Our Comments on EPA’s Proposal to Regulate GHGs from New Power Plants

This week, C2ES filed comments on EPA’s proposed greenhouse gas (GHG) emissions standard for new power plants.

Let me start by saying I would prefer to be working on the implementation of a market-based program to reduce GHG emissions. For years, C2ES has believed that a market-based policy—whether a cap-and-trade program, an emissions tax, emissions averaging among companies, or a clean energy standard with tradable credits—would be the best way of reducing GHG emissions and spurring clean energy technology. Market-based policies create a good division of labor, with the law setting the goal, and private industry deciding how best to achieve it.

Unfortunately, there’s no real prospect of Congress enacting a market-based GHG reduction program—or any climate action—any time soon. Previous Congresses debated bills to tackle climate change. The current Congress debates bills to block efforts to tackle climate change.

So we’re left with the work of even earlier Congresses—namely those that wrote the existing Clean Air Act.

In 2007, the U.S. Supreme Court ruled that GHGs fit within the Clean Air Act’s definition of “air pollutants.” Through a process you can read more about here, this has led EPA to propose the GHG emissions standards for new power plants.

C2ES has some concerns with the proposed rule, as expressed in our comments, but, assuming those concerns are addressed, we support EPA moving forward with it.

The proposed greenhouse gas standard could be met cost-effectively today only by a new state-of-the-art power plant burning natural gas. This would essentially rule out construction of new coal plants using current technology, though the rule would hold open the door for advances in the technologies that capture carbon emissions from coal plants and store them deep underground. (Carbon capture and storage while in use in other sectors, has not been demonstrated at scale in the power sector and would be very expensive today.)

For reasons having nothing to do with GHGs—mostly the availability of inexpensive natural gas and the regulation of other pollutants—most independent analysts already project virtually no construction of new coal plants through 2020 (when the law requires EPA to reevaluate the rule). Given the projected status quo, the Office of Management and Budget estimates that the cost for industry to comply with the proposed rule is zero.

That said, wildly fluctuating natural gas prices are a recent memory, and current projections of an abundant and inexpensive supply for decades to come could be wrong. Setting a standard that effectively prohibits the construction of new high-emitting coal plants therefore poses a risk—if natural gas prices go higher than currently foreseen, electricity rates could face upward pressure. On the other hand, allowing the construction of new high-emitting coal plants poses a different set of risks—locking in the emissions of those plants for decades to come, thereby exacerbating the challenges the United States faces in reducing its GHG emissions, and increasing the likelihood and costs of dangerous climate change.

C2ES believes that on balance the better option is to do what EPA is proposing (although, as we explain in our comments, some aspects of the rule shouldn’t necessarily serve as precedent when regulating existing plants or other sectors). At the same time, we must do more to advance low-emitting uses of coal and natural gas—for example, through better incentives for developing and deploying carbon capture and storage—as well as nuclear power, renewable energy, and efficiency in generation, transmission and end-use.

EPA faces a bigger challenge after the election, when it is expected to issue regulations for existing power plants—perhaps under a court order. Because the Clean Air Act allows different approaches for existing sources, EPA could be more creative here—for example, by allowing for the use of market mechanisms to reduce emissions.

The role of the states is very important. A number of states have established programs to reduce GHG emissions from power plants, providing potential models and options for a federal standard. EPA could choose to allow states to use existing or new market-based policies to meet whatever GHG standard it sets for existing plants. Maybe more experience with markets at the state level will then give a future Congress the confidence to establish a comprehensive market-based GHG reduction policy.