Will EPA’s Carbon “Pollution” Rules Implement the Defunct Waxman-Markey Bill?

Will EPA’s Carbon Rules implement the defunct Waxman-Markey cap-and-trade bill?

That’s a question I addressed in a previous post and more recently in a comment letter to EPA on its proposed Carbon Rule for new fossil-fuel power plants. Today’s post offers a more complete discussion.

The Waxman-Markey bill (H.R. 2454), officially titled the American Clean Energy and Security Act (ACESA) of 2009, aimed to rapidly phase-out coal-based power in the U.S. via three types of carbon dioxide (CO2) regulation:

1. New source performance standards (NSPS) for coal-fueled power plants (section 116). New coal power plants permitted between Jan. 1, 2009 and Jan. 1, 2020 would have to achieve a 50% reduction in CO2 emissions. The only technology capable of meeting that standard is carbon capture and storage (CCS), which can make new coal power plants 5 times more expensive than new natural gas combined cycle (NGCC) plants (see Table 2 of this EIA report). Unless heavily subsidized, utilities planning to build coal power plants would “fuel switch” and build new NGCC plants instead.
2. A cap-and-trade program covering all major emitters (Title III). Existing coal power plants and other major emitters would have to achieve aggregate CO2-equivalent greenhouse gas emission reductions of 3% below 2005 levels by 2012, 17% below by 2020, 42% below by 2030, and 83% below by 2050.
3. A combined efficiency and renewable electricity standard (Title I). Utilities would have to supply increasing percentages of electricity from a combination of efficiency upgrades and renewable sources (6% in 2012, 9.5% in 2014, 13% in 2016, 16.5% in 2018, and 20% in 2020-2039).

Let’s consider the parallels — both obvious and tacit — between the Waxman-Markey regulatory Troika and EPA’s Carbon Rules.

(1) The Waxman-Markey section 116 new source performance standard (NSPS) is virtually identical to that in EPA’s Carbon Rule. The Carbon Rule standard for new coal power plants is 1,100 lbs. CO2/MWh. It can only be achieved through “partial” CCS, which EPA estimates will reduce coal power plant CO2 emissions by as much as 50% (79 FR 1436).

(2) The Carbon Rule (79 FR 1346-1347) invites comment on whether EPA should follow its traditional practice of codifying NSPS for coal power plants and NGCC plants under different subparts (Da for coal boilers, KKK for gas turbines) of the Federal Code, or should promulgate the standards under a newly-minted combined source category (TTTT). EPA does not explain why it seeks input on this abstruse matter. Reports by Resources for the Future and Natural Resources Defense Council reveal the game plan.

Efficiency enhancements deliver only trivial CO2 reductions from existing coal power plants (79 FR 1435). To get big CO2 reductions, state implementation plans must induce big reductions in coal generation. The most effective way to do that is place existing coal plants and NGCC plants under a steadily declining carbon cap, and allow them to trade emission permits. However, trading is lawful as an EPA-approved “best system of emission reduction” only for facilities within the same source category. Therefore, EPA must codify coal power plants and NGCC plants as “fossil fuel electric generating units” within a new common source category, TTTT.

What a creature of administrative convenience is the law! All EPA has to do is edit regulatory nomenclature, and voilà, that which Congress rejected becomes the EPA-preferred model for state implementation plans.

(3) EPA’s original proposed Carbon Rule (April 2012) defined NGCC as the “best system of emission reduction” (BSER) “adequately demonstrated” for new coal power plants. This was deeply weird, because a gas turbine is not a system of emission reduction for a coal boiler but a different type of emission source. The updated (September 2013) Carbon Rule now defines CCS as BSER for new coal power plants. EPA wrongly claims CCS is “adequately demonstrated,” but at least it no longer absurdly defines one type of power plant as an emission reduction system for a different type of power plant.

However, some residual weirdness still clings to the updated rule. NSPS are supposed to reflect the “best system of emission reduction” for a particular source category (Clean Air Act section 111(a)). The standard for new NGCC power plants is 1,000 lbs. CO2/MWh (79 FR 1433). But according to EPA, nearly all NGCC power plants already meet the standard (77 FR 22414). NGCC plants can comply with the Carbon Rule just by being what they are. In effect, the Carbon Rule treats NGCC as both source and emission reduction system for the source. But, logically, a source cannot be its own system of emission reduction.

It’s only a matter of time before environmental groups, most of whom loathe fracking and want to regulate America “beyond gas” as well as “beyond coal,” petition EPA to require new NGCC power plants to install actual emission reduction systems. Indeed, this has been a long-term objective of some climate activists ever since the Supreme Court ruled in Massachusetts v. EPA (2007) that CO2 is an “air pollutant” within the meaning of the Clean Air Act.

Former Sierra Club general counsel David Bookbinder, a lead attorney for environmental petitioners in Mass. v. EPA, spelled out the game plan in 2008:

So there you have it. We may reasonably anticipate that the EPA will attempt, in phases, to:

1. effectively ban new coal generation via the current proposed Carbon Rule;
2. put the kibosh on existing coal power plants via a carbon cap-and-trade program; and
3. restrict new NGCC generation by tightening the NSPS so that it is achievable only via combined gas/solar or gas/wind.

If EPA gets away with it, and adopts a de-facto renewable electricity mandate, the agency’s ascension to Super Legislature will be complete.

Recall that in his state of the union address (Jan. 25, 2011) following the defeat of cap-and-trade, President Obama called upon Congress to enact a “Clean Energy Standard.” The standard, he said, should require America to obtain 80% of its electricity from low- and zero-carbon sources by 2035. As I noted at the time, this was virtually identical to the restructuring of the electric power sector forecast in the Energy Information Administration’s “base case” analysis of the Waxman-Markey bill.

There was so little enthusiasm on the Hill for the President’s proposal that Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.) waited more than a year (March 2012) to introduce a clean energy standard bill (S. 2146). Bingaman obtained only 10 co-sponsors, and Democratic leaders never brought the bill to a vote. Yet, if EPA follows the playbook outlined above, the electric power sector will be subject to a clean energy standard of the agency’s own devising — a policy regime incorporating all three pillars of the Waxman-Markey regulatory architecture.

Litigation may slow down this train but courts are too deferential (and activist) to curb EPA lawmaking. Congress can put EPA in its place any time it wants to. It doesn’t because too many senators have too little regard for the constitutional prerogatives of their chamber. EPA will rule unchecked until “We, the People” elect more representatives who respect the separation of powers.