January 29, 2015 Categories: Climate Change EPA Rule

The Best-Kept Secret About the Clean Power Plan: It’s Not Actually That Complicated

From the moment EPA announced its groundbreaking proposal to limit harmful carbon pollution from power plants, virtually all discussion of the Clean Power Plan has taken as a premise that implementing the rule will be extremely complicated. But the actual regulation proposed in the Clean Power Plan is no more complex than state administrators want it to be.

Of course, if states do not wish to write their own regulations, EPA will do it for them by implementing a federal plan. But everywhere else, states are in the driver’s seat, and states have the power to implement this law through very straightforward and familiar regulatory methods.

State Air Agencies’ Responsibility: Write And Enforce An Air Pollution Rule

The actual proposed rule requires states to submit a plan to implement state-level regulation like any other air rule. This regulation must limit carbon pollution from existing power plants to a target level provided by EPA. The requirements for what the state air regulator includes in the plan are fairly straightforward, and provide lots of flexibility for states to propose tweaks and adjustments to reflect their states’ unique situations.

EPA’s proposal takes up about 6 pages of regulatory text, accompanied by two full-page tables that list the pollution limits for each states, and 1 page of definitions. Of those 6 pages, only about 1 page describes what states actually must include in their state plans, and the rest answers questions states may have and describes various procedural requirements, such as deadlines. In 732 words, (significantly less than this blog post, sadly) that one crucial page lists 11 things states must include in their state plans. 

The 11 things for states to do include some basic requirements, such as identifying which power plants are regulated (EPA actually did this one for them already), saying whether they are submitting a single-state or multi-state plan, setting a schedule for telling EPA how the plan is going, and showing that the state held at least one hearing on the plan (Items #1, 2, 9, and 10, respectively).

What’s left after you sweep away the ministerial extras is a requirement that the state do exactly 3 things: tell power plants what standard they are being held to, collect the proof that power plants are meeting that standard, and enforce penalties if the power plants don’t follow the rules.

States Choose Their Own Level of Complexity

In order to give states more flexibility, EPA provides two options for what form of target the state wants to hit – either a tonnage limit on carbon pollution statewide, or a CO2 “speed limit” on how cleanly the statewide electricity fleet runs, on average. Both are explained below.

Option 1: Limit the tons of CO2 power plants can dump in the atmosphere

Under this option, the state makes available a big pile of permits, representing the emissions limits set by EPA. For each ton of CO2 a power plant wants to emit, it must obtain one permit. There is no third step!

From there, states are free to add on various bells and whistles, and they probably should. For instance, states could auction the permits instead of giving them away for free. They could allow power plants that have more permits than they need to sell the extras to power plants that need more than they bought. They could expand this market to include other states. They could re-invest auction proceeds in communities that have suffered the most from pollution historically and in programs that will further reduce pollution, such as energy efficiency funds and solar panel rebates. States are free to take all or any of these steps, but EPA does not require any of them.

Option 2: The Average CO2 “Speed Limit”

This option is slightly more complicated: it involves a third step. First the state has to let electricity generators know how much carbon pollution they, as a group, are allowed to dump for every unit of electricity they produce. Second, generators need to show that for every pound of CO2 a given power plant is over that “speed limit,” they have also put other cleaner energy into the system, using sources that are under the limit, to balance out the average mix. Overall, the mix needs to meet the target level, but the state gets to decide how to divvy up responsibility among the generators for achieving that balance.

The third step is that the state needs to make sure that these other, cleaner sources are being accurately measured (states with energy efficiency programs already do this through a process called EM&V), and that these sources are only being counted once (states that participate in renewable energy credit markets already do this, too).

For states that do not already participate in efficiency EM&V programs or have systems for tracking interstate renewable energy credits, this is a larger undertaking. If setting up the EM&V programs and REC tracking systems needed for this option is too difficult for a state, they should probably go with Option 1 instead. But once these systems are in place, the regulatory system for keeping track of the carbon speed limit credits and debits themselves is very straightforward. No math harder than arithmetic is needed.

Complex Analysis Produces Straightforward Regulation

The notion that the rule may be hard for state air regulators to implement probably derives from the fact that our nation’s electricity system is, indeed, an extremely complex beast. In recognition of this fact, EPA performed extensive analyses and provided unprecedented transparency in how it established the targets under the rule, and gave states considerable leeway in how they implement it.

This means EPA has already done the difficult job of setting state-specific standards that reward early action without letting leaders off the hook, and that require significant progress from states that still have the farthest to go, while not unduly burdening these laggard states. It was a complicated job!

EPA made all of the documentation behind how it derived the targets available to the public, and they provided a comprehensive description of it in the Preamble to the proposed rule. So between the Preamble, the Technical Support Documents, and subsequent Notices of Data Availability, EPA has provided hundreds of pages to work with.

States and members of the public then put considerable effort into understanding this analysis in order to ensure that the targets set in the rule are based on a good assessment of what can be achieved in the states through a combination of various carbon-cutting measures. (Many of these comments were based on EPA’s “building block” approach, about which so much ink has been spilled.) This commenting process revealed some important information that may help EPA improve upon the proposal when it releases the final rule. For example, EPA may have over-estimated the difficulty or expense of cutting carbon by relying on inflated cost estimates for energy efficiency and by underestimating many states’ ability to scale up wind, solar, and other renewable energy technologies.

But these and many other technical issues (I commented on a big one here) that go into determining how stringent the rule should be are, well, technical.

Contrary to the impression one might get from reading many of the comments and articles on the Clean Power Plan, states do not need to predict their state’s precise power mix for the next 15 years. They don’t need to think about the “building blocks” ever again. The state regulator only needs to tell polluters how much they are permitted to pollute, how to prove they are within the legal limits, and what the penalty will be for violating the law.

The Task May be Complicated, but the Regulation Doesn’t Have to be

At least one group, Western Resource Advocates, has already made an admirable effort at drafting a model state regulation based on the “Speed Limit” option, and they managed to do it in under four pages. States that wish to implement a tonnage limit can model their rules after existing efforts in Northeastern states participating in the Regional Greenhouse Gas Initiative, or look to California’s hugely successful programs, which have already placed limits on carbon pollution from their power plants (and other sources). Once EPA gives everybody a peek at what a federal version of this kind of state plan would look like this summer, it will be even easier for states, since they can model their plans after the federal plan or even adopt the federal plan wholesale.

Ultimately, making sure the standards are actually met will certainly involve some complex work on the part of electrical utilities, who must balance the competing duties of providing a reliable power supply, meeting environmental standards, keeping bills manageable, and satisfying their investors. (Don’t feel too sorry for them: they also operate a monopoly and are virtually assured that they will have perpetual profits or else be bailed out by the public if they really blow it.)

The complex work utilities have to do is precisely what was requested when industries asked regulators to provide them with “flexibility.” The alternative to accepting the responsibility that comes with the freedom to implementing a flexible regulation would be to accept “command and control” regulation instead.

This is what it looks like when we set a standard and then let the market figure out the cheapest and best way to meet those standards. In a word, it is how performance-based regulation is supposed to work, and it is surprisingly, dare I say, elegant.

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