The Obama administration is set to release a regulatory plan that it’s calling the most significant step the United States has ever taken to combat climate change.
The highly anticipated Clean Power Plan (CPP) will require power plants to achieve a 32 percent reduction in national greenhouse gas emissions compared to 2005 levels. The final rule, to be formally announced by President Obama today, sets a more ambitious overall target than the initial 30 percent reduction proposed last year.
The new version of the rule also expands the Clean Energy Incentive Program, a mechanism that gives states extra credits for acting quickly to invest in renewable energy resources, specifically wind and solar. This change is expected to boost the amount of renewable electricity to 28 percent by the year 2030, compared with 22 percent under the previous version of the rule.
In addition to a national target, the CPP sets greenhouse gas reduction goals for each state based on each region’s energy mix and current emissions levels. According to administration officials, the final rule gives states more ways to meet their mandates and extends the interim compliance period by two years, from 2020 to 2022.
The plan also includes a “safety valve” -- a feature many utilities and electricity grid operators lobbied for -- that would ease compliance with the regulation if the retirement of old, more polluting power plants were to threaten the overall reliability of the electrical grid.
To make clean energy more accessible, the rule includes incentives for utilities to build renewable energy projects in lower-income neighborhoods. These communities will eventually benefit from lower electricity rates and cleaner air -- poor communities tend to suffer disproportionately from higher asthma rates and other pollution-related illnesses.
Another feature of the final plan is that it eliminates one of the four “building blocks” put forward in last year’s proposal. The rule does not include the building block that would have allowed states to reduce emissions through energy efficiency programs.
Efficiency measures -- often the fastest, cheapest way to reduce emissions -- will still count toward compliance, but states will no longer be expected to hit specific efficiency levels. The change was reportedly made to avoid legal action over states’ ability to curb future demand. The other three building blocks (heat rate improvements at coal-fired facilities, increased use of natural gas, and the adoption of carbon-free energy resources) will remain intact.
The power sector currently accounts for about a third of all emissions produced by human activity in the U.S. In a promotional video released over the weekend, President Obama called the new regulation “the biggest, most important step we've ever taken to combat climate change.”
Overreach or strong leadership?
Depending on who you’re talking to, the far-reaching nature of the CPP is considered to be either its best or worst attribute.
To many environmentalists and political progressives, the historic rule represents a pivotal shift toward a cleaner economy. Some supporters believe the EPA could have set even more stringent targets to speed up that process.
To many Republican lawmakers and fossil-fuel interest groups, the rule represents gross federal overreach that stands to topple the domestic coal industry and saddle consumers with higher electricity rates. In March, Senate Majority Leader Mitch McConnell (R-Ky.) urged all 50 governors to reject the EPA rule, writing in an op-ed that the regulation is “not technologically achievable.”
“There is little doubt that many states will be poised to challenge the final rule as soon as possible. Many states are likely to join stay petitions, and even more will challenge the rule over the 60 days that follow its finalization,” said Scott Segal, director of the Electric Reliability Coordinating Council, a broad-based coalition of energy companies united against the climate action.
“Aside from clear threats to reliability and the economy of the states, state leaders are also angry that EPA has finalized an unprecedented interference into state authority over energy regulation and markets, clearly inconsistent with statutory and constitutional principles,” he said.
Not all state leaders oppose the CPP, however. Many states are finding ways to make the rule work. William Becker, executive director of the National Association of Clean Air Agencies, an independent group that represents state regulators, said on Sunday that he gives the EPA “two thumbs up for responding to states’ concerns,” while still delivering a rule that will result in “substantial reductions in greenhouse gas emissions.”
Also, while the CPP will surely face legal opposition from fossil-fuel companies, it is interesting to note how many businesses are in support of the regulation.
Last week, 365 companies and investors, with combined revenue totaling more than $350 billion, sent letters to 29 governors across the country voicing their support for the climate plan.
“Our support is firmly grounded in economic reality,” wrote the businesses, including industry giants such as General Mills, Nestle, Staples and Unilever. “Clean energy solutions are cost effective and innovative ways to drive investment and reduce greenhouse gas emissions. Increasingly, businesses rely on renewable energy and energy-efficiency solutions to cut costs and improve corporation performance.”
