The Center for Climate and Energy Solutions seeks to inform the design and implementation of federal policies that will significantly reduce greenhouse gas emissions. Drawing from its extensive peer-reviewed published works, in-house policy analyses, and tracking of current legislative proposals, the Center provides research, analysis, and recommendations to policymakers in Congress and the Executive Branch. Read More
An Energy, Economic and Environmental Solution for Our Nation:
Using Captured Carbon Dioxide for Enhanced Oil Recovery
Thursday, June 26, 2014
Russell Senate Office Building
2 Constitution Avenue, NE
Washington, D.C., 20002
Carbon dioxide enhanced oil recovery (CO2-EOR) is a decades-old, proven commercial practice that involves injecting CO2 into already developed oil fields to coax additional production. Increasing the supply of CO2 captured from power plants and industrial sources for use in CO2-EOR has the potential to increase American oil production by tens of billions of barrels, while safely storing billions of tons of CO2 underground. The event will focus on CO2-EOR’s benefits for domestic energy production, the economy, and the environment.
Vice President, Fossil Energy, Great Plains Institute
The Honorable RICHARD GEPHARDT
Former Majority Leader, U.S. House of Representatives (D-MO)
The Honorable TIM HUTCHINSON
Former U.S. Senator (R-AR)
Vice President, Government Affairs, Arch Coal, Inc.
Counsel, Leucadia Energy
Executive Director, Industrial Union Council, AFL-CIO
Climate Program Manager, Natural Resources Defense Council
Solutions Fellow, Center for Climate and Energy Solutions
The National Enhanced Oil Recovery Initiative (NEORI) brings together industry, labor and environmental advocates, and state officials to foster increased domestic oil production through the capture, use and storage of CO2 from power plants and industrial facilities. NEORI is convened by the Center for Energy and Climate Solutions (C2ES) and Great Plains Institute (GPI).
This page discusses EPA's proposed standards for new power plants issued on Sept. 30, 2013. For a discussion of the standards for existing power plants, released on June 2, 2014, click here.
The U.S. Environmental Protection Agency (EPA) released a new proposal to limit greenhouse gas emissions from new power plants on September 20, 2013. The proposed “Carbon Pollution Standard for New Power Plants” replaces an earlier proposal released by EPA in March 2012. It would establish New Source Performance Standards (NSPS) under the Clean Air Act to limit emissions of carbon dioxide (CO2) from coal- and natural gas-fired power plants. C2ES submitted public comments in response to this proposed rule, which can be found here. Under a June 2013 directive from President Obama, EPA is also developing a proposal to limit carbon emissions from existing power plants.
Why is regulation of greenhouse gas emissions from power plants important?
Electric power generation is responsible for about 40 percent of U.S. emissions of carbon dioxide, the primary greenhouse gas.
Figure 1: 2012 U.S. CO2 Emissions
Source: Energy Information Administration
Since the federal government adopted new vehicle standards in August 2012 to reduce transportation-related emissions, the power sector represents the next opportunity to achieve significant carbon reductions.
Coal and natural gas are used to fuel over two-thirds of U.S. electricity generation, and are responsible for nearly 100 percent of power sector CO2 emissions. As shown in Figure 2, the United States currently obtains 30 percent of its electricity from natural gas. Since 2000, however, natural gas has accounted for over 90 percent of new fossil generation capacity, and most new generation planned for the next few years will be fueled by natural gas.
There is one new coal plant planned for 2014: Southern Company’s Kemper Plant, which will employ carbon capture and storage (CCS). There is one new coal plant planned for 2015, which is a combined heat and power (CHP) plant that would likely not be subject to the proposed EPA standard.
Figure 2: 2012 U.S. Electricity Generation
Source: Energy Information Administration
Figure 3: Proposed U.S. Fossil Generation Capacity
Source: Energy Information Administration
How would the standards work?
New Source Performance Standards set limits on emissions based on EPA’s assessment of available technologies. As with many other Clean Air Act programs, EPA establishes a standard for a given category of facility, which state environmental agencies then translate into requirements for individual facilities.
