EPA Announces Clean Power Plan
On Monday August 3, 2015, the U.S. Environmental Protection Agency announced a final Clean Power Plan that it claims will cut carbon emissions from existing electric power plants by 32 percent from 2005 levels by the year 2030. These goals are even more stringent than the version of the plan initially proposed by the Obama administration in 2014, which would have cut carbon emissions by 30 percent from 2005 levels.
EPA has noted that carbon emissions are already down by approximately 15 percent from 2005 levels, and thus it anticipates that these new goals can be met. In addition, the White House is touting the uniformity of the new carbon emission reduction plan, after claims that 2014 proposed reductions were not uniform across all states.
The White House also lauded the health and economic benefits associated with these emission reductions, claiming that such benefits would be four to seven times greater than the estimated costs associated with these new regulations. While the Obama Administration is claiming that the costs associated with the program will be just under $8.5 billion, industry insiders and trade groups are estimating far larger costs.
Emphasis on Renewable Energy and Natural Gas
One reason that the price tag is expected to be lower than earlier anticipated is that the cost of wind and solar energy is falling, according to the White House. The new plan intends to give states credit for wind or solar energy projects that break ground before the rule is scheduled to take effect in 2022.
The plan will also call for states to encourage plants that burn natural gas rather than coal. Coal plants recently accounted for half of the nation’s electricity production, but now are responsible for 40 percent of that production. As the new rules are implemented, it is expected that coal’s role in power generation will be further diminished.
New England Stands to Benefit
The EPA plan is not without limits, and the administration has assured the regulated community that individual states can delay (but not cancel) implementation of the new rules if such implementation would threaten the reliability of a state’s electricity supplies. EPA Administrator Gina McCarthy has stated that EPA does not “expect the safety valve to ever have to be used.”
As such, states that already have experience in regulating carbon emissions are anticipated to have a competitive advantage over those states that have thus far resisted carbon emission regulation. The New England states, through their participation in the Regional Greenhouse Gas Initiative (RGGI), have had some of the first experiences with carbon emission regulation and planning. This is fortunate since EPA is claiming that it will be providing rewards to those states that provide it with emission reduction plans early.
Stiff Opposition Expected
Obviously, the proposal is not being met with a uniform embrace. Top Republican officials are claiming that EPA’s proposal will have profound impacts on the economy. In addition, trade associations in both the electricity and extractive and mining industries are in opposition to the proposal. The regulation, as with most of EPA’s sweeping regulations in recent years, will likely face legal opposition which will not be resolved until the U.S. Supreme Court has had an opportunity to address the matter.