As Obama’s climate rule turns 1, markets and politics diverge

Source: Emily Holden and Rod Kuckro, E&E rep • Posted: Friday, August 5, 2016

In the year since U.S. EPA unveiled its Clean Power Plan, the American electricity sector has outpaced all expectations about how quickly it can shift away from coal.

Utilities, especially those that are investor-owned, have moved rapidly, driven by a combination of lower gas and renewable power prices, state mandates, federal tax incentives, customer demands and their own corporate efforts to address climate change (EnergyWire, Feb. 11).

A new market reality has emerged — one that is starkly different from when President Obama announced his landmark climate effort on Aug. 3, 2015.

“The trend toward investment in renewables and energy efficiency is unfolding all around us,” said EPA Administrator Gina McCarthy in a blog post yesterday celebrating the rule’s birthday. It’s no accident, she said, that the Clean Power Plan mirrors those private-sector changes.

But while market realities have shifted, political realities have not. Clean power progress is not equal across the board, and, to be sure, some states and companies would have a much harder time meeting EPA’s goals than others.

Opposition from coal-reliant companies, Republican-led states and mining interests is as strong as ever.

Laura Sheehan, spokeswoman for the American Coalition for Clean Coal Electricity, yesterday hammered the rule for its promise of “higher electric prices and lost jobs.” National Mining Association President and CEO Hal Quinn predicted that “in year two of the CPP, more states will appreciate that its costs greatly outweigh any conceivable benefit it provides to the country.”

The Clean Power Plan has also not emerged unscathed from court battles. Most states have greatly slowed their planning after a historic Supreme Court order halting the regulation.

Still, dozens of headlines from the past six months suggest EPA and environmental advocates could get a lot of what they want anyway.

“It simply got the ball rolling and focused the regulatory community,” said Matt Stanberry, vice president of market development at Advanced Energy Economy. “It made it very clear EPA had authority to regulate carbon and plans to regulate carbon … it just made it real.”

Optimism ‘in the face … of uncertainty’

The Clean Power Plan, although frozen, is on an accelerated path to the Supreme Court. The U.S. Court of Appeals for the District of Columbia Circuit will hear oral arguments on Sept. 27. The court will skip a step — with all participating judges weighing in rather than a smaller panel of three judges that had been slated to hear the case first in early June.

Ultimately, the fate of the rule could depend on a single tie-breaking Supreme Court justice, who will probably be appointed by the next president.

Meanwhile, the stay has greatly altered the early timeline of the rule. Without it, states would be finalizing their initial plans to submit to EPA in just under a month.

Melissa Kuskie, air policy planner at the Minnesota Pollution Control Agency, said the stay brought pros and cons.

Minnesota has continued to prepare for the Clean Power Plan, holding regular public meetings about how carbon trading systems might work.

“The negative side of how things have change in the past year, of course, is that things have become more uncertain because of the stay: interstate communications have become more challenging, getting guidance/advice from EPA is a bit harder, trying to plan out rule/plan development schedules and milestones obviously harder,” Kuskie said in an email.

“The positive side is that we’ve [been] given a bit of time to be more thoughtful and deliberative on all of the potential plan elements, and consider more information (modeling, stakeholder input, growth of renewables in the market, etc.) which could have been a bit more challenging if we were all sprinting toward the plan submittal deadline.”

Kuskie added that most of that information suggests national compliance with the rule is “much more feasible than some people had worried about just a year ago … so perhaps there’s more optimism, even in the face of all the uncertainty.”

At least 20 states have publicly disclosed that they are continuing planning anyway. That includes the nine states that will use the Regional Greenhouse Gas Initiative to comply and California, which yesterday became the first state to release a compliance plan for using its cap-and-trade system to meet EPA’s goals (ClimateWire, Aug. 3).

Leaders in about 19 states have said they aren’t officially planning, although their power companies say they continue to contemplate strategies to achieve EPA’s standards.

Another handful of states are in limbo. Nevada, for example, took a “step back” from compliance preparation, and a task force there is taking a broad look at the state’s energy policy.

“There are a set of states continuing to work on this that aren’t RGGI or California,” Stanberry said, “some of them in formal processes, some of them just staff continuing to work.”

Stanberry said that if the stay is lifted, “there should be some interesting models out there.”

Pennsylvania and Virginia, for example, are looking at carbon reduction plans. Virginia’s Legislature has prohibited the state Department of Environmental Quality from spending money to prepare for the Clean Power Plan, but Democratic Gov. Terry McAuliffe issued an executive order to develop a state plan to reduce power-sector emissions.

“It’s not a CPP plan, but would it help you develop a CPP plan? Yes, absolutely,” Stanberry said. It’s unlikely either of those states would have undertaken that level of planning without the rule, Stanberry argued.

CPP still centerpiece of U.S. pledge

Even if the country is largely on track to meet the goals of the Clean Power Plan with or without the rule, it still serves as the showpiece of U.S. pledges to the international community. And environmental advocates say it is needed as a foundation for future carbon cuts.

McCarthy spent the second week of last year’s climate summit in Paris briefing foreign counterparts on the rule and smoothing fears that a new administration might easily roll it back.

“This rule is going to stand the test of time,” McCarthy told ClimateWire in an interview during the conference. She noted that states at the time — even those actively opposing the rule — were preparing to implement it (Greenwire, Dec. 7, 2015).

The United States promised the world in Paris that it would cut greenhouse gas emissions between 26 and 28 percent compared with 2005 levels by 2025. The utility-sector rules were offered as the main way the world’s largest historic emitter would meet that commitment.

Conference attendees were assured that a future administration would have to pursue a long and arduous process to roll back the rule, while states and the industry would already have taken steps to comply.

When the stay was issued two months after the Paris conference, it threw both the rule and its timeline into doubt. The White House and EPA then shifted tactics, arguing that the United States could meet its Paris pledge through other means, including increased renewable power. Congress unexpectedly passed an extension of renewable energy tax credits in the waning days of last year, giving the renewable energy sector a boost (ClimateWire, Feb. 11).

Regardless of the rule’s importance to international negotiations, it remains divisive in American politics even while it is in limbo.

“Like everything else about this rule — its alleged legality, cost-effectiveness, flexibility — the anniversary is bogus,” said Marlo Lewis, a senior fellow at the libertarian-leaning Competitive Enterprise Institute.

“The Supreme Court put a stay on the power on Feb. 9. That means the ‘terrible infant’ stopped growing in its sixth month and never actually made it to its first birthday,” he said.

Billionaire climate activist Tom Steyer, meanwhile, used the occasion to blast GOP presidential nominee Donald Trump and other Republicans for vowing “to end the Clean Power Plan” and prioritizing profits for corporate polluters over protecting American families.

To review E&E’s coverage of the Clean Power Plan over the last year, visit the Power Plan Hub.

Reporters Jean Chemnick and Ellen M. Gilmer contributed.