US Blog: The US Clean Power Plan 2015 – an explanation

Catherine Mitchell, IGov Team, 24th August 2015

Overview

The US Clean Power Plan (CPP) was announced at the beginning of August 2015, and follows on from the Presidents Climate Action Plan of 2013. The first stage of the CPP was announced in 2014 and the final CPP is very different from that proposed a year ago. The CPP has come into being via the EPA, and their ability to reduce greenhouse gas emissions via air quality legislation (The Clean Air Act, 111d). The EPA has said that it expects the CPP to lead to a 32% reduction in GHG by 2030 from 2005 levels. The EPA is giving each state an individual goal for cutting power plant emissions. States can then decide for themselves how to make those reductions. For example by switching from coal to natural gas, expand renewables or nuclear, boost energy efficiency, enact carbon pricing or trading and so on. States have to submit their plans by 2016-2018, start making reductions by 2022 at the latest, and then continue until 2030.

It is also expected that many States will oppose the CPP. If the EPA gets through the challenges, and the States still don’t comply with the legislation as it stands, the EPA is able to step in and force them to work to a federal plan – expected to be tougher and more inflexible than the recalcitrant States own plans.

How this will work out, only time will tell. There is a plethora of information about the CPP – discussing whether it is or is not radical – but it brings air quality and climate /energy policy together in the US – and this is impressive – something GB would benefit from.

References

RAP has written extensively about the CPP and how States can fulfil the targets. Brad Plumer has written various blogs on the CPP, and the examples below come from him. Another useful source are 19 basic ‘cards’ which provide a very simple explanation of US clean air and climate change policy.

Details

1) The EPA has individual emissions goals for 47 states

Vermont and Washington, DC, are exempt because they don’t have any large fossil fuel or electric power plants. Also, Alaska and Hawaii are not included because of their unique grid situations.

2) State emissions goals are decided by a complicated formula

The EPA took all the coal, oil, and natural gas power plants across the United States and placed them into two broad categories: coal / oil and gas. They then produced an average emission rates in 2012 for each of the US’s three main electric-grid regions – the west, the east, and the centre south (ERCOT). For example, it was found that in the east coal/oil steam plants emitted 2,160 pounds of CO2 per megawatt-hour of electricity produced, on average in 2012; while natural gas combined cycle plants emitted 894 pounds of CO2 per MWh, on average.

The EPA then decided what was reasonable to expect each State to cut by 2030 – and this has to be compliant with the Clean Air Act, 111d. The EPA has to show that power plants can cut emissions using methods that have been adequately demonstrated and can be done at a reasonable cost.

Each State can decide how it reduces its emissions. However, the EPA has put forward three suggestions for emission reductions from their coal and natural gas power plants using three different methods or building blocks (BBs).

• Building Block 1: Operate coal plants more efficiently.
• Building Block 2: Run gas plants more often, coal less.
• Building Block 3: Ramp up renewable power. The EPA now believes renewables could rise to 28 percent of the electricity supply by 2030.

Building Block 3 is the weakest in terms of the Clean Air Act. Adding more renewables relies on actions outside of the power plant. It seems certain that this BB will be challenged.

The EPA then worked out the potential for each of the three areas to cut their emissions based on these BBs. So for example, the eastern area would move average coal/steam plant emissions go from emitting 2,160 pounds of CO2 per MWh down to 1,305 lbs/MWh by 2030 ; and the average natural gas combined-cycle plant would go from emitting 894 lbs/MWh down to 771 lbs/MWh by 2030, factoring in clean energy outside the plant.

These plant numbers (ie the 1305 lb/MWh and the 771 lb/MWh) were the basis for State goals. All this is at reasonable cost rather than maximum stringency, because of the legislation.

3) State Example

Indiana currently has fossil-fuel plants — 88 percent are coal/steam, and 12 percent are natural gas combined cycle. In 2012, those plants emitted 2,021 lbs/MWh of CO2, on average.

The EPA applied a formula – ie based on where they expected to get to in 2030:

(0.88 * 1,305 lbs/MWh) + (0.12 * 771 lbs/MWh) = 1,242 pounds of CO2/MWh.

Indiana’s goal therefore is to reduce it s power plants’ emissions from an average of 2,021 lbs/MWh in 2012 to 1,242 lbs/MWh in 2030.

2005 versus 2012

There is also a very confusing use of different dates: 2005 and 2012. 2005 is the date from which the EPA estimates emissions could fall by 32%; while they estimate a 20% emission reduction below 2012 levels. However, 2012 is the date from which the formula is applied. This benefits some States because their 2012 emissions are below their 2005 emissions but it penalises other States which have higher emissions ie Texas.

Every state has a different interim goal and a final goal

The EPA has goals for each State but they also have interim goals. The EPA has posted a more detailed set of goals for each state that looks like the table below. As explained above, Indiana’s coal and gas power plants emitted about 2,021 lbs/MWh in 2012, on average. That is expected to drop to 1,882 lbs/MWh in 2020 — even before the Clean Power Plan takes effect because Indiana has scheduled some coal closures and intends to add gas plants.

In 2022, Indiana will have to start to reduce its power plant emissions so that it reaches 1,242 lbs/MWh by 2030, and it has the interim targets along the way. States can get extra credit if they start to reduce emissions before 2022 via the Clean Energy Incentive Program (CEIP).  And they can also think about reducing emissions per KWh (known as rate based) or by tons known as mass based, and reducing the total number of tonnes emitted (and this is from 107.2 million tons in 2012 down to 76.1 million tons in 2030). In theory, both rate based and mass based should be linked but there are pros and cons. If a state adopts a rate-based goal, then emissions can technically increase over time— it’s just that the carbon intensity of power plants has to go down. By contrast, EPA estimated that mass-based goals might be a little cheaper to comply with, as well as more useful for setting up cap-and-trade programs.

Table 1 EPA’s goal for Indiana

There is also a third option – the Mass Goal (Existing) & New Source Complement. This is meant to deal with the fact that it would be tricky for a state to adopt a mass-based goal and build new fossil-fuel power plants. Multiple regulations would come into play and this option is intended to streamline that process.

States Can Choose Their Own Policy Mix

Climate Central has created an interactive map showing every state’s “mass-based” targets, as well as the percentage cuts that each state will have to make between 2012 and 2030. California already has State legislation which is tougher than the CPP. Other States, such as New Hampshire, may well be able to make their cuts by continuing in the Regional Greenhouse Gas Initiative (RGGI), a cap and trade program for the North East since 2009. Other States have much tougher goals. For example, West Virginia is facing a 29 percent cut and it may have to alter its state energy policies significantly to comply.

States have to submit plans by 2016, although it appears likely that they will be able to get an extension and submit a plan by 2018.

States could build nuclear plants or increase output from existing nuclear plants. However, they do not receive credit for prolonging the life of existing nuclear plants at risk of closing.

The EPA also encourages interstate cooperation – which could include more emission trading schemes like RGGI.

The EPA has final judgement on whether the plans are acceptable or not. The next US president will be crucial to how the Clean Power Plan works, since he or she will be overseeing that whole approval process, and could water it down if they wanted to.

Conclusion

America has three types of States: those that are very supportive of the CPP; those that will go along with it; and those that oppose it. How successful the latter are in blocking the CPP is yet to be seen. But the US is to be given credit for the efforts to put in place a trans-US policy and for bringing together air quality, climate and energy policies – as China is also doing in its latest 5 Year Plan for Energy.

Posted by: rhoggett

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