EPA’s proposed "Carbon Pollution Standard for New Power Plants" was developed under Section 111(b) of the Clean Air Act. Section 111(b) calls for a standard that "reflects the degree of emissions limitation achievable through the application of the best system of emissions reduction which (taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated." The emissions limit must take the form of a standard – in the case of power plants, maximum allowable CO2 emissions per unit of electricity – and may not prescribe a particular technology.
The Act ostensibly requires EPA to review the technological options available and, if appropriate, establish a new standard every eight years. In practice, standards have typically remained unexamined and unchanged for much longer than eight years, often because of resource constraints at EPA.
What does the standard require?
The proposed rules would set separate standards for power plants fueled by natural gas and coal. New, large plants (roughly 100 MW or larger) fueled by natural gas could emit no more than 1,000 pounds of carbon dioxide per megawatt-hour (MWh) of electricity produced, which is achievable with the latest combined cycle technology. Smaller natural gas plants, which tend to be less efficient and operate less frequently, would have to achieve a less stringent rate of 1,100 lbs CO2/MWh. Coal plants would have two compliance options, either of which would require the use of CCS technology. Under one option, coal plants would have to begin using CCS soon after startup to achieve a 12-month average emission rate of 1,100 lbs CO2/MWh. Alternatively, coal plants could begin using CCS within seven years of startup to achieve a seven-year average emission rate of between 1,000 and 1,050 lbs CO2/MWh, with EPA inviting comment as to the final standard within that range. CCS is not yet in use at any commercial-scale power plants, but is currently being built into large coal plants in Kemper County, Mississippi and Saskatchewan, Canada. CCS technology is also in place in several industrial facilities, some of which generate as much carbon dioxide as a commercial-scale power plant.
A handful of states already have greenhouse gas limits in place for electricity generation. California, Oregon, and Washington all have limits of 1,100 lbs CO2/MWh. New York has a stricter limit of 925 lbs CO2/MWh. If finalized, EPA’s proposed standard would supersede the standards in California, Oregon, and Washington, while New York would be able to maintain its stricter standard since the Clean Air Act allows states to go beyond the federal standard.
What are the costs associated with the proposed standards?
EPA expects this standard to have negligible costs through 2022 (the intended time horizon of the standard), since very few new coal plants are planned, even without the proposed standard, and since developers of new natural gas plants should see minimal, if any, additional costs.
If a developer chooses to build a new coal plant, the proposed standards could add considerable costs to the project because it will have to employ CCS technology. Since CCS technology is so new, especially for power plant applications, its costs are still high. However, as with any new technology, costs will come down as developers gain experience and new innovations are made.
What effect is this proposal expected to have on carbon dioxide emissions?
In the near future, the proposed standard is expected to have very little impact on emissions because so few new coal plants would likely be built even without the standard. Nearly all new fossil-fuel power plants in the planning stages will be fueled by natural gas, using generation technology that should be able to comply with EPA’s proposed standards without any alterations. Power plant developers already have strong incentive to use the most efficient technology to maximize the amount of electricity that can be generated from each unit of fuel.
If a developer chooses to build a new coal plant, the requirement that the plant install CCS technology within seven years will drastically reduce its emissions. Increased deployment of CCS technology at power plants will very likely drive CCS costs down and make it a more viable option at other new coal plants. Through experience and innovation, CCS costs may come down enough to be viable on new natural gas power plants, or as retrofits on existing coal plants, to reduce carbon dioxide emissions from the power sector even further.
How is this different from the standard EPA proposed in 2012?
EPA’s first proposal for limiting carbon emissions from new power plants was released on March 27, 2012. Under that proposal, all new power plants would have been subject to a uniform standard: 1,000 lbs CO2/MWh. Under this standard, new coal plants would have been possible only if CCS technology were employed to capture an average of about 50 percent of CO2 emissions over 30 years. However, EPA viewed combined cycle natural gas plants as the primary compliance pathway because it did not project a demand for any new coal plants in the near future regardless.
