EPA Issues Proposed Carbon Emissions Rules

The Obama administration took its most forceful step yet on climate change with an EPA proposal to curb greenhouse gases from existing power plants. (See “EPA to Take Biggest Step Ever to Fight Climate Change”). The most likely impact from the rules, if they survive legal challenges, will be an accelerated shift to natural gas and more energy efficiency measures in coal-heavy states.

EPA director Gina McCarthy on Monday unveiled the Clean Power Plan to reduce carbon dioxide emissions from power generation 30 percent by 2030 compared to 2005. The EPA expects to finalize the rules in one year and give states one year to submit an initial compliance plan. Final plans would be approved by 2017 or 2018 if it’s a multistate approach.

The proposed cuts are significant. With the proposal, emissions will go down 24 percent compared to its current upward trajectory, according to the Center for Climate and Energy Solutions. And although it’s effectively a national policy on carbon dioxide emissions, states have a great deal of say in how the power industry will meet EPA-set goals.

Coal-reliant states, such as Wyoming, West Virginia, and Kentucky, will likely accelerate the industrywide shift to natural gas power plants or upgrade coal plants to burn biomass and run more efficiently. Utilities in coal-heavy states could also offer incentives for customers to improve energy efficiency, such as rebates on efficient appliances and industrial equipment.

The picture will be different in states that already have renewable energy mandates and other policies to lower emissions from the power sector—which accounts for about 40 percent of U.S. carbon emissions. States could continue programs to add more distributed solar and microgrids or form regional carbon trading programs to meet reduction targets. Northeast states already have a cap and trade system that allows utilities to lower emissions or purchase carbon reduction credits. California, Oregon, and Washington could partner to create another regional carbon trading program, says Robert Stavins, an environmental economist at Harvard University.

A number of state governors and attorneys general are opposed to carbon-reducing programs, such as cap and trade, yet those are the most cost-effective, says Stavins. “Because of their ideological record of being opposed to cap and trade, do they use a more costly approach and punish the citizens and industry of their state? That’ll be interesting to see,” he says.

But it will likely take years before any rules are put into effect because of legal challenges and the complexity of getting state regulators and power generators to implement the rules.