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Complying with 111(d)
Exploring the cap-and-invest option.
With the United States Environmental Protection Agency’s (EPA) proposed Section 111(d) New Source Performance Standards (NSPS) for new plants published in January 2014 – and a proposed rule for existing fossil generators expected in June 2014 – many states are exploring the development of “equivalency plans” that would enable them to flexibly meet compliance requirements in the least disruptive manner and at the lowest cost. States are likely to have many options, as demonstrated by the State of Kentucky, for example, in its recent “Greenhouse Gas Policy Implications for Kentucky under Section 111(d) of the Clean Air Act.” 1
One option with which states might not be familiar is known as “cap-and-invest.” The most prominent example is the Regional Greenhouse Gas Initiative (RGGI, pronounced “Reggie”), an electric sector CO 2 emissions reduction program for fossil generators established by Northeastern states, which started operation in 2009. While there’s plenty of conventional wisdom about “cap-and-trade,” there’s far less understanding of cap-and-invest. States shouldn’t confuse the two, and as they weigh various approaches to developing equivalency plans, states might want to take a page from the RGGI playbook, and see whether cap-and-invest could serve as a 111(d) compliance model.
Section 111(d) and GHG Standards
The Clean Air Act (CAA) is generally very prescriptive, in that specific pollutants are explicitly addressed in different sections of the Act. For example, Section 112 focuses on air toxics like mercury, and Sections 108 and 109 focus on criteria pollutants like sulfur dioxide (SO 2) and particulate matter. Section 111 doesn’t follow that pattern. Unlike other more specific sections of the CAA, this section wasn’t drafted with greenhouse gases in mind. However, Section 111 was designed to prevent any pollutants not covered under the other, more prescriptive sections of the CAA from going entirely unregulated. Consequently, EPA’s task under 111(d) is to construct a program with little specific statutory guidance which, of course, is a significant undertaking. In doing so, EPA will need to develop a framework that strikes a balance between coordinating more than 50 state jurisdictions under one program for fossil electricity generators, and empowering states to use the most effective and least expensive compliance options available.
EPA already has proposed NSPS for GHG emissions from new power plants, and expects to issue standards for existing plants by June 2014, and to finalize them in June 2015. Section 111(d) of the Clean Air Act sets out a two-step federal and state process which the Supreme Court summarized as, “for existing sources, EPA issues emissions guidelines; in compliance with those guidelines and subject to federal oversight, the States then issue performance standards for stationary sources within their jurisdiction.” 2