Many of the public comments received by EPA on its initial proposal objected to the unprecedented use of a single standard for both coal- and natural gas-fired plants. EPA has responded in its new proposal by including a separate standard for each fuel. However, since CCS would still be required for new coal plants, the net effect of the new proposal would be similar.
What can power plants do to reduce emissions?
New natural gas plants can reach the proposed CO2 standard by employing the most efficient generation technology. In older steam turbine plants, natural gas is combusted to heat water, which creates steam to turn a turbine and generate electricity. These plants have thermal efficiencies of 30-35 percent, meaning about one third of the chemical energy stored in natural gas is converted to electricity. In contrast, new combined cycle combustion turbines more effectively take advantage of the energy in natural gas to operate with a thermal efficiency above 60 percent.
New coal plants, on the other hand, cannot achieve the proposed standard through efficiency alone. The most efficient type of coal plants, using ultra-supercritical boilers or integrated gasification combined cycle technology, can currently achieve a CO2 emission rate of around 1,700 lbs/MWh. Thus new coal plants can only meet the standard through the use of CCS, which traps CO2 exiting the plant, transports it, and injects it into an underground geological formation for permanent storage. New plants can either begin using CCS soon after startup, or begin using it later to reach a seven-year average emission rate between 1,000 and 1,050 lbs CO2/MWh, which would require the capture of about 40 percent of CO2 emissions. EPA is inviting comment on the appropriate point within this range to set the standard.
If new coal plants must use carbon capture and storage technology, what will that mean for the future of coal? How far along is CCS technology?
Even if EPA were not moving forward with this standard, very few new coal plants would likely be built, in large part because of the availability of affordable natural gas. The Energy Information Administration lists only four potential coal plants between now and 2018, compared with more than 200 expected natural gas plants.
Today, there are nine active commercial-scale CCS projects at industrial plants around the world (six of them in the United States). The world’s first two commercial-scale CCS power plants – Southern Company’s coal-fueled Kemper County energy facility in Mississippi and the Boundary Dam Power Station in Saskatchewan, Canada – are under construction and expected to be completed in 2014.
Approximately 50 additional commercial-scale CCS projects in the power and industrial sectors are in various stages of development around the world. Learn more about the status of CCS technology here.
How would existing state policies, such as the Regional Greenhouse Gas Initiative, be affected?
The proposed standard for new power plants would likely be layered on top of existing state programs. For example, a new plant operating in the Regional Greenhouse Gas Initiative (RGGI) territory would have to achieve the proposed federal standard, and would also have to submit tradable emission allowances annually to comply with the requirements of RGGI.
How does this proposal relate to EPA’s work on a standard for existing power plants?
Section 111 of the Clean Air Act requires EPA to regulate greenhouse gas emissions from new and existing power plants under two separate but related provisions. Section 111(b) requires EPA to set emission performance standards for new, modified, and reconstructed power plants, while Section 111(d) requires EPA to set guidelines for existing power plants. The guidelines for existing power plants cannot be finalized until a final standard is in place for new power plants.
Section 111(b) vests relatively more authority in EPA, and is more straightforward. EPA is required to find emission-reduction technology that has been adequately demonstrated and use this to set federal, numerical performance standards that new power plants must meet. These Section 111(b) standards are implemented by the states, as are most EPA air rules, but states do not have much flexibility to alter the standards set by EPA. On the other hand, under Section 111(d), states have greater flexibility in how they implement the EPA standard. For instance, Section 111(d) allows for the possibility of market-based mechanisms to reduce emissions system-wide, rather than focusing on individual power plants.
How long will it take EPA to finalize this standard?
President Obama’s June 2013 memo to EPA directed the agency to propose standard for new power plants by September 2013, but did not set a deadline for finalizing the standard. Federal agencies typically have a year to finalize proposed regulations.
EPA must finalize the standard for new power plants before it can finalize its guidelines for existing power plants. Since President Obama set a deadline of June 1, 2015, for the final standards for existing power plants, this may effectively serve as the deadline for a final standard for new power plants.
