Last month, the Environmental Protection Agency (EPA) proposed CO2 emission guidelines for existing power plants. Once EPA issues the final rule in 2015, each State (except for Vermont) can submit a plan to EPA describing how it will meet its power sector carbon intensity target by 2030, or it can accept a plan written by EPA. If a State develops its own plan, it can include any strategy that will produce a quantifiable and verifiable reduction in carbon intensity, so long as it has legal authority to enforce its implementation. State plans will therefore be confined by the scope of regulators’ authorities — in general, State plans may only include programs that can be enforced by State regulators under State law.1
EPA’s proposed rule does not prescribe how each State must meet its target. Instead, EPA said in its proposal that it is providing “each State [with] flexibility to choose the most cost-effective measures given that state’s energy profile and economy.” EPA identified several potential strategies, including increasing renewable energy generation or end-use energy efficiency (EE) and displacing coal-fired generation with electricity from existing underutilized natural-gas fired plants. In its plan, a State will have to provide quantitative analysis showing that its carbon intensity reduction strategies will enable it to meet its 2030 target.
To meet with EPA approval, a plan will also have to demonstrate that the State has relevant legal enforcement authority. For instance, if a State plan includes renewable energy generation, the plan would have to point to relevant laws and regulations that identify the entities responsible for procuring renewable energy, specify how much renewable energy they must procure, and outline enforcement consequences if an entity fails to meet its requirement.
EPA is providing States with essentially two options for enforcing their plans (although EPA requested comments on additional possibilities). One option is that a State plan holds power plant owners solely responsible for meeting the State’s 2030 target. Plants could demonstrate compliance by measuring their CO2 emissions and by owning credits that represent avoided emissions or zero-emission megawatt-hours of generation. Those credits could be generated by renewable energy or EE programs that are not included in the plan but instead encouraged or required by the State.
Most State environmental regulatory agencies already have authority under State law to enforce emission limits against power plants. This authority may be sufficient to implement such a plan if the State’s coal-fired plants can sufficiently reduce carbon intensity to meet the State’s 2030 target by making efficiency improvements, switching to natural gas, operating at lower capacity factors, or retiring. If those measures are insufficient to meet the State’s 2030 target and plant owners need offsite credits, environmental or utility regulators may need additional authority under State law to implement and oversee credit markets or encourage or require renewable energy generation or EE.
A second option is for a State plan to hold power plant owners and other entities, such as electric distribution companies or EE providers, directly responsible for meeting portions of the State’s 2030 target. Regulators in many States already enforce renewable energy and EE programs. State plans could rely on existing laws, but regulators that write the plan may be powerless to modify current programs to make them more relevant to achieving the State’s 2030 target.
For example, Pennsylvania’s Renewable Portfolio Standard (RPS) expires in 2021, and the law allows some emitting sources, such as waste coal, to count towards meeting the mandate. Regulators can neither extend the mandate to 2030 nor limit the law’s inclusion of sources that emit CO2. In Florida, lawmakers have not passed an RPS, and State regulators lack authority to create one. Under current law, the only enforceable renewable energy program that Florida regulators can include in their plan is a modest distributed generation requirement.
Regulators designing State plans will also have to adhere to regulatory models that are either codified in State law or enshrined in decades of regulatory practice. For example, under traditional cost-of-service regulation, a vertically integrated utility can increase its revenue by building more power plants and generating additional power. Although EE might be a cost-effective strategy for reducing carbon intensity, the utility has no incentive to reduce demand, and regulators may not be authorized or inclined to provide cost recovery for EE.
States have different priorities. Some States may want to expand EE, others may prioritize shutting down older coal-fired plants, while other States may choose to maintain existing coal-fired generation to sell excess power to neighboring States. Ultimately, State Legislatures are the key decision makers. They can choose to engage with EPA’s rule and ensure that regulators have sufficient authority to implement a plan that is consistent with their priorities, or they can accept EPA’s plan for their State.
Claims that EPA has eliminated States’ discretion ignore the central role of State law. EPA’s rule requires only that States reduce the carbon intensity of their power plants. By allowing States to design implementation strategies, the rule enables locally tailored and democratically chosen solutions.
In a paper I co-wrote with Kate Konschnik, director of Harvard Law School’s Environmental Policy Initiative, we explore State plan enforceability in more detail. The paper describes how EPA and States generally enforce State plans submitted under the Clean Air Act, and how EPA proposes to treat enforcement issues under its rule for power plants. The paper also surveys laws in four States to assess whether they provide regulators with sufficient authority to meet EPA’s proposed requirements.
1 A notable exception: FERC-regulated regional electricity markets could reprioritize dispatch to account for plants’ emissions. That measure would be enforced by FERC, not States.
Photo Credit: Power Plant Regulation and Enforcement/shutterstock