United States: EPA Announces "Clean Power Plan" To Reduce Carbon Pollution From Power Plants

On June 2, 2014, the United States Environmental Protection Agency announced its proposed Clean Power Plan to reduce carbon dioxide emissions from power plants.

According to the EPA, temperatures have been rising since 1901, and in 2012, weather disasters cost the United States over $100 billion.  The EPA cites human emissions of greenhouse gases as the cause of these climate changes, and states that power plants are responsible for about one-third of all United States GHG emissions, and are the largest source of carbon dioxide emissions nationwide.  The EPA's Clean Power Plan includes a National Framework for States that sets state-specific emissions goals for reducing carbon dioxide emissions from power plants.  The Plan only proposes goals for states with fossil fuel-fired power plants, so Vermont and Washington, D.C. are not included because they do not have fossil fuel-fired power plants that would be affected by the Plan.  The EPA also did not propose goals for the four sources located on Indian reservations.

The EPA estimates that the Clean Power Plan will create climate and health benefits totaling an estimated $55 billion to $93 billion per year by 2030, and reduce carbon pollution in the power sector nationwide by about 30 percent compared to 2005 levels by 2030.  The EPA expects electricity bills to be about 8 percent lower as states, cities, businesses, and homeowners work to increase energy efficiency.  The EPA also claims that the Plan will create jobs for Americans in the power sector and ensure that the United States remains a leader in the global movement towards sustainable energy.

The EPA's "National Framework for States" outlines state-specific emissions goals under the Clean Power Plan.  The EPA devised the following formula to calculate each state's goal: CO2 emissions from fossil fuel-fired power plants in pounds divided by state electricity generation from fossil-fuel fired power plants and certain low- or zero-emitting power sources in megawatt hours.  In developing this formula, the EPA analyzed what states and utilities were already doing to reduce carbon emissions, and identified four "building blocks" for states to implement in order to increase energy efficiency:

  1. Increase the efficiency of fossil fuel power plants;
  2. Increase the use of low-emitting power sources (i.e., natural-gas combined cycle plants);
  3. Increase the use of zero-emitting power sources (e.g., renewables and nuclear); and
  4. Generally increase the efficiency of end-use, consumer electricity consumption.

The EPA's formula applies the building blocks to create each state's goal, but each state is free to choose any combination of the four measures to meet its goal.  The EPA also proposes to accept multi-state implementation plans.

The Plan could have far-reaching consequences across a wide range of states, industries, and consumers; and certain industries have been critical of the plan.  The United States Chamber of Commerce's Institute for 21st Century Energy, which represents more than three million businesses, analyzed the impact of GHG regulation on the power industry and the U.S. economy.  They determined that "even with implementation features designed to keep compliance costs low . . . [the Plan] leads to nearly a half trillion dollars in total compliance expense, peak GDP losses over $100 billion, hundreds of thousands of lost jobs, higher electricity costs for consumers and businesses, and more than $200 on average every year in lower disposable income for families . . . ."

The coal industry would be the hardest hit, as coal-fired power plants are responsible for 76 percent of utilities' carbon dioxide emissions.  In a state like Ohio, which derives more than 69 percent of its electricity from coal, the Plan could destroy the coal mining industry and over 3,000 people could lose their jobs.  In a statement  to the Pittsburgh Business Times on Monday, Ohio-based coal company Murray Energy Corp. said "The Obama Administration's proposed cap-and-tax mandates are absolutely illegal and will destroy millions of jobs, cripple the American economy, and cause massive blackouts in this country."  Senate Minority Leader Mitch McConnell (R-KY) called the Plan "a dagger in the heart of the American middle class, and to representative Democracy itself."  However, 128 companies and 49 investors sent letters to the Obama Administration supporting the proposed regulation because they claim it will reduce the financial risks posed by climate change.

Comments on the Clean Power Plan must be submitted within 120 days after the Plan is published in the Federal Register.  Additionally, public hearings will take place the week of July 28 in Pittsburgh, Atlanta, Denver, and Washington, D.C. The EPA aims to finalize the Plan by June 1, 2015. States would then have until June 30, 2016 to submit their initial state plans; states can request an extension for submitting their complete plans of one year (for single-state submissions) or two years (for multi-state submissions).

More information regarding the Clean Power Plan can be found here, here, and here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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