Under what authority is EPA regulating greenhouse gas emissions?
EPA is required by the Clean Air Act to develop and enforce regulations on greenhouse gases, much in the way it regulates other air pollutants. This authority was clarified in the U.S. Supreme Court decision in Massachusetts v. EPA (2007). The decision was a result of 12 states petitioning EPA to regulate greenhouse gases from new motor vehicles in 1999. The Supreme Court ruled that greenhouse gases meet the definition of air pollutants under the Clean Air Act and must be regulated if these gases could be reasonably anticipated to endanger public health or welfare. Responding to the Court’s ruling, EPA finalized an endangerment finding in December 2009. Based on overwhelming scientific evidence it found that six greenhouse gases, including carbon dioxide, constitute a threat to public health and welfare. Thus, it is the Supreme Court’s interpretation of the existing Act and EPA’s assessment of the scientific evidence that form the basis for EPA’s regulatory actions.
Once any substance becomes a regulated pollutant under the Clean Air Act, certain other provisions of the Act automatically kick in. Greenhouse gases first became regulated under the Act with EPA’s rule setting new standards for light-duty vehicles. This, in turn, triggered the requirement that major new or modified stationary sources be subject to a handful of Clean Air Act provisions, including Section 111(b).
Has EPA regulated greenhouse gas emissions before?
Yes. In addition to its existing greenhouse gas standards for new light duty vehicles, EPA regulates greenhouse gas emissions from new, large stationary sources through a process called New Source Review (NSR). If a new emissions source, including a power plant, will emit above a certain threshold, it must acquire a permit to emit greenhouse gas. This permit will include a requirement that the source employ the Best Available Control Technology (BACT) to ensure it will take all feasible steps available to limit greenhouse gas emissions. BACT is set on a source-specific basis, and so far EPA has determined BACT for greenhouse gas emissions from power plants to be efficiency improvements. Once EPA’s proposed NSPS is finalized, new power plants will have to comply with both this NSPS and NSR, as well as other permitting requirements already in place.
The U.S. Environmental Protection Agency (EPA) has proposed new limits on carbon pollution from existing power plants. Electric power generation is responsible for nearly 40 percent of U.S. carbon dioxide emissions – making it the largest single source.
Reducing power sector emissions is a key part of President Obama’s Climate Action Plan, which aims to reduce overall U.S. greenhouse gas emissions 17 percent below 2005 levels by 2020. His June 2013 presidential memorandum directed EPA to set standards for both new and existing plants.
In June 2014, EPA released a “Clean Power Plan” to limit carbon emissions from existing power plants. Under the rule, each state has its own target (due to regional variation in generation mix and electricity consumption), but overall the rule is designed to cut emissions 30 percent from 2005 emissions by 2030, with an interim target of 25 percent on average between 2020 and 2029. EPA is expected to finalize this rule by June 2015.
Previously, in September 2013, EPA released a “Carbon Pollution Standard for New Power Plants,” replacing a March 2012 proposal. EPA proposed standards for coal- and natural gas-fired plants (measured as tons of greenhouse gas emissions per megawatt-hour of electricity produced) that states would apply at each regulated plant. EPA is expected to finalize this rule later this year.
Explore the issues and options involved in EPA regulation of carbon pollution from power plants through the following resources.
