EPA carbon rule: how it works

Last week, the U.S. Environmental Protection Agency issued a groundbreaking proposed rule to limit carbon emissions from power plants.  EPA's Clean Power Plan would require each state to develop a plan to limit the amount of carbon dioxide its power plants produce per unit of electricity generated.  By reducing the carbon intensity of electric generation, EPA projects that the Clean Power Plan would would achieve a 30 percent reduction in CO2 emission from the nation's power sector below CO2 emission levels in 2005, resulting in net climate and health benefits of $48 billion to $82 billion.  Importantly, the Clean Power Plan would rely on federal and state cooperation to achieve this goal.

Public Service of New Hampshire's Schiller Station, in Portsmouth, NH, can burn coal, oil, and wood chips.

EPA proposed the carbon rule pursuant to its authority under Section 111(d) of the Clean Air Act.  As with other Section 111(d) regulations, the Clean Power Plan relies on a combination of federal emission limits and state implementation plans.  First, EPA proposed state-specific carbon dioxide emission goals, stated as an emission rate of pounds of CO2 emitted per net megawatt-hour of electricity generated.  Second, EPA offered states guidelines for how to develop, submit, and implement their own plans to reach those emission goals.

At the federal level, EPA set a carbon emissions rate limit for each state based on the agency's evaluation of how much the state could feasibly reduce emissions by adopting the "best system of emission reduction", or BSER.  Effectively, EPA considered each state's portfolio of electricity generating resources as well as how hard it would be to reduce its carbon intensity.

At the state level, EPA expects each state to propose a plan based on a combination of four "building blocks" or types of measures:

• Reducing the carbon intensity of generation at individual affected fossil-fired electric generating units (or EGUs) through heat rate improvements
• Reducing emissions from the most carbon-intensive affected EGUs by substituting generation at those EGUs with generation from natural gas combined cycle power plants and other less carbon-intensive fossil-fired units
• Reducing emissions from affected EGUs by substituting generation at those EGUs with expanded low- or zero-carbon generation
• Reducing emissions from affected EGUs through demand-side energy efficiency measures 

State plans would be subject to EPA approval, based on their enforceability, ability to achieve emission performance, verifiability, and reporting process.  EPA suggested that states may develop collaborative multistate programs.  States may also incorporate existing CO2 emissions reduction programs such as the Regional Greenhouse Gas Initiative or California's carbon market into their plans.  Procedurally, EPA expects that states would submit their plans by June 30, 2016, for review and approval, with the possibility of a one-year extension of this deadline.

EPA is now taking public comment on its proposed Clean Power Plan rule for 120 days, and will hold public hearings on the proposal in July and August.  EPA projects that it would issue its final Clean Power Plan rule in June 2015.