EPA's Clean Power Plan: An Unequal Burden

Deck: 

The Clean Power Plan's  largest obstacle  is how its cost is distributed disproportionately among the states.

The Clean Power Plan's largest obstacle is how its cost is distributed disproportionately among the states.

Fortnightly Magazine - October 2014

The largest obstacle looming within the Clean Power Plan proposed in June by the U.S. Environmental Protection Agency (EPA) will not be the overall cost of the program, but how that cost is distributed disproportionately among the states. As a nation, the overall impact may not seem large for many. But in some states, it will severely alter the current economic surroundings. This plan becomes a test of the federal power versus states' rights. Using EPA's supplied analysis and our advanced highly sophisticated power market models, we will demonstrate that the cost of the plan is more onerous in some states than others.

On June 2, 2014, the U.S. EPA proposed rules to reduce CO 2 emissions from existing power plants through Section 111(d) of the Clean Air Act (CAA). The rule is also commonly called the "Clean Power Plan." There are some key nuances that should be immediately understood.

The proposed rule covers existing power plants only - meaning that new units built would not be impacted by this ruling. The new plants are subject to 111(d), which essentially supports building natural gas combined-cycle plants. Given that EPA is targeting only existing units, it is proposing a state-by-state rate target, or pounds of CO 2 per MWh.

EPA’s Assumed Emission Rate Formula

Each state is required to submit a plan that would achieve that state's EPA-targeted emission rate. This emission rate will represent the amount of emissions divided by the energy produced. The unit EPA uses is pounds (lb) per megawatt-hour (MWh). To calculate a simple state CO 2 emission rate, add the total CO 2 emissions from all existing units and divide by the energy produced by the unit. EPA has added complexity in determining the emission rate, as it is allowing the generation of zero-carbon sources to be part of the denominator in calculating the rate as shown in Figure 1 .

In past programs, covering both acid rain (SOx) and nitrogen oxide (NOx), EPA targeted a fixed amount of emissions, not a rate-based target. By contrast, the rate-based approach in the Clean Power Plan will enable the state not necessarily to eliminate CO 2 emissions altogether, but it will force a transition to lower emitting CO 2 plants. That difference reflects the comparative lack of cost-effective emission control technologies for CO 2, versus SOx and NOx. CO 2 emission control technology is very cost-prohibitive. Therefore, the only means to reduce CO 2 is to run generating units that produce fewer CO 2 emissions. These two nuances change the approach to typical emissions modeling. Moreover, the EPA should be able to issue and enforce its new ruling without any enabling Congressional action, given that implementation will proceed under the existing Clean Air Act.

For the EPA to produce state-by-state targets, it examined four mechanisms to reduce CO 2 on state-by-state basis and guesstimated the likely efficacy of each mechanism by

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