Experts Cite Key Role For EPA GHG Rules Despite Hill Power Sector Plans

Source: By Doug Obey, InsideEPA • Posted: Wednesday, October 6, 2021

EPA planned greenhouse gas standards could play a major role in curbing power sector emissions even if Congress approves a proposed clean electricity performance program (CEPP), observers say, because the agency’s rules would create enforceable limits and likely accelerate a phase out of coal plants.

But the extent of future climate and environmental benefits from such rules could depend on the design of both the regulation and the legislation, including whether a CEPP would offer partial credits for natural gas-fired generation that could also advantage such plants over coal facilities.

The fate of the CEPP remains highly uncertain as congressional Democrats continue to haggle over the contours of their emerging budget “reconciliation” package, as well as the details of various climate and social programs within the package.

EPA’s forthcoming rules also remain under wraps, including the key question of whether it attempts to impose standards based on actions taken “beyond the fenceline” of regulated plants, or whether it stays “inside the fence” to shore up its defense in court.

Biden administration officials are touting their willingness to issue new rules to curb GHGs, though EPA has been largely mum on the specifics of its power plant climate rules. Most public debate on power sector climate policy has focused heavily on the Capitol Hill efforts to enact a climate-heavy reconciliation package.

But “there is more justification than ever for EPA regulations,” argues Resources for the Future economist Dallas Burtraw in an interview with Inside EPA’s Climate Extra — even if Congress were to pass a CEPP alongside an extension of tax credits for various low-carbon energy sources.

At issue is the difference between the primary focus of the proposed Hill policies — prodding greater “clean” or zero-carbon power — and directly targeting pollution from existing fossil fuel power sources. As proposed, the CEPP would only indirectly affect the operation of existing plants.

A version of the CEPP approved by the House Energy & Commerce Committee last month would provide a financial incentive for power suppliers if they improve their percentage of clean power by at least 4 percent a year, while imposing penalties if they do not.

Eligibility depends on meeting an emissions threshold of no greater than 0.1 metric tons of carbon dioxide equivalent per megawatt hour, which excludes essentially all fossil fuel generation without carbon capture and sequestration.

Existing Generation

Burtraw notes, however, that neither the tax credits nor the proposed CEPP distinguish between the different levels of GHG performance in existing fossil fuel generation. That means it is possible the CEPP could just as easily discourage natural gas-derived power as that from existing coal plants.

Even though the program indirectly pushes utilities to replace existing generation with “clean” power, he argues, “the fact that one gas unit may have less the half the emission rate of another coal unit is irrelevant to the CEPP.”

This underscores the utility of using EPA rules for both conventional air pollutants and GHGs to clamp down on existing source emissions, he argues, particularly in the near term before the required percentages of clean power under a CEPP or similar program rise to the point to ensure replacement of both gas and coal generation.

In this vein, Burtraw touts a May analysis he co-authored noting the potential for EPA to rapidly clamp down on power sector GHGs by crafting a standard based on co-firing natural gas at coal plants. The analysis concluded such standards would accelerate emissions cuts relative to a scenario in which Congress extends clean energy tax credits and enacts a version of a clean electricity standard (CES) with a modest credit for natural gas, but without EPA’s GHG rules.

Supporters say the CEPP would “mimic” the effects of a CES, though lawmakers are focusing on incentives and penalties rather than an enforceable standard to comply with budget rules allowing the measure to pass the Senate on a simple majority vote.

In addition to providing additional GHG reductions beyond possible Hill action, the analysis argued that a co-firing standard could survive a key legal criticism raised against prior EPA attempts to write power sector climate rules.

“Because a performance standard based on the opportunity for [co-firing] applies to an individual facility, it does not raise concerns about measures taken outside regulated emissions sources,” wrote Burtraw and RFF scholar Maya Domeshek in their May paper. The reference to legal concerns alludes to the Supreme Court’s 2016 stay of the Obama EPA’s power plant GHG rule that took a beyond-the-fenceline approach.

Questions about the relationship between the CEPP and future EPA regulations come amid pending decisions on a CEPP that could affect how the two policies interact. They include indications that Senate energy panel Chairman Joe Manchin (D-WV) wants more eligibility for gas generation in the program and may oppose the proposed penalties, as Democrats seek to forge agreement on their reconciliation plan.

If lawmakers do include such a natural gas incentive in the CEPP, it could provide more direct pressure on coal facilities, Burtraw notes, accelerating an ongoing coal-to-gas switching trend.

It is possible that such a CEPP could decrease both the projected benefits and costs of an EPA rule, Burtraw says, to the extent the program and EPA’s rules create similar pressure to shift from coal. In this scenario, a CEPP would alter the assumed policy and emissions baseline for EPA rules.

The scope of EPA’s planned rules also remains unclear for now, with the agency to date prioritizing issuance of proposals on vehicle GHGs and oil and gas methane emissions.

But White House domestic climate adviser Gina McCarthy in Sept. 29 remarks alluded to the potential for EPA rules to curb power plant GHGs should Congress balk at the CEPP, even as she continued to cast the CEPP as a top priority for President Joe Biden. “There are other ways to get at this in terms of regulatory constraints,” she said.

‘Enforceable’ Standards

Environmentalists, meanwhile, tout the legal enforceability of Clean Air Act rules as a key reason why a CEPP should supplement, but not replace, an agency push to write emissions standards.

“[S]trong, enforceable performance standards . . . provide additional enforceable support for lower-carbon energy production,” Clean Air Task Force’s senior counsel Ann Weeks wrote in an August blog post.

One environmental advocate adds that EPA has a legal obligation to issue GHG standards for existing power plants because an Obama-era GHG standard for new power plants remains on the books. The source also characterizes EPA standards as a “floor” for accomplishing GHG cuts.

Section 111 of the Clean Air Act in general requires EPA to issue emission guidelines for existing sources — to be implemented via state compliance strategies — once it regulates new sources, though the act does not include a specific deadline for doing so. — Doug Obey (