- Map: Renewables in the Clean Power Plan (June 2014)
- Map: Proposed state emission rate targets (June 2014)
- Q&A on EPA Greenhouse Gas Standards for Existing Power Plants (June 2014)
- Graphic: Policy options to reduce carbon emissions in the power sector (June 2014)
- C2ES President Eileen Claussen's Statement on EPA's Carbon Emissions Standard for Power Plants (June 2014)
- Blog: EPA’s proposed carbon standard for power plants is stringent and flexible (June 2, 2014)
- Event: Carbon Pricing: State and Federal Options (May 22, 2014). See video of the event, and relevant slides from Dallas Butraw, David Bookbinder, Brian Turner, and Jon Brekke
- Blog: What to Watch in EPA's Power Plant Carbon Emissions Proposal (May 16, 2014)
- Brief: Carbon Pollution Standards for Existing Power Plants: Key Challenges (May 2014)
- Brief: Carbon Pollution Standards for Existing Power Plants: Issues and Options (March 2014)
- Q&A on EPA Greenhouse Gas Standards for New Power Plants (November 2013)
- C2ES President Eileen Claussen's statement on Proposed EPA Rule for New Power Plants
- C2ES Comments on Proposed EPA Rule for New Power Plants
- Brief: Events Leading to Regulation of Greenhouse Gases under the Clean Air Act (March 2010)
- Blog: EPA’s Regulation of Greenhouse Gases: What are the Facts? (January 6, 2011)
- U.S. Environmental Protection Agency, Carbon Pollution Standards webpage.
- Presidential Memorandum – Power Sector Carbon Pollution Standards
- Megan Ceronsky and Tomas Carbonell, Section 111(d) of the Clean Air Act: The Legal Foundation for Strong, Flexible & Cost-Effective Carbon Pollution Standards for Existing Power Plants (Washington, DC: Environmental Defense Fund, 2013).
- Samuel D. Eisenberg, Michael Wara, Adele Morris, Marta R. Darby and Joel Minor, A State Tax Approach to Regulating Greenhouse Gases Under the Clean Air Act (Washington, DC: Climate and Clean Energy Economics Project at Brookings, 2014).
- Georgetown Climate Center, Carbon Pollution Standards for Existing Power Plants: State Opportunities and Potential Benefits (Washington, DC: Georgetown Climate Center, 2013).
- Daniel Lashof et al., Closing the Power Plant Carbon Pollution Loophole: Smart Ways the Clean Air Act Can Clean Up America’s Biggest Climate Polluters (Washington, DC: Natural Resource Defense Council, 2013).
- Daniel Lashof and Starla Yeh, Cleaner and Cheaper: Using the Clean Air Act to Sharply Reduce Carbon Pollution from Existing Power Plants, Delivering Health, Environmental, and Economic Benefits (Washington, DC: Natural Resource Defense Council, 2014).
- Jonas Monast et al., Regulating Greenhouse Gas Emissions From Existing Sources: Section 111(d) and State Equivalency, 42 Environmental Law Reporter 10206 (Washington, DC: Environmental Law Institute, 2012).
- James McCarthy, “EPA Standards for Greenhouse Gas Emissions from Power Plants: Many Questions, Some Answers.” Congressional Research Service (CRS). R43127. June 26, 2013.
- Stephen Munro, EPA's Clean Power Plan: 50 chefs stir the pot (Washington, DC: Bloomberg New Energy Finance, 2014).
- National Conference of State Legislatures, States Reactions to Proposed EPA Greenhouse Gas Emissions Standards webpage.
- Conrad Schneider, Power Switch: An Effective, Affordable Approach to Reducing Carbon Pollution from Existing Fossil-Fueled Power Plants (Boston, MA: Clean Air Task Force, 2014).
- Robert Sussman, Power Plant Regulation under the Clean Air Act: A Breakthrough Moment for US Climate Policy? (Charlottesville, VA: Virginia Environmental Law Journal, 2014).
- Jeremy M. Tarr, Jonas Monast, and Tim Profeta, Regulating Carbon Dioxide under Section 111(d) of the Clean Air Act: Options, Limits, and Impacts (Durham, NC: Nicholas Institute for Environmental Policy Solutions, 2013).
- Gregory E. Wannier et al., Prevailing Academic View on Compliance Flexibility under § 111 of the Clean Air Act, RFF Discussion Paper 11-29 (Washington, DC: Resources for the Future, 2011).
You expect a business leader to keep a close eye on the bottom line and to act when a threat is clear. As C2ES and others have noted, it is increasingly clear to many business leaders that climate change is a here-and-now threat that we all -- businesses, government and individuals -- must address.
