EPA-proposed Carbon Pollution Standards ("The Clean Power Plan")
As you have no doubt heard, the US EPA is issuing proposed guidelines today that would reduce greenhouse gas emissions from existing power plants by 30 percent by 2030 (25 percent by 2020). The EPA touts that its Clean Power Plan will lead to public health and climate benefits worth an estimated $55 billion to $93 billion in 2030, including avoiding 2,700 to 6,600 premature deaths and 140,000 to 150,000 asthma attacks in children. According to a EPA Fact Sheet on the benefits of the proposal, “these climate and health benefits far outweigh the estimated annual costs of the plan, which are $7.3 billion to $8.8 billion in 2030. From the soot and smog reductions alone, for every dollar invested through the Clean Power Plan, American families will see up to $7 in health benefits.”
My initial take on the proposal is that it's aggressive, flexible, and pragmatic.
Analysts report that the proposed guidelines would result in deeper emissions reductions in 2020 than any of the recent federal legislative attempts to regulate carbon: Waxman-Markey in 2009, Kerry-Lieberman in 2010, or the Clean Energy Standard proposal in 2012. Reductions in 2020 would be on the same order of magnitude as a $10/ton carbon tax.
As many are reporting, the proposed guidelines would give states broad discretion for developing plans that would achieve the required reductions. Instead of requiring very expensive (and not very effective) power plant modifications, the EPA will allow states to include carbon emissions avoided through energy efficiency and renewable energy to count toward the required reductions. In addition, states will have the option to create or opt-into cap and trade regimes like the Regional Greenhouse Gas Initiative (RGGI is a cooperative effort among the states of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont to cap and reduce CO2 emissions from the power sector.)
This flexibility would allow the proposed rule to be implemented via least-cost, consumer and business friendly strategies. It’s critical that we both reduce carbon emissions and control costs, rate impacts. We need to protect our environment while encouraging economic vitality. Minnesota’s utilities have done a terrific job implementing our state’s clean energy policies very cost-effectively. Today’s rule will help build on their terrific track record.
The EPA described the reductions as a 30 percent reduction compared to 2005 levels. However, the reference to 2005 is kind of a misnomer – the proposed rule does not use 2005 as a baseline year. Instead, the rule proposes a complex methodology for calculating each state’s targeted emissions rate. While it will take a while for folks to figure out how the proposed rule will operate in practice, it seems to try to take a pragmatic view of the emissions reduction that can be achieved in each state, given the specific circumstances of that state.
It is as yet unclear whether the proposed rule gives "early action credit" for emissions reduced or avoided from Xcel's Metropolitan Emissions Reduction Plan (MERP) as well as the ramp-up of the state's Renewable Energy Standard and Conservation Improvement Plan from the 2007 Next Generation Energy Act - emissions that Minnesota ratepayers have already paid for. In any event, the proposed rule will ask other states to take actions to catch up to Minnesota's leadership, evening the playing field between states.
The rule would also set a reduction goal that Minnesota will have to stretch to meet.
Further, the proposal protects against backsliding on the progress Minnesota utilities have made. Although Xcel Energy projects that carbon emissions from its Upper Midwest operations will be reduced by an amazing 30% by 2020 , maintaining those reductions after that period will be challenging as the utility develops replacement plans for its non-carbon emitting nuclear facilities.
The US EPA will take comments on the proposed rule, and plans to issue a final rule in June of 2015. States will then be required to develop implementation plans to meet emissions reduction requirements, and submit those for US EPA approval by June 2016, a very tight timeline. The proposed rule would allow states to ask for a one-year extension, to June 2017, and, if the state plans to work with other states to jointly comply with the rule, to June 2018.
All in all, this proposal is very good first step in putting a national framework for climate action in place. Put into a global perspective, the US has now upped the ante on international action on climate, making coordinated international action on greenhouse gas reductions much more likely - though still exceedingly challenging.
For those of us who care about clean energy, climate, and the economy, today is a very good day.
Take a look at this webinar to hear leaders from MN’s Division of Energy Resources, the MN Pollution Control Agency, and the energy sector discuss regional solutions to cut emissions from existing power plants.