The EPA’s Clean Power Plan: Flexibility Equals Paralysis

The recently proposed EPA clean power plan (the “Plan”) has been hailed by environmentalists as a great way to reduce green house gas (GHG) emissions from existing stationary sources of GHGs.[1] However, this proposal’s flexibility may give rise to unintended consequences that will interfere with the Plan’s successful implementation. The proposed rule sets a rate-based emissions goal for each state (allowing for states to coordinate for reaching their combined goal), which the state must implement via a state plan, and the regulation provides for guidelines for adequate state plans. The Plan provides that the pollutants regulated are GHGs, and then goes on to define GHGs under the proposed rule as limited to CO2.[2]

The proposed rule aims for a 30 percent reduction of 2005 levels of CO2 by 2030.[3]The plan imposes a two-part goal structure, to achieve an average emission reduction between the years of 2020-2029 and a final goal to be met in 2030.[4] States must include in their plans interim goals for 2020-2029 to ensure that the state is moving towards its 2030 reduction goal.[5] Each state must submit a plan or they can form a multi-state co-op and submit a regional plan to show how they will meet their assigned target.[6] Then EPA will review and approve the plan.[7]

The EPA has identified a mix of four building blocks that make up the best system of emissions reduction (BSER) under the Clean Air Act.[8] Each of these four building blocks represents different ways that power plants can reduce GHG emissions.[9] The EPA used these building blocks to calculate and set each State’s goal for the Plan. The building blocks are representative of strategies that are currently in use today in many states, while also accounting for the inter-connected nature of the power sector.

The BSER’s four building blocks include: (1) make fossil fuel power plants more efficient, (2) use more low-emitting power sources, (3) use more zero- and low emitting power sources, (4) use electricity more efficiently.[10] The Plan proposes to increase the efficiency of fossil fuel plants by improving equipment and processes to get more energy out of less fuel. The Plan advocates for an approximate heat rate improvement of 6% for coal steam electric generating units.[11] The Plan suggests greater use of lower emitting power sources more frequently to meet electricity demands, which in turn leads to less carbon pollution. This can be accomplished through dispatch to existing and under construction natural gas combined cycle units.[12]

The use of zero and lower emitting power sources refers to expanding the capacity of renewable power sources including solar, wind, and low emitting nuclear facilities.[13] The final building block is simply using electricity more efficiently.[14] The Plan calls for an increase in demand side efficiency of 1.5% annually. [15]However, the Plan states that these are not the only acceptable ways that a state or co-op can meet their emissions reduction goal.[16] The Plan suggests that any state plan that can be shown to result in the emissions reduction goal that was set by the EPA, will be allowed.

This proposed rule is problematic because the EPA mandates the target CO2 emissions states must reach by 2030, without requiring states undertake a specific course of action. While the proposed emissions goals are based on the EPA’s calculation of CO2 emissions if existing stationary sources adopt BSERs, the rule would not require sources actually adopt the BSERs. Ultimately, states will chose how to achieve their respective targets.

A regulatory paralysis is all but guaranteed, because the incentive is for each state to wait and see which of the GHG reduction measures other states undertake. Even states that are not opposed to the Plan, will be confronted with a never ending list of options, which renders meaningful cost-benefit analysis too costly to perform in the aggregate. A state that is concerned with choosing the most cost-efficient options for itself will want to avoid spending more time than is necessary to choose state-plan options, and the easiest way to void that conundrum is to let other states do the front-end work. The delay caused by the long list of options, not only negatively affects the time the concerned state takes to develop its plan but also takes time away from the states that are dragging their feet waiting for the concerned state’s plan.

Confronting the problem of GHG emission reduction in the context of this proposed rule, will be further complicated by the amount of people that will be involved in the decision making in devising a state plan. The decisions to be made by the States or Co-ops will reflect hundreds of different people and multiple State agency’s decisions. This could take years.

Unsurprisingly, lawsuits have already been filed, immediately following the passage of the rule.[17] However, because the proposed rule cannot be officially adopted until the summer of 2015, there cannot be any lawsuits regarding its passage until then. A lawsuit at this point in the administrative process is premature, because the rule has not yet been finalized. The legal battles will further draw out the implementation of the plan in the jurisdictions that will sue. These jurisdictions will have less than an ideal amount of time to draft a plan and put it into action in time to start making meaningful GHG reductions for the year 2020.

This proposed rule has been praised for the flexibility that it offers States for compliance. However, is flexibility really the answer to the GHG emissions problem? The EPA has already named the BSER in the proposed rule. The proposed rule’s 2020 application for an initial improvement of emissions stresses the urgency of the GHG emissions issue. This rule gives States too many options to consider, which will undermine efficient application of the rule by not drawing a hard line for States to follow. The lack of direction given to states in how to meet their GHG emissions reduction goal will likely result in a paralysis, ironically caused by the flexibility that was implemented for the purpose of making this law easier to follow

Gavin Dunn,  The EPA’s Clean Power Plan: Flexibility Equals Paralysis, LSU J. Energy L. & Res. Currents (October 22, 2014), http://sites.law.lsu.edu/jelrblog/?p=491.

[1] Environmental Defense Fund Hails EPA Proposal to Limit Carbon Pollution from Power Plants, Environmental Defense Fund (June 2, 2014), http://www.edf.org/media/environmental-defense-fund-hails-epa-proposal-limit-carbon-pollution-power-plants.

[2] Environmental Protection Agency, 79 Fed. Reg. 34829, 34951 (proposed June 18, 2014) (to be codified at 40 C.F.R. pt. 60).

[3] Environmental Protection Agency, 79 Fed. Reg. 34829, 34832 (proposed June 18, 2014) (to be codified at 40 C.F.R. pt. 60).

[4] Environmental Protection Agency, 79 Fed. Reg. 34829, 34838 (proposed June 18, 2014) (to be codified at 40 C.F.R. pt. 60).

[5] Environmental Protection Agency, 79 Fed. Reg. 34829, 34952 (proposed June 18, 2014) (to be codified at 40 C.F.R. pt. 60).

[6] Environmental Protection Agency, 79 Fed. Reg. 34829, 34833 (proposed June 18, 2014) (to be codified at 40 C.F.R. pt. 60).

[7] Environmental Protection Agency, 79 Fed. Reg. 34829, 34893 (proposed June 18, 2014) (to be codified at 40 C.F.R. pt. 60).

[8] Environmental Protection Agency, 79 Fed. Reg. 34829, 34834 (proposed June 18, 2014) (to be codified at 40 C.F.R. pt. 60).

[9] Id.

[10] Environmental Protection Agency, 79 Fed. Reg. 34829, 34835 (proposed June 18, 2014) (to be codified at 40 C.F.R. pt. 60).

[11] Environmental Protection Agency, 79 Fed. Reg. 34829, 34926 (proposed June 18, 2014) (to be codified at 40 C.F.R. pt. 60).

[12] Environmental Protection Agency, 79 Fed. Reg. 34829, 34851 (proposed June 18, 2014) (to be codified at 40 C.F.R. pt. 60).

[13] Id.

[14] Id.

[15] Id.

[16] Environmental Protection Agency, 79 Fed. Reg. 34829, 34853 (proposed June 18, 2014) (to be codified at 40 C.F.R. pt. 60).

[17] Andrew Zajac and Mark Drajem, EPA Coal Plant Emissions Limits Challenged by 12 States, Bloomberg (Aug. 1, 2014, 6:24 PM), http://www.bloomberg.com/news/2014-08-01/west-virginia-11-other-states-sue-epa-over-coal-plant-rule-1-.html.