Today’s “Risky Business” report lays out in stark numerical terms the likely economic impact of climate change on U.S. businesses and the U.S. economy. The initiative – co-chaired by former New York City Mayor Michael Bloomberg, former Treasury Secretary Henry Paulson, and former hedge fund manager Tom Steyer – brings high-profile attention to this issue in the hopes that highlighting the risks and potential costs will help spur action to manage the impacts and curb climate-altering emissions.
The report’s outline of the many costs of climate impacts is likely an underestimate. For example, the impacts of diminishing groundwater are difficult to calculate and are not included.
In its proposed Clean Power Plan to reduce carbon dioxide emissions in the power sector, EPA has set a unique target emissions rate for each state to hit by 2030. To develop this target, EPA first determined a carbon emissions baseline (using 2012 data) based on each state’s level of CO2 emissions from fossil-fired power plants divided by its total electricity generation (including fossil-fired generation, renewable generation, and nuclear generation). Targets for 2030 were then established based on the capacity of each state to achieve reductions using the following four “building blocks” identified by EPA:
- Make coal-fired power plants more efficient;
- Use low-emitting natural gas combined cycle plants more where excess capacity is available;
- Use more zero- and low-emitting power sources such as renewables and nuclear; and
- Reduce electricity demand by using electricity more efficiently.
Since there is a wide variation among states in both emissions baseline and capacity to leverage each of the four building blocks, there is a wide variation in how much each state must cut from current emissions to hit its 2030 target emissions rate. (See Table 1.)
Each state can meet its established target however it sees fit, and does not need to leverage each building block to the extent that EPA projects. States will be able to convert their target emissions rate (pounds CO2 per megawatt-hour of electricity generated) to a mass-based standard (tons of CO2 emitted per year) to enable a cap-and-trade program. States are also free to join together and work toward an aggregated regional target.
Table 1: Building Block Reduction by State
|State||Emissions Rate of Power System, including zero-carbon generation (lbs CO2 / MWh) (2012||Block 1 (Coal-plant Efficiency)||Adding Block 2 (Natural Gas Fuel Switching)||Adding Block 3 (Renewable and Nuclear Generation)||Final Target by Adding Block 4 (Demand-side Energy Efficiency)||Total Emissions Reduction Target by 2030|
|Vermont||No affected sources|
Source: U.S. Environmental Protection Agency, Technical Support Document (TSD) for the CAA Section 111(d) Emission Guidelines for Existing Power Plants: Goal Computation, Appendix 5.
The Obama Administration today took a major step toward reducing the carbon dioxide emissions that are impacting our climate. The Environmental Protection Agency (EPA) released its “Clean Power Plan,” which leverages existing authority in the Clean Air Act to propose carbon pollution standards for existing power plants, the largest single source of U.S. carbon emissions. The proposal would cut emissions in the power sector by 30 percent by 2030, based on 2005 levels. We reviewed the basics of the Clean Power Plan with four critical questions in mind:
1. Is the standard based on emission reductions outside the power plant fence line?
The short answer is “yes.” EPA cannot require states or power plant operators to take any specific measures, but it can set the emissions target stringent enough so that it would be challenging to achieve unless certain measures are taken. EPA is proposing state-specific targets based on the capacity of each state to leverage four “building blocks.” They are:
- Make fossil fuel power plants more efficient.
- Use low-emitting natural gas combined cycle plants more where excess capacity is available.
- Use more zero- and low-emitting power sources such as renewables and nuclear.
- Reduce electricity demand by using electricity more efficiently.
Although “outside-the-fence-line” measures are not specifically required under the proposal, states would be hard-pressed to meet their targets without using programs to reduce the demand for fossil electricity, by, for example, increasing energy efficiency and encouraging renewable energy.
Looking to Figure 1, EPA has chosen the System-level Option.
