On August 3, 2015, the U.S. Environmental Protection Agency (EPA) finalized 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 establishes different target emission rates for each state due to regional variations in generation mix and electricity consumption. Overall, however, it is projected to achieve a 32 percent cut in power sector emissions by 2030 from 2005 levels,
See more resources and maps at the C2ES Carbon Pollution Standards Resource Page .
Why is EPA regulating carbon dioxide?
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 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.
In June 2013, President Obama directed EPA  to work closely with states, power plant operators, and other stakeholders as it finalized its guidelines and EPA released its proposed rule in June 2014.
What is in EPA’s Clean Power Plan?
The Clean Power Plan sets different target emission rates for each state due to regional variations in generation mix and electricity consumption, but overall is projected to achieve a 32 percent cut in power sector emissions by 2030 from 2005 levels.
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 Clean Power Plan is similar in that states have a unique target emissions rate, but have broad flexibility to determine how to achieve that target. Each state was 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 was set for each state based on its capacity to achieve reductions using the following three “building blocks” identified by EPA:
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.
State plans can include market-based mechanisms, such as averaging or trading. States can convert their target emission rate (pounds CO2 per megawatt-hour of electricity generated) to a mass-based standard (tons of CO2 emission per year) to enable a cap-and-trade program, a carbon tax or any other mix of market-based mechanisms.
States also have the option of complying as an individual state or as a group of states. States have long collaborated to achieve energy and environmental goals (e.g., through the sulfur dioxide trading program). The Clean Power Plan provides an opportunity to expand on these efforts. A multi-state approach  could be similar to the Regional Greenhouse Gas Initiative (RGGI) in that it would regulate carbon dioxide emissions from power plants across multiple states. This could also be accomplished through another existing authority  such as a local Regional Transmission Organization (RTO) or Independent System Operator (ISO). Alternatively, states sharing common plan elements could allow trading across state lines even though the programs are not formally linked.
What are the big differences between the proposed and final plans?
States will get more time to submit a plan – they can get an extension to 2018 – and an extra two years – until 2022 -- to begin phasing in pollution cuts. C2ES and others argued for more time to encourage states to take a longer view on planning and investment for a cleaner energy future.
Along with the Clean Power Plan, the administration proposed a voluntary Clean Energy Incentive Program to encourage the installation of renewable energy projects and energy efficiency programs for low-income communities before the 2022 compliance date. It will also encourage states to submit plans early.
Market-based mechanisms are more explicitly encouraged in the final rule. The proposed federal implementation plan includes an option for states to join an interstate cap-and-trade program. It also would allow states to make “trading ready” plans to participate in emission credit trading without the creation of interstate compacts.
What are the costs vs the benefits?
The Clean Power Plan is projected to provide $34 - $54 billion in total benefits ($14 - $34 billion are for U.S. health and $20 billion is for the benefit of the global climate). Compliance costs to implement the plan range from $5.1 to $8.4 billion.
By encouraging energy efficiency, the rule could reduce electricity consumption, especially with regard to the business-as-usual forecast. A homeowner’s electricity bill could stay the same or even decrease.
The incentive program specifically targets helping low-income communities become more energy efficient.
C2ES examined six economic modeling studies on the proposed plan. The majority of them projected that consumers would save money or pay less than $87 per household per year -- about 25 cents a day.
We also can’t forget to factor in the costs of inaction. Adapting to the impacts of unmitigated climate change would be much more expensive than reducing our reliance on fossil fuels.
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 will implement 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 1.
Figure 1: Opportunities to reduce carbon dioxide emissions in the power sector
What happens next?
States will have up to two years to submit their proposed implementations plans to EPA. 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.
How was each state’s target calculated?
EPA changed the way it calculated each state target from the proposed plan to the final one.
Unlike the proposal, the amount of energy efficiency a state could achieve, which would reduce electricity demand, was not considered for state target setting. However, the EPA has stated that it will provide ample latitude to use energy efficiency programs for compliance.
EPA also changed its methodology with regard to the determination of incremental renewable energy by making it more reflective of regional technical potential, rather than based on state-level renewables policies as had been the case in the proposal.
“At-risk” nuclear power from existing plants and new generation from plants currently under construction were not used for calculating states’ emission rates targets. Tennessee, Georgia, and South Carolina, which have five units under construction, are now able to use this generation for compliance.
In its final rule (Clean Power Plan ) to reduce carbon dioxide emissions in the power sector , EPA has set a unique target emissions rate for each state to achieve by 2030. Targets are based on the “best system of emission reduction” (BSER), which use three “building blocks ” or potential pathways to cost-effectively and efficiently reduce CO2 emissions:
State Target Calculation Steps
To calculate a state’s target, EPA first determined a CO2 emissions baseline (using 2012 data) based on each state’s level of CO2 emissions from fossil-fired power plants divided by its total fossil-fired electricity generation (including coal steam plants, oil and natural gas steam plants and natural gas combined cycle plants). Next, the state level data was aggregated to the regional level (Eastern, Western and Texas Interconnections). Then, “emission performance rates” were established for years 2022-2030 for two subcategories of existing fossil-fired power plants (1) fossil steam (generally, coal-fired plants), and (2) natural gas combined cycle units, based on the capacity of each region to achieve reductions using the identified building blocks.
Finally, state target emission rates (pounds of CO2 per megawatt-hour of electricity generated) were calculated based on a weighted average of the states’ baseline fossil fuel mix (percentage of fossil steam and natural gas combined cycle plant generation) and the two emission performance rates (see sample calculation below).
In 2030, the emission performance rate for all fossil steam plants was determined to be 1,305 lb CO2/MWh, and the emission performance rate for all natural gas combined cycle plants was calculated to be 771 lb CO2/MWh. All state target emission rates in 2030 fall between these two values.
How much flexibility will states have to minimize costs?
States have considerable flexibility to adopt a variety of approaches to reduce carbon dioxide emissions from the power sector, as long as they demonstrate they will achieve the emissions target.
Among the possibilities:
What is the Clean Energy Incentive Program?
The Clean Energy Incentive Program (CEIP) is an optional program for states designed to reward early investment in wind and solar generation broadly, as well as demand-side energy efficiency (EE) in historically underserved low-income communities.
To establish participation in the CEIP, states must submit their final plans. New projects generating (MWh) or saving (MWh) energy in 2020 and/or 2021 are eligible to receive allowances or emission rate credits from the EPA. These credits will contribute to state compliance during the compliance period beginning in 2022.
For more details on the program, see the EPA factsheet .
How will existing state policies, such as the Regional Greenhouse Gas Initiative, be affected?
States 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 , California and the nine Northeast states participating in the Regional Greenhouse Gas Initiative (RGGI)  could demonstrate that their cap-and-trade  programs satsify 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 |
With the interim targets extended, can the United States still meet its emissions reduction goals, especially the one for Paris?
The Clean Power Plan is an important piece of the puzzle to reduce emissions, but it’s not the only one. The federal government is also taking action on transportation, methane and other sources of emissions.
The changes made to the proposal put it on a better footing to withstand legal challenges.
Incentivizing early action on deploying renewables sets us up for deeper decarbonization in the future.
C2ES estimated measures already adopted or proposed will reduce emissions up to 23 percent below 2005 levels. So more will be needed to achieve the 2025 target of 26-28 percent that the U.S. made to the Paris talks.
The power plant rule is the most concrete measure of U.S. willingness to act and lead. It will make it tougher for others to hold back and will strengthen the odds of a decent global deal next year in Paris.
Will the Clean Power Plan affect the reliability of the electric grid?
Why is regulation of greenhouse gas emissions from existing power plants important?
Electric power generation is the single largest source of carbon dioxide emissions in the United States. In 2013, electric power generation accounted for nearly 40 percent of U.S. carbon dioxide emissions (see Figure 1).
Figure 2: 2013 U.S. CO2 Emissions
Source: Energy Information Administration
Since the federal government adopted new vehicle efficiency standards  to address transportation emissions through 2025, the power sector represents the greatest opportunity for greenhouse gas reductions.
Figure 3: 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, which emit about half as much carbon when combusted. 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 4: Distribution of Fossil Fuel Power Plants across the Contiguous United States
Source: Energy Information Administration 
Additional resources can be found on the C2ES Carbon Pollution Standards Resource Page .