Last month, Facebook announced it will build a 200-megawatt wind farm to help power its $1 billion data center in Fort Worth, Texas. And this is just the most recent in a spate of clean energy-related announcements. Facebook, along with tech giants Apple, Google and SAS, has also opposed changes to North Carolina’s renewable energy standard, which the companies say will create “new risk and uncertainty” for their businesses.
Despite strong corporate support overall, companies based in solidly red states were noticeably absent.
Meanwhile, for the electricity industry, the main concerns are “the overall timing and stringency of the near-term reduction targets,” according to a press release issued yesterday by the Edison Electric Institute. EEI elaborated on these concerns in 400 pages of comments submitted to the EPA.
At the EEI convention in June, leading utility CEOs suggested the CPP should be scrapped. But in the statement issued Sunday night, EEI leadership took slightly more positive tone.
“The industry asked that EPA provide sufficient time for states to craft compliance plans and then subject those plans to critical reliability reviews, and we are hopeful the final guidelines will address this issue,” said EEI President Tom Kuhn.
“Until we review the final guidelines in their entirety, it is difficult to assess whether they address the range of concerns we have raised over the past year,” he continued. “Ultimately, it is imperative that the final guidelines respect how the electric system works and provide enough time and flexibility to make the necessary changes to achieve carbon emission reductions.”
"Puts states in the driver's seat"
Giving states until 2022 before they have to start reducing pollution would seem to assuage some of the concerns over timing. In addition, reports show that states will also have until 2018 to submit their carbon-reduction plans, whereas the original rule only gave them until 2016. The safety valve measure, depending on how its structured, could also go a long way toward appeasing utilities.
“[The rule is] flexible, customizable, and it puts states in the driver’s seat,” EPA Administrator Gina McCarthy told reporters on Sunday. “They can cut carbon pollution in whatever way makes the most sense to them.”
Despite strong pushback, the Obama administration ultimately got automakers to back aggressive new fuel-economy regulations finalized in 2012 by including flexibility measures. While the specifics of the final power plant rule are still coming out and reactions are still coming in, these changes could mean that the rule isn’t quite as unworkable as some have suggested.
“I know from my conversations with state leaders and utility CEOs that even those who may openly oppose the rules are thinking hard about how to meet them. And many are very interested in the types of incentive- and market-based approaches EPA is encouraging,” said Bob Perciasepe, president of the Center for Climate and Energy Solutions and former deputy administrator of the EPA. “It behooves every state to sit down with stakeholders -- mayors, consumers, businesses -- and craft a plan that fits it best.”
Getting cleantech businesses to the table is unlikely to be a challenge. The CPP represents an enormous opportunity for these companies. According to the U.S. Energy Information Administration, under the CPP, nearly 400 gigawatts of renewable energy will be possible by 2040. This represents a business opportunity not only for wind and solar companies, but also for related technology companies working in everything from stationary batteries to customer acquisition software.
Advanced Energy Economy (AEE), a national association of business leaders across the clean energy spectrum, from solar and smart grid companies to natural-gas electric generators, has released a suite of reports detailing how the CPP is expected to affect certain states and various segments of the energy sector. Earlier this year, AEE also challenged the North American Electric Reliability Corp.’s Phase 1 report on the CPP, claiming that its models did not include technologies that are already helping states meet their electricity needs and reduce carbon pollution at the same time.
Green industry groups have also pointed to reports from The Brattle Group and the National Renewable Energy Laboratory to show that wind and solar can reliably and cost-effectively supply large amounts of electricity.
If the rule survives legal challenges over the next year, the fate of the CPP will lie in the hands of the next president. In her recently released climate plan, Hillary Clinton said she would make it “a top priority to fight efforts to roll back the Clean Power Plan.” Meanwhile, every Republican candidate would likely try to dismantle the regulation, or slow its implementation.
In the video released over the weekend, President Obama urged constituents to get behind the climate plan, and to urge their lawmakers to do so as well.
“If you believe, like I do, that we can’t condemn our kids and grandkids to a planