Harvard paper wades into debate on scope of power plant rules

Source: Jean Chemnick, E&E reporter • Posted: Thursday, March 6, 2014

U.S. EPA’s upcoming rule to limit carbon dioxide emissions from today’s power plant fleet should encourage as much demand-side energy efficiency as possible, according to a white paper released yesterday by the Harvard Environmental Policy Initiative.The initiative, which is a project of Harvard Law School, argues that Section 111(d) of the Clean Air Act allows — and perhaps compels — EPA to reach for proven strategies “outside the fence line” of individual plants in setting emissions standards. And because many states already require their utilities to meet energy efficiency targets or run programs to help their customers save energy — programs that have been proved to reduce emissions — EPA must promulgate a standard that takes into account the success of those existing programs, it said.”Any adequately demonstrated system of emission reduction available for compliance with a performance standard must also drive the standard’s stringency,” said the paper, authored by EPI Director Kate Konschnik.

This argument strikes at the heart of what has become a chief bone of contention among Clean Air Act experts as the clock winds down to June 1, when EPA is expected to release its proposal for greenhouse gas emissions from existing power plants. The agency has been tight-lipped about the kind of standard it is crafting, but many observers say it is leaning toward setting separate emissions-reduction targets for different power plant technologies and then allowing states to determine how best to meet those standards.

But the stringency of those EPA caps will be key to how that new rule operates and what its effect will be on the power sector. Environmentalists say the agency must cap emissions at a level that takes into account emissions savings that utilities can make at a reasonable cost, even if they are “outside the fence line” of a facility.

The Natural Resources Defense Council and the Clean Air Task Force have both put forward proposals for model rules that would allow trading of emissions allowances (E&E Daily, Feb. 27). NRDC’s proposal assumes most reductions would come from demand-side efficiency upgrades, while CATF’s — which was released last week — is designed to speed a trend toward more power from low-carbon fuels, including natural gas.

But industry advocates say the Clean Air Act does not give EPA the authority to use Section 111(d) to compel systemwide changes. Jeff Holmstead, an attorney with Bracewell & Giuliani who served as assistant administrator for air and radiation under former President George W. Bush, said at a recent Washington, D.C., briefing that such a broad reading of the statute would effectively turn utilities into slush funds to support projects that EPA deems worthy of backing — with the aim of reducing demand for their own product.

“The Clean Air Act doesn’t give EPA authority to regulate the energy economy,” Holmstead said. Rather than setting a standard that can only be achieved through fuel-switching or off-site efficiency improvements, he said, EPA must limit itself to requiring modest heat-rate changes at individual power plants.

But the Harvard paper said the law gave EPA ample authority to compel those wider changes to the power system. The Clean Air Act asks EPA to base its standard on the “best system of emissions reductions” and does not define that term, it noted. That leaves the agency latitude to determine that the BSER is located on-site or elsewhere in the system.

“In sum, the statute provides significant discretion to EPA, while setting forth a multi-factor analysis that requires EPA to evaluate cost, energy requirements and health and environmental benefits to arrive at the best system of emissions reductions,” it said. A proposal for power plants that is too lax to meet the law’s environmental protection goals is likely to be challenged in court, it noted.