Figure 1: Scope of reduction requirements
On June 2, 2014, the U.S. Environmental Protection Agency (EPA) released its proposed Carbon Pollution Standards for Existing Power Plants (known as the Clean Power Plan), per its authority under Section 111(d) of the Clean Air Act (CAA). The development of this rule was announced by President Obama during his June 25, 2013, climate policy speech. The Clean Power Plan would establish different target emission rates (lbs of CO2 per megawatt-hour) for each state due to regional variations in generation mix and electricity consumption, but overall is projected to achieve a 30 percent cut from 2005 emissions by 2030, with an interim target of 25 percent on average between 2020 and 2029.
See more resources and maps at the C2ES Carbon Pollution Standards Resource Page.
Why is regulation of greenhouse gas emissions from existing power plants important?
Electric power generation is responsible for nearly 40 percent of U.S. carbon dioxide emissions.
Figure 1: 2012 U.S. CO2 Emissions
Source: Energy Information Administration
Since the federal government adopted new vehicle efficiency standards last summer to address transportation emissions through 2025, the power sector represents the greatest opportunity for greenhouse gas reductions.
Figure 2: Electric Power Sector Carbon Dioxide Emissions without Proposed Emission Standards
Source: Energy Information Administration
Power sector emissions have declined over the past five years in part due to the economic downturn, increased energy efficiency, greater use of renewable energy and a switch from coal, the most carbon-intensive fossil fuel, to natural gas, the least carbon-intensive (in terms of combustion). In the absence of any policy changes, the U.S. Energy Information Administration projects that as the economy grows and natural gas prices rise slowly over the next five years, emissions will rise. The Clean Power Plan will have to push against these underlying trends.
Figure 3: Distribution of Power Plants across the Contiguous United States
What is in EPA’s proposal?
Typically, EPA regulations are set at the federal level and then administered by states. For example, EPA sets a limit on the level of smog in the atmosphere, and states then submit plans for how they will meet that standard. Once approved by EPA, states then administer these plans, known as State Implementation Plans.
The proposed Clean Power Plan is similar in that states would be given a target emissions rate, but have broad flexibility to determine how to achieve that target. Each state would be assigned a carbon emissions baseline based on its level of carbon emissions from fossil-fired power plants divided by its total electricity generation. (See our Proposed State Emission Rate Targets Map.) Electricity generation in this case includes fossil generation, nuclear, renewables, plus generation avoided through the use of energy efficiency programs. A target for 2030 is then established for each state based on its capacity to achieve reductions using the following four “building blocks” identified by EPA:
1. Make fossil fuel power plants more efficient.
2. Use low-emitting natural gas combined cycle plants more where excess capacity is available.
3. Use more zero- and low-emitting power sources such as renewables and nuclear.
4. Reduce electricity demand by using electricity more efficiently.
Each state could then meet its established target however it sees fit. States could join multi-state programs to reduce emissions collectively, for example through a cap-and-trade program.
How much flexibility will states have to minimize costs?
States would have considerable flexibility to adopt a variety of approaches to reduce carbon dioxide emissions from the power sector, if they can demonstrate that they will achieve the emissions target.
Among the possibilities:
- States could allow emissions credit trading among power plants owned by the same operator. This means that if one power plant reduced its emission rate below the state target, it could trade credits to a power plant that could not meet the target so that the company overall would be in compliance.
- States could allow emissions trading between power companies and even across state lines (such a program would be similar to the Regional Greenhouse Gas Initiative). Averaging or trading across power plants, companies, and states cut overall compliance costs by taking advantage of the lowest-cost opportunity for emissions reductions.
- States could use energy efficiency or renewable energy for compliance, provided that the total emissions met an EPA-approved target.
- States could also set a standard that is more stringent than what would be required by EPA's guidelines.
How much will this rule cost?
EPA projects that the compliance costs for this rule would be between $7.3 billion and $8.8 billion annually by 2030. EPA projects that this would lead to about a 3 percent increase in electricity rates by 2030. The rule would deliver considerable benefits as well, including a total of $55 billion to $93 billion in public health benefits by 2030, as projected by EPA. The rule could also reduce electricity consumption, meaning a homeowner’s electricity bill could stay the same or even decrease. It is important to weigh any costs of the Clean Power Plan against the costs of allowing carbon dioxide emissions to continue to rise unabated, contributing to climate change. The costs of climate impacts such as more frequent and intense heat waves, higher sea levels, and more severe droughts, wildfires and downpours, are projected to be much higher.
