The U.S. Environmental Protection Agency (EPA) released its long-anticipated proposal for regulating greenhouse gas emissions from existing power plants on June 2, 2014, to much fanfare.  The proposal is simpler than it looks.  Here are the key points.

1.  The Proposed Rule is Only 38 Pages Long.  It’s the “Justification” That Takes up Space.  Many observers have been overwhelmed by the sheer volume of material associated with the EPA’s proposal – a 607-page preamble, a “legal memorandum” defending the proposal, a “regulatory impact analysis” discussing the proposal’s impacts and several “technical support documents.”  All of that material is important, but if you want to understand the heart of what EPA is proposing, focus on the draft regulatory text – the actual proposed rule.  Read the other material if you want to understand EPA’s justification for the rule.

2.  The Gist of the Proposed Rule: Target Rates and State Compliance Plans.  The rule applies to state governments, not to power plant owners and operators.  The rule requires each state to submit a plan to EPA showing how that state will reach a target CO2 emission rate for its existing power plants (coal, oil and gas) by 2030, as well as how the state will reach an interim target rate for the years between 2020 and 2029.   Thus, the rule has two parts: the “target rate,” and the requirement that each state submit a plan for reaching the target rate.  The target rate is going to be the most controversial aspect of the rule.  EPA set a different target rate for each state, and the manner in which it did so is what the fight is going to be about.  As for how to achieve the target rate, that is a bit less controversial because EPA has given the states a lot of flexibility.  In essence, the states can get to their targets however they want – by mandating heat rate improvements, by implementing a cap-and-trade system, by reducing demand for electricity – as long as they demonstrate that their plan will in fact get them there.

3.  The Easiest Way to Comply:  Follow RGGI.  The easiest way for states to comply with this proposed rule is to develop and participate in a program like the Regional Greenhouse Gas Initiative (RGGI).  Participating in a RGGI-type cap-and-trade program may not get every state all the way to its target rate, but it will help many states get a long way toward that goal.  Equally important, RGGI is a relatively simple cap-and-trade system.  That means that implementing a RGGI-like program faces fewer bureaucratic and legal obstacles than some of the other compliance mechanisms available to the states.

4.  The Proposal Raises at Least Three Overarching Legal Questions. 

First, does EPA have authority to issue the rule in the first place?  This question turns on the language of Clean Air Act (CAA) Section 111(d).  Some lawyers contend that rather than authorizing EPA to regulate power plant greenhouse gas emissions, Section 111(d) actually prohibits such [...]

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