PROPOSED RULE
Title: Repeal of Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units
Docket ID: EPA-HQ-OAR-2017-0355-0002
Agency: Environmental Protection Agency
Comments Close: January 16, 2018
Summary Index:
- Purpose
- Rule Actions
- Context: Section 111(d) of the Clean Air Act; 2015 Clean Power Plan; West Virginia v. EPA; Executive Order 1378; EPA review of the Clean Power Plan; Regulatory Impact Analysis of Clean Power Plan Repeal
- Debate: Arguments for and against repeal
Source: Wikipedia
The Environmental Protection Agency (EPA) is proposing to repeal the October 2015 “Clean Power Plan,” or the Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units. This repeal is the result of a review mandated by executive order, and is based on a proposed change in the legal interpretation of Section 111(d) of the Clean Air Act (discussed in Context section below). The EPA asserts that its new interpretation ‘is consistent with the [Clean Air] Act’s text, context, structure, purpose, and legislative history, as well as the [EPA’s] historical understanding and exercise of its statutory authority.’ Further, ‘under the interpretation proposed in this notice, the [Clean Power Plan] exceeds the EPA’s statutory authority and would be repealed.’ The EPA is requesting comments on the new legal interpretations asserted in this proposal, as well as on their preliminary analyses to assess the regulatory impacts of the proposed repeal.
Finalizing this proposal would result in a full repeal of the Clean Power Plan. While the Clean Power Plan was finalized in 2015, it was tied up in court for more than a year and has yet to go into effect. This action to repeal the Clean Power Plan would ensure that the rule as it stands is never implemented. The EPA has also determined that any future rule that regulates greenhouse gas emission under the Clean Air Act Section 111(d) must begin with a ‘fundamental re-evaluation of appropriate and authorized control measures and recalculation of performance standards.’
This proposed repeal does not include a replacement or alternative to the Clean Power Plan; the EPA has not yet determined whether it will create such a rule, when that rule would be introduced, or ‘what would be the appropriate form and scope of that rule.’ The EPA is ‘engaged in the process of considering whether it is appropriate to propose such a rule,' and is ‘intending to issue [a notice] in the near future’ to solicit information related to this issue.
The EPA will also be assessing the regulatory impacts of the proposed repeal. While they present various ‘preliminary approaches’ in this document, ‘the EPA requests comments on the avoided compliance costs, forgone benefits, modeling assumptions, uncertainties, and other relevant matters related to the development of the [regulatory impact analysis] for this rulemaking.’
Section 111(d) of the Clean Air Act
Section 111(d) states “The [EPA] Administrator shall prescribe regulations which shall establish [...] standards of performance for any existing source for any air pollutant […] for which air quality criteria have not been issued”. This section provides the EPA with the authority to regulate, implement, and enforce the standards for emissions of air pollutants and acts to include all pollutants that weren’t specified in other sections. Specifically, “emission guidelines for existing sources” must “reflect the ‘best system of emission reduction’ under certain circumstances.”
The 2015 Clean Power Plan
According to the text of the 2015 final rule, the purpose of the Clean Power Plan is to “protect human health and the environment by reducing CO2 emissions from fossil fuel-fired power plants in the US." Fossil fuel power plants are the largest domestic stationary source of emissions of CO2 and other greenhouse gases, which the EPA has determined endangers public health and welfare through the contribution to climate change.
Under the authority of the Clean Air Act (CAA), the EPA established CO2 emission guidelines for existing fossil fuel-fired electric generating units. The Clean Power Plan is the first national standard that addresses carbon pollution from power plants and will reduce CO2 emissions from the utility power sector by 32% of CO2 emissions levels from 2005. The Clean Power Plan gives states flexibility on how to achieve these levels and provides guidelines for development and implementation. The three major building blocks of this plan involve:
- Making fossil fuel power plants more efficient
- Utilizing lower-emission power sources such as combined natural gas and steam power plants
- Using more zero- and low-emission power sources like renewable energy
States can develop a state-only plan or collaborate in multi-state or market based approaches to achieve their interim CO2 performance rates between 2022 and 2029, and the final emission performance rate by 2030. The Clean Power Plan includes an extensive cost-benefit analysis that concludes climate benefits of $20 billion, health benefits of $14-$34 billion, and net benefits of $26-$45 billion. Because carbon emissions are also paired with other dangerous air pollutants, the Clean Power Plan concludes that each year 3,600 premature deaths, 1,700 heart attacks and 90,000 asthma attacks will be avoided.
More extensive summaries of the Clean Power Plan are available from the Congressional Research Service in the form of two white papers: Frequently Asked Questions and Highlights of the Final Rule.
Litigation: West Virginia v. EPA
States participating in Clean Power Plan Litigation. Source: Congressional Research Service
The Clean Power Plan was one of the most controversial regulations ever put forth by the EPA, and multiple petitions challenging the plan were consolidated into one large, multi-party litigation case, West Virginia v. EPA. All petitions challenging the Clean Power Plan were submitted by December 2015. The Supreme Court granted an immediate stay of the Clean Power Plan in February 2016, meaning that although the final rule had been published, it could not go into effect until litigation was completed. In September 2016, the Washington D.C. Circuit Court met to hear the arguments for and against the Clean Power Plan. Following oral arguments, the EPA moved to put the case on hold, which it was in August 2017.
There were five primary areas of arguments heard by the Washington D.C. Circuit Court, but petitioners focused much of their challenge on the EPA’s overall design of the Clean Power Plan, especially it’s inclusion of electricity generation-shifting measures and the Plan's three building blocks for the “best system of emission reduction.” Petitioners argued that the EPA does not have authorization to reorganize the nation’s electric grid of states’ energy economies; that authority lies only with the Federal Energy Regulatory Commission. In response, the EPA argued that it’s phrasing around systems of emission reduction were broad enough to not be limiting, and that the Clean Power Plan only limits air pollution under the CAA rather than regulating electricity sales or rates.
In all, more than 100 parties filed dozens of petitions challenging the Clean Power Plan, supported by members of Congress, scientists, state/local chambers of commerce, legal foundations, and utility companies. In addition to the EPA and former Administrator Gina McCarthy, respondents to the challenges included multiple states, cities, municipal utility and power companies, nonprofit organizations, and several energy industry associations.
A more comprehensive summary of the litigation is available here.
Executive Order 1378
Executive Order 13783 was signed by President Trump on March 28, 2017. There were six major directives in the order, one of which was for the EPA Administrator to review the EPA’s Clean Power Plan (and other related rules and actions), and to suspend or revoke those rules if they were not in line with President Trump’s policy recommendations. These policy recommendations were outlined in the first part of this executive order, and were as follows:
The US should develop domestic energy resources and avoid regulatory burdens.
Environmental regulations should be developed through transparent processes that employ both peer-reviewed science and economics.
“...It is the policy of the United States that executive departments and agencies immediately review existing regulations that potentially burden the development or use of domestically produced energy resources and appropriately suspend, revise, or rescind those that unduly burden the development of domestic energy resources beyond the degree necessary to protect the public interest or otherwise comply with the law.”
Other directives included repealing certain energy and climate-related policies set by the Obama Administration, and reviewing rules regarding oil and gas exploration on Federal, tribal, and non-federal lands.
The EPA's review of the Clean Power Plan
In accordance with Executive Order 13783, the EPA conducted an initial review of the Clean Power Plan. ‘That review raised substantial concerns that the [Clean Power Plan] is not consistent with the policy’ that was articulated in the Executive Order, and that the Clean Power Plan, specifically the second and third “building blocks,” exceeded the EPA’s regulatory authority under Section 111(d) of the Clean Air Act.
The EPA's Regulatory Impact Analysis of the repeal
A major aspect of introducing (or repealing) a rule that will have a large economic effect is conducting a regulatory impact analysis. The Regulatory Impact Analysis for the repeal of the Clean Power Plan evaluates the costs and benefits of repealing the Plan, and also re-visits the 2015 Clean Power Plan’s regulatory impact analysis issued under the Obama administration. The new regulatory impact analysis ultimately determined that repealing the Clean Power Plan would save the Environmental Protection Agency $33 billion. The new analysis differed from the previous 2015 analysis in several ways, including the following:
- It presents the energy efficiency cost savings as a benefit, rather than a cost reduction (as was done in the 2015 analysis).
- It 'shifts the focus to the domestic, rather than global social cost of carbon.'
- It uses the U.S. Energy Information Administration’s 2017 Annual Energy Outlook projections to estimate the benefits lost, and the costs avoided, by repealing the Clean Power Plan. The analysis then projects the net benefits of the repeal.
- It reconsiders the health benefits put forth in the 2015 analysis, specifically looking at the 'scientific uncertainty regarding the relationship between [fine particulate matter] exposures and the risk of premature death at low fine [particulate matter] concentrations.'
Pro repeal of the Clean Power Plan
The Environmental Protection Agency’s primary reason to withdraw the Clean Power Plan is that it exceeds their regulatory authority, based on the interpretation of the phrase “best system of emission reduction” in Section 111(d) of the Clean Air Act (CAA). There is no legal support or prior practice under the CAA suggesting “system” means anything beyond physical or operational measures that can be applied to a power facility by a facility owner. Yet the Clean Power Plan would require power plant facilities to change their energy portfolios to natural gas, wind, or solar energy.
The EPA turns to historical context to validate their interpretation of “best system of emissions reduction” as being limited to measures that can be applied to or at a single source of emissions. Previous house bills pertaining to Section 111(d) use language specifically related to physical or operational changes with terms like “designed and equipped”, and “application of…technology, processes, operating methods,…” The EPA’s withdrawal of the Clean Power Plan under this interpretation of “best system of emission reduction” would remain consistent with historical practices, and simply officially establish the historical context of Section 111(d).
Under this new official interpretation, the second and third “building blocks” of the Clean Power Plan both exceed EPA authority, and the first “building block” can not stand on its own. The EPA therefore determined that any future rule that regulates greenhouse gas emissions under Section 111(d) must begin with a ‘fundamental reevaluation of appropriate and authorized control measures and recalculation of performance standards.’
The Clean Power Plan might also interfere with other rules that are under different sections of the CAA, like the Cross State Air Pollution Rule and the ACID Rain Program. It would also shift the policy relationship between state and federal governments by encroaching on the authority of the Federal Energy Regulatory Commission, which regulates the nation’s mix of energy generation and transmission of electric energy between states. Indeed, supporters for withdrawal consider the Clean Power Plan an “overreach of executive power” (Chrissy Harbin, Vice President of External Affairs at Americans for Prosperity), and an “unlawful expansion of government authority into the energy sector” (Paul Ryan, R-WI, Speaker of the House). By withdrawing the regulation, some energy businesses could save billions of dollars and the EPA would prevent burden from falling on small businesses. “The Clean Power Plan would drive up operating expenses for small businesses, and it would discourage consumer spending. It would force small businesses to spend more on overhead, and it would leave their customers with less money to spend at their businesses,” stated Juanita Dugan of the National Federation of Independent Business, in an article for Global Trade Magazine.
Against repeal of the Clean Power Plan
The opposition to this repeal rests in two major arguments: (1) the new calculations of the regulatory impact analysis do not encompass the full extent of the benefits of the Clean Power Plan, and (2) the EPA’s interpretation of Section 111(d) is incorrect.
The EPA's current regulatory impact analysis claims that their proposal to repeal the Clean Power Plan will save $33 billion. But many argue that their analysis is severely flawed. In this proposed repeal, the EPA’s approach to calculating the social cost of carbon is drastically different than the approach used when the agency was proposing the Clean Power Plan. For the repeal:
‘We have estimated the forgone climate benefits from this proposed rulemaking using a measure of the domestic social cost of carbon… [which] focus on the direct impacts of climate change that are anticipated to occur within U.S. borders.’
Source: Environmental Defense Fund
This first leaves out any social or economic benefits that may occur beyond U.S. borders. When you remove the international benefits of emissions reductions, the Clean Power Plan does end up costing the US slightly more (according to Brookings, domestic benefits are $2-7 billion and cost would be $7 billion). And technically, while analysis of domestic impacts of a rule (or its repeal) is mandatory in a regulatory impact analysis, analysis of international impacts is optional.
But in the case of the Clean Power Plan, failure to include an international perspective is seen as a major oversight. As is recognized in the 2013 Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, which was used to calculate the social benefits of the Clean Power Plan in 2014,
“The climate change problem is highly unusual in at least two respects. First, it involves a global externality: emissions of most greenhouse gases contribute to damages around 15 the world even when they are emitted in the United States... Second, climate change presents a problem that the United States alone cannot solve...When these considerations are taken as a whole, the interagency group concluded that a global measure of the benefits from reducing U.S. emissions is preferable.”
The EPA's current approach also fails to include many of the health benefits that come from reducing air pollutants that lead to asthma, heart attacks, and premature deaths (Politico). This is accomplished using a high “discount rate” to ignore essentially all of the effects that carbon pollution would have on children and future generations (NRDC).
Then there are the arguments against the administration’s new interpretation of Section 111(d) which labels the Clean Power Plan as an overreach because standards are not based on ‘physical or operational changes to the source itself.’ According to the National Resource Defense Council, this is an incorrect interpretation of the Clean Air Act. The Act simply requires the standards to be effective - and “a standard doesn’t represent the ‘best system of emission reduction’ if it does not achieve as much carbon pollution reduction as can be accomplished at an acceptable cost." The Supreme Court has emphasized the EPA’s authority to solve complex air pollution problems as they arise, and has upheld standards that reflect how the power industry actually functions. That authority includes setting standards that include emission credit “systems” that enable significant cuts in power sector pollution at reasonable cost (EPA v. E.M.E. Homer City Generation, in 2014.)
Sources
Note that all single quotes ‘’ cite from the proposed repeal; material in double quotes “” may come from any of the sources below.
Clean Power Plan, Federal Register / Vol. 80, No. 205 / Friday, October 23, 2015 / Rules and Regulations
42 U.S.C. United States Code, 2013 Edition Title 42 - THE PUBLIC HEALTH AND WELFARE CHAPTER 85 - AIR POLLUTION PREVENTION AND CONTROL SUBCHAPTER I - PROGRAMS AND ACTIVITIES Part A - Air Quality and Emission Limitations Sec. 7411 - Standards of performance for new stationary sources From the U.S. Government Publishing Office, www.gpo.gov
Gayer, T. (Feb 28, 2017). The social costs of carbon. Brookings Environment. https://www.brookings.edu/testimonies/the-social-costs-of-carbon/
Environmental Protection Agency. (May 2013; revision Aug 2016) Technical Support Document: Technical Update of the social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866. https://www.epa.gov/sites/production/files/2016-12/documents/sc_co2_tsd_august_2016.pdf
Holden, E. (Oct 5, 2017). EPA’s climate rule withdrawal will include big changes to cost calculations. Politico. http://www.politico.com/story/2017/10/05/epa-climate-rule-withdrawal-cost-calculations-243520
Tsang, L. & Wyatt, A.M. (March 8, 2017) Clean Power Plan: Legal Background and Pending Litigation in West Virginia v. EPA. Congressional Research Service. https://fas.org/sgp/crs/misc/R44480.pdf
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