What can power plants do to reduce emissions?
An individual power plant could reduce its greenhouse gas emission rate by using fuel more efficiently or by switching to a lower carbon fuel, such as natural gas or biomass instead of coal. However, states would be complying with this rule on a statewide basis using any number of emission reduction options. As long as states met carbon dioxide targets broadly, action would not necessarily be required at particular power plants. States could meet their emissions targets by increasing their consumption of renewable electricity relative to fossil-generated electricity or improving energy efficiency. Options to reduce carbon dioxide emissions in the power sector are illustrated in Figure 4.
Figure 4: Opportunities to reduce carbon dioxide emissions in the power sector
How will existing state policies, such as the Regional Greenhouse Gas Initiative, be affected?
States would have significant flexibility in setting regulations for existing power plants within their borders, but are required to follow the broad limits in EPA’s proposed rule. Since states have been given the authority to use market-based mechanisms, the nine Northeast states participating in the Regional Greenhouse Gas Initiative (RGGI)would be able to demonstrate that their cap-and-trade program for power plants satisfies the required emission reductions, and that further regulation is therefore unnecessary. Policy measures that states might employ to achieve their carbon targets are listed in Table 1.
Table 1: Policy options to reduce power sector carbon dioxide emissions
|Power plant performance standard||Each power plant must achieve a set emissions intensity||California, New York, Washington|
|Renewable Portfolio Standard||Utilities must deliver a set percentage of renewable electricity||Colorado, Hawaii, Kansas, Missouri, Nevada, Rhode Island, and others|
|Energy Efficiency Resource Standard||Utilities must cut demand by a set amount by target years||Arizona, Connecticut, Maryland, Minnesota, Texas, and others|
|Decoupling||Reduce utility incentive to deliver more electricity by decoupling revenue and profit||California, Idaho, Massachusetts, Michigan, Oregon, and others|
|Net Metering||Encourage residential solar by paying homeowners to put excess electricity back on grid||Arkansas, Colorado, Georgia, Louisiana, and others|
|Cap & Trade||Issue a declining number of carbon allowances, which must be surrendered in proportion to each plant’s emissions||California, Regional Greenhouse Gas Initiative|
|Carbon Tax||Charge a tax for emitting carbon||British Columbia|
|Grid Operator Carbon Fee||Add a carbon price to grid operator decision over which power plants to run||None currently|
|Appliance Efficiency Standards||Require new appliances sold to meet set electricity consumption standards||California, Florida, New Jersey, and others|
|Commercial & Residential Building Codes||Require new buildings to include electricity saving measures||California, Illinois, Maryland, Mississippi, and others|
What happens now?
EPA has been directed by President Obama to work closely with states, power plant operators, and other stakeholders as it finalizes its guidelines due to their novelty and far-reaching implications. Administration officials have said they aim to issue a final rule by June 2015. The target date for states to submit their proposed plans to EPA is June 30, 2016, but states can apply for a one-year extension. After a plan is submitted, EPA will have a year to either approve plans or send them back to states for revision. If a state does not submit an adequate plan, EPA is authorized to impose a federal plan to drive the necessary reductions.
It is important to note that this action is not voluntary on the part of EPA. According to the Supreme Court in Massachusetts v. EPA (a decision that was recently reaffirmed), EPA is legally required to regulate greenhouse gases under the Clean Air Act if it finds them to endanger public health and welfare, just as EPA has addressed more traditional pollutants for the past 43 years. In 2010, EPA settled a suit with several states and environmental groups by agreeing to finalize greenhouse gas standards for existing power plants by May 26, 2012.
Additional resources can be found on the C2ES Carbon Pollution Standards Resource Page.