On June 2, 2014, the U.S. Environmental Protection Agency (EPA) proposed a new rule under section 111(d) of the Clean Air Act that would lower CO₂ intensity from fossil-fuel generators by 2030. Instead of a single requirement, the “Clean Power Plan” outlines state-specific carbon intensity requirements (lbs CO₂/MWh). If all states meet the requirements, the EPA estimates CO₂ emissions from the power sector will decline 30% from 2005 levels.

Key Details

• The EPA developed state intensity requirements using four building blocks: heat rate improvements at coal plants, dispatching gas instead of coal, zero carbon generation (i.e., renewables and nuclear), and end-use energy efficiency
• States will be required to propose compliance strategies in State Implementation Plans (SIPs)
• The regulations provide states flexibility in the development of SIPS; they may choose from the EPA building blocks or propose alternative strategies (e.g., regional market-based trading programs)
• The EPA is entering a public comment period and must finalize the rule by June 2015 according to orders issued by President Obama; individual state plans must be submitted by June 2017; multi-state plans must be submitted by June 2018
• The regulations will require complex formulas since compliance is a composition of real carbon output, offsetting renewable and nuclear generation, and MWhs avoided from energy efficiency
• The power sector accounts for roughly one-third of all domestic greenhouse gas emissions

Implications

The rule marks a significant departure from prior policy as this is the first time EPA is regulating CO₂ emissions from existing power plants. The rule may experience dramatic changes as the EPA incorporates public comment into a final rule, stakeholders challenge the rule in court, and states develop SIPs.

More Information

EPA: http://www2.epa.gov/carbon-pollution-standards/clean-power-plan-proposed-rule

Bloomberg New Energy Finance Technical Summary: http://bit.ly/1pAyKa1

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