President Barack Obama on 3rd August announced the EPA’s final rules to limit greenhouse gas emissions from new and existing power plants. In doing so, the President has finally fulfilled a pledge he made when running for president in 2008. Then-Senator Obama told the San Francisco Chronicle in January 2008 that, “Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket.”
The Existing Source Performance Standards (or ESPS) being applied under section 111d of the Clean Air Act to coal- and gas-fired power plants already in operation are called by the EPA the “Clean Power” Plan. Don’t buy it. More accurate names would be the Costly Power Plan or the Skyrocketing Rates Power Plan (h/t Alan Carlin) or the Obama Power Grab (h/t Senator McConnell’s office) or the National Energy Tax (h/t Speaker Boehner’s office).
The final ESPS is 1560 pages. The final rule is significantly different from the proposed rule released in June 2014. In fact, it is so different that the legal case has already been made that it is a brand new rule and therefore EPA must start the rulemaking process all over again.
Here are some of the major changes from the proposed to the final rule. EPA has extended the deadlines by two years, but has also increased the emissions reductions that must be achieved by 2030 from 30% to 32% below the 2005 baseline. The proposed rule contained four “building blocks” by which States can meet their individual targets.
The final rule lowers its estimates of reductions that can be made from building block one—efficiency improvements in generating plants—from 6% to 2-4%. Reliance on building block two—replacing coal-fired plants with natural gas-fired plants—has been reduced, while reliance on replacing coal with renewable energy sources (building block three), such as windmills and solar panels, has been increased. And EPA has dropped gains in energy efficiency (building block four) entirely, although States can still count any emissions reductions that result from efficiency gains.
The final ESPS gives extra incentives for early moves to more renewable energy. It also changes the way nuclear plants under construction and those that may be built in the future are counted. In short, the big loser in the final rule will still be coal, but natural gas will now also be a loser. It’s not clear to me whether nuclear gains or loses. But there is no doubt that the big winners will be renewable energy producers, compared to the proposed rule.
Those are major changes, but by far the biggest change is that EPA has completely recalculated the targets that each State must meet. The proposed rule analyzed each State’s power sector to come up with what that State could reasonably be required to achieve. The analysis was complex and involved quite a few judgment calls. The new targets are based on a much simpler calculation involving the State’s current total electric generation and what percentage comes of that generation from coal and from gas.
This change in the way the emissions cuts allotted to each State are calculated leads to some huge changes. For example, the proposed rule required North Dakota to cut its emissions by 11%; the final rule requires a 45% cut. Montana goes from 21% to 47%. Iowa 16% to 42%. Twenty-two States have bigger emissions cuts in the final rule than in the proposed rule. Of course, there are winners as well.
The EPA also released a model Federal Implementation Plan. I will only note here that the EPA concludes that the best way for a State to meet its emission reduction targets is by creating a cap-and-trade system with other States. The Congress failed to pass the Waxman-Markey cap-n-tax bill in 2009, but President Obama has now fulfilled his 2008 campaign promise by executive fiat.
Most state public utility commissions that have spent the past year trying figure out how they will meet their target in the proposed rule will now have to start all over again. This should increase opposition from governors and state legislatures to the ESPS, which in turn should build support in Congress for blocking implementation of the rule. The House has already passed bills to block the ESPS and the NSPS. On 6th August, the Senate Environment and Public Works Committee passed a similar bill, S. 1324, introduced by Senator Shelley Moore Capito (R-WV).
The final ESPS is just as obviously illegal as the proposed rule. Whether the D. C. Circuit Court of Appeals and ultimately the Supreme Court will see it that way is another matter. Sixteen States, led by West Virginia Attorney General Patrick Morrissey, have already petitioned the EPA to delay implementation of the ESPS until the court has ruled. They will undoubtedly immediately request an injunction from the court after the EPA denies their petition.