You have probably heard about the release of the final version of the Clean Power Plan on Aug. 3, 2015 (http://www2.epa.gov/cleanpowerplan). Clean Power Plan Fact Sheet: (http://epa.gov/airquality/cpp/fs-cpp-preview.pdf). It sets even stricter emission standards than the initial proposal of last year. The Clean Power Plan aims to cut GHG emissions by 32% from a 2005 baseline by 2030, while giving states greater flexibility to meet standards, such as that reductions do not need to begin to be achieved until 2020. Emission reductions must be phased in on a “gradual glide path” to 2030.

Overview

Under the Clean Power Plan, states must develop and submit a plan by 2018 to the USEPA for their approval containing the strategies to ensure that their power plants individually or as a group meet specific GHG performance rates for 2030 and for the years between 2022 and 2029. States will have until 2022 to begin phasing in emission reductions. This is a two year extension from the dates contained in the proposed rule.

States may choose between two approaches to meet their goals:
1. Emission standards plan – with power plant-specific emission rate or fuel-based requirements that a state must enforce that will achieve the required reductions.
2. State measures plan– includes a mixture of measures enforced by the state, such as power plant-specific emission reduction standards, renewable energy standards, and programs to improve energy efficiency not included in the “best systems” list. The federally-enforceable requirements (on the “best systems” list) and any state-only measures must result in all power plants meeting the state’s GHG emission reduction goal.

Specific Program Elements

The Plan contains a Clean Energy Incentive Program to further incentivize renewable energy, offering credits for renewable energy installed in 2020 and 2021. These credits can then be used for the compliance period starting in 2022.

The Clean Power Plan contains a “safety valve” allowing states relief of their emission reduction standard if there is risk of disruption of its power supply. A state may drive certain high-emitting power plants to retire quickly to meet a 2020’s reduction goal before a new source necessary to take its place in producing electricity is up and running. There are also allowances for states to request extensions to deadlines.

Finally, the Clean Power Plan allows for interstate trading of GHG emission reduction credits, giving another option to states – to procure credits from states which have achieved over-reduction of GHG emissions, beyond their goals. The Plan provides guidance for states who wish to establish such a trading program. The USEPA wishes to encourage such trading programs, such as the successful RGGI program in the Northeast.

Early Reaction

The early response has been mixed. Republicans will try to block its implementation, as it will certainly impact the power and coal industries. The National Association of Manufacturers is against the rule. The Plan will likely be challenged in court. However, 365 major companies and investors including General Mills, Mars, Nestle, and Unilever sent supporting letters for the Plan.

The Advanced Energy Economy (AEE) was upset that the Plan contains no credit for actions taken between now and 2020, and that energy efficiency was removed from “the best system of emission reduction” methods used to set state-by-state targets. The 3 main “best systems” listed are improved heat rate at coal-fired facilities, increased use of natural gas, and use of renewable (carbon-free) energy. It is understood, however, that energy efficiency programs can still be included in state compliance plans. It is likely that energy efficiency was removed as a “best system” because it represents efforts outside the property lines of power plants, which is harder to measure and may have legal obstacles for affected power plants.

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