.  This rule does not purport to directly regulate EGUs.  Instead, USEPA is proposing statewide carbon dioxide (CO2) emission goals and guidelines, called the “state goals.”  States would develop plans to meet those state goals, using a flexible menu of programs and tools that USEPA discusses in the proposal.  Most of the details are left to the states and will be included in State Implementation Plans (SIPs).

Q:  What is the GHG reduction goal? 

A: By 2030, USEPA expects the proposed rule to achieve a 30% CO2 emissions reduction from estimated 2005 CO2 emissions from the power sector, with declining targets in the years 2020 through 2029.

Q: Under what authority is USEPA proposing the Clean Power Plan?

A: USEPA proposed the Clean Power Plan under Section 111(d) of the Clean Air Act (CAA), which requires states to adopt a plan that establishes a standard of performance for any existing source when a pollutant is not subject to regulation under another CAA program.  In order to establish requirements to meet this obligation, USEPA must determine the “best system of emission reduction . . . adequately demonstrated” (BSER).  USEPA is proposing BSER in this rule.

Q: What is USEPA proposing as BSER?

A: USEPA has identified four “Building Blocks” that, when combined, become a BSER.  USEPA justifies the Building Blocks as follows:  The interconnected grid already operates in a way that maximizes use of least cost resources, maximizes grid reliability, and treats all energy delivered as fungible.  Since electricity is not stored and the fuel generating the source is dispatched on a cost basis, BSER is a system that discourages use of higher emitting fuels and encourages lower emitting generation.

Q:  What are the four building blocks?

A:

• Building Block 1:  Improve the heat rates at existing fossil fuel plants.  Making fossil fuel plants more efficient by improving equipment and processes means that the plants will get more electricity out of each unit of fuel.

• Building Block 2:  “Redispatch” existing natural gas combined cycle (NGCC) power sources, which means to dispatch them more often in order to increase their utilization up to an average 70% utilization rate.  In 2012, the average utilization rate of U.S. NGCC capacity was 46%, and approximately 10% of NGCC plants operated at annual utilization rates of 70% or higher.

• Building Block 3:  Increase use of low- and zero-emitting power sources through policies and market mechanisms such as renewable portfolio standards and incentives.  This approach will require increased generation from solar, wind, hydro-power, and nuclear facilities.

• Building Block 4:  Decrease electricity demand by increasing use of demand-side energy efficiency programs.

Q: How does USEPA define the “emissions guidelines” in the Clean Power Plan? 

A: The emission guidelines in the Clean Power Plan are based on USEPA’s determination of BSER.  USEPA has identified and evaluated the four Building Blocks and applied BSER to each state in proposing state goals.  Each state must follow the emission guidelines in formulating compliance plans to meet those state goals.

Q: Are all state goals the same?

A: No, the state goal for each state is different.  The Clean Power Plan proposes a complex formula that evaluates existing generation and planned generation to derive a technology-forcing state goal.  Each state has a unique mix of emissions and power sources that factor into each part of the formula.

Q: Does USEPA’s proposal tell states how to combine the Building Blocks to meet their goals?

A:  No.  Only Building Block 1 is required; the others are optional.  The Clean Power Plan affords states the liberty to choose how to combine the four Building Blocks into their state-specific plans to meet reduction requirements.  USEPA proposes two basic approaches:

• Option 1 – The Portfolio Approach:  The state sets forth an EGU standard and the additional programs it will use for each of the Building Blocks (in whatever combination it wants to use).  In this case, EGUs would not be the only affected sources.  However, the state would be responsible for achieving the state goal in a timely fashion.

• Option 2 – Direct Emissions Limits:  Under Building Block 1, the state translates its state goal into a mass- or rate-based standard for affected EGUs and then sets up a system that will allow the affected EGUs to demonstrate compliance.  Option 2 essentially authorizes a cap-and-trade system.

Q: Is there a state mass-based cap? 

A: No.  The Clean Power Plan proposes state-specific emission rates in lbs/MWhr that its affected EGUs, in the aggregate, must meet by 2030, with interim goals that apply from 2020 through 2029.  USEPA used 2012 data to establish the state goals.

Q: What year is selected for the baseline? 

A: State-wide CO2 emission levels from affected EGUs in 2005 were used to calculate the mass of emissions for the nation.  The state goals translate the goal of reaching a 30% reduction from this amount by 2030.  In using 2012 data, the state goals allow “early mover” states to take credit for programs put in place since 2005 that reduced CO2 emissions.

Q: What is the regulated “source category”? 

A: Fossil fuel-fired EGUs.  However, USEPA is soliciting comment on combining steam EGUs (standards of performance for which are codified in Subpart Da) and the natural gas combined cycle units (NGCC) (standards of performance for which are codified in Subpart KKKK) into this single source category for purposes of the CO2 emissions from existing affected EGUs.  USEPA is proposing to create a new Subpart UUUU for all of the GHG emission guidelines for the affected sources.

Q: Why is this called the “Clean Power Plan” if it regulates primarily fossil fuel-fired EGUs?

A: The proposed rule is intended to give states flexibility to comply, meaning that reductions in carbon emissions may not come from only reductions in coal use, but also from state policies mandating an increase in use of renewables, continued reliance on nuclear energy, and an increase in the efficient use of energy in businesses, manufacturing facilities, homes, and other buildings.

Q: When will obligations under this proposed rule become effective?

A:  If this rule proceeds along the timeline in the proposal, initial state SIPs will be due June 30, 2016, and final SIPs will be due by June 30, 2017.  State participating in multi-state plans are allowed more time, until June 30, 2018, to finalize SIPs.

Q: How does the Clean Power Plan proposal treat existing programs designed to move away from fossil fuels such as (1) Renewable Portfolio Standards; (2) the Regional Greenhouse Gas Initiative; or (3) California’s Cap-and-Trade Program?

A: The proposal allows states to rely on and expand programs such as these to meet state goals.  The proposal even allows multi-state programs but each state must meet its individual state goal.

Q: Isn’t the approach of using Building Blocks 2, 3, and 4 inconsistent with CAA Section 111(d) because they are “beyond the unit” measures?

A: The approach as presented by USEPA will certainly result in varied positions and challenges.  According to USEPA in the proposed rule, any measure taken by the state and included in a SIP becomes federally enforceable.  Therefore, USEPA takes the position that if the SIP incorporates actions that are binding on entities other than affected EGUs (USEPA calls these entities “affected sources”), then USEPA can enforce against those affected sources even though they might not otherwise be subject to the CAA (USEPA also noted that measures included in an approved SIP are also subject to citizen suits under Section 304 of the CAA).  USEPA rightly invites comment on this issue.

Q: When will legal challenges to this proposal begin?

A: When a rule becomes final, affected entities may challenge the rule in the D.C. Circuit Court of Appeals.  Until then, parties may submit written comments to USEPA.  Public comments must be filed within 120 days from the date of publication in the Federal Register, which should occur in the coming weeks.