US Domestic Policy & The Clean Power Plan ESP 165: Climate Policy Michael Springborn Department of Environmental Science & Policy UC Davis

Implicit CPP mitigation objective: reduce carbon dioxide (CO2) emissions from existing U.S. power plants 32%* below 2005 levels by * proposed rule (30%), final rule (32%) **rate-based approach means this number changes based on expected electricity use *** illustrates gaming that can occur when specifying the baseline by a year (NYT, 2014) (Fowlie et al. 2014) equivalent to eliminating 2/3 of cars & trucks in U.S. electricity use all energy

The 4 key precursors to the CPP involve the Supreme Court, the EPA, the Copenhagen meeting and Obama’s Climate Action Plan (Analysis Group, Inc. 2014) CPP Final Rule

(eenews, 2016) Executive branchJudicial branch

EPA argues the CPP is authorized by the CAA, section 111(d) which “applies to pollutants (like GHGs) not regulated elsewhere in the law.” (Analysis Group, Inc. 2014)

Senate version: “clearly permits…EPA to regulate power plant carbon emissions.” House of Representatives version: “…prohibits the EPA from regulating pollutants “emitted from a source category which is regulated under” the Clean Air Act’s toxics program.” Current legal challenge: “power plants are regulated under the toxics program” “the House version means the EPA can’t regulate them” a second time EPA’s response: “final rule includes (an)…argument that this reading of the law makes no sense” “the better interpretation… merely prevents the EPA from regulating the same pollutant twice” “supported by both legislative history and the scheme of the Clean Air Act—and reinforced by the clear text of the Senate version” Legal challenge hinges on “a bizarre drafting glitch”: “Congress inadvertently passed two different versions of the relevant provision when it amended the Clean Air Act in 1990” (Freeman, 2015)

Jumping the fence line generates flexibility & legal peril (Analysis Group, Inc. 2014)

the EPA is establishing: 1.CO2 emission performance rates representing the best system of emission reduction (BSER) for two subcategories of existing fossil fuel-fired EGUs 2.state-specific CO2 goals reflecting the CO2 emission performance rates 3.guidelines for the development, submittal and implementation of state plans that establish emission standards or other measures to implement the CO2 emission performance rates, which may be accomplished by meeting the state goals. (EPA, 2015) ( ) At its core, the CPP sets (for the first time) CO2 emissions performance standards for existing power generation from coal and natural gas

1.Instead of the burden falling on states as originally drafted “it places the regulatory burden directly on power plants…tells coal and gas plants how much carbon pollution they can emit per megawatt-hour of electricity, setting a single national rate for each category.” “revisions…will make it harder…to argue it intrudes on state sovereignty.” Instead of individual state goals “the new structure of the final version lets states meet their obligation simply by applying the EPA’s uniform national rates for coal and gas units to the power plants in their jurisdiction—the most straightforward compliance plan imaginable. The rule will offer states other ways to comply by translating these two rates into a single state emissions target; (states can, if they want to,) adopt an emissions cap and create a credit-trading scheme.” 2.“opponents…charge(d) the EPA with “jumping the fence-line,”” in the original draft, i.e. “straying beyond its acknowledged authority to regulate power plants. …(including) use of energy efficiency as a basis for setting emission rates. …But doing so exposed EPA to vehement criticism that it was seeking to regulate how consumers use energy. … the new standard drops energy efficiency as a consideration for stringency, …(but) the EPA does allow sources to use energy efficiency in order to hit their targets.” 3.Compliance deadline has eased by 2 years, to Explains more comprehensively…why EPA has the required legal authority. (Freeman, 2015) The final rule included key changes to protect against legal challenges

To “ensure that both states and affected EGUs enjoy the maximum flexibility” states can choose from 3 options: 1.“establishing standards of performance that apply the subcategory specific CO2 emission performance rates to their affected EGUs 2.adopting a combination of standards and/or other measures that achieve state-specific rate-based goals that represent the weighted aggregate of the CO2 emission performance rates applied to the affected EGUs in each state, and 3.adopting a program to meet mass-based CO2 emission goals that represent the equivalent of the rate-based goal for each state.” (EPA, 2015)

The CPP is expected to accelerate a pre-existing trend away from coal to nat. gas, and renewables. (EIA via EDF, 2015)

(EIA, 2016) with CPP

(NYT, 2014) Heavy coal using and supplying states will likely bear the brunt of the costs

Areas with heavy coal-mining have been trending republican (NYT, 2014)

States that are suing are not distributed randomly

(EIA, 2016)

State reactions to the Supreme Court stay response are varied

Estimated mass reductions are: bigger in TX and several mid-western states, & smaller in early mover states like CA.

Compliance costs for electricity generators are estimated to be several billion dollars.

Benefits stem from (1) reduced climate effects, and (2) co- benefits Not all benefits are quantified and monetized.

Benefits by 2030 are in the $10’s of billions, led by co-benefits.

By 2030 net benefits are estimated to be >= $25B

Retail electricity prices are estimated to increase but by a small %

(EIA, 2016)