Q&A: EPA's Federal Implementation Plan

Q&A: EPA's Federal Implementation Plan

On August 3, 2015 as part of the Clean Power Plan release, the Environmental Protection Agency (EPA) issued a proposed federal plan. The agency is currently soliciting comments on the proposal and intends to issue a final federal plan by summer 2016.

What is a federal implementation plan and when is it used?

The Clean Air Act offer states the opportunity to implement national pollution control programs, including the Clean Power Plan. There is every reason for a state to develop its own plan that takes into account its own unique circumstances, and most states choose to develop and implement programs based on that knowledge. Most states are likely to develop their own program to comply with the Clean Power Plan.

EPA assists state efforts by providing technical and policy guidance. EPA must also review and approve state plans to ensure that they comply with the Act. If a state fails to adopt and implement an adequate plan, EPA is required to issue and enforce a federal implementation plan. States may also choose to adopt the federal plan as an alternative to developing their own plan. However, if a federal plan is implemented in a state, the state may still, at a later date submit a plan to replace the federal plan either in whole or in part. States may take over the administrative and enforcement aspects of a federal plan rather than leaving it to EPA.

What is included in the federal plan?

EPA is proposing two federal plans with different approaches – a rate-based approach and a mass-based approach. These two federal plans can be enforced in states that fail to adopt or implement an adequate plan. These two federal plans may also be considered as model rules which states can adopt or tailor for implementation as a state plan.

How does the federal plan encourage market-based solutions?

The federal plans offers two market-based programs to achieve cost-effective emissions reductions. These may be adopted in part or in whole by states or used as a model for states to design their own plans.

In the rate-based program, units must meet an emission standard or acquire a sufficient number of emission rate credits (ERCs), each representing a zero-emitting megawatt-hour, to bring their rate of emissions into compliance. ERCs can be generated by units not covered directly by this rule, and they can be bought, sold, or banked for later years.

For a mass-based program, EPA would create a state emissions budget equal to the total tons of CO2 allowed to be emitted by the affected units in each state, consistent with the state targets. EPA would initially distribute the allowances within each state budget – less three proposed allowance set-asides – to the affected units based on their historical generation. Allowances may then be transferred, bought, sold, or banked for future use. The compliance obligation on each of the affected unit is to surrender the number of allowances sufficient to cover the unit’s respective emissions at the end of a given compliance period.

The federal plan will also facilitate interstate trading as well as international trading with Canadian and Mexican units that are connected to U.S. electric grid. EPA intends to set up and administer a program to track trading programs – both rate-based and mass-based – that will be available for all states that choose it. EPA proposes that affected units in any state covered by a federal plan could trade compliance instruments with affected units in any other state covered by a federal plan or a state plan meeting the conditions for linkage to the federal plan.

Proper evaluation, measurement, and verification procedures are important to ensure emissions reductions are actually achieved in a trading program. EPA must approve any such procedures and has also offered model procedures to verify that any credits in a state-based trading regime are compliant with federal requirements. States may choose to incorporate these procedures into the state plan to assure approval by EPA.

Will states be penalized for using the federal plan?

No. States will not be penalized for using all or part of a federal plan. The stringency of the proposed federal plan for each state will be the same as required if states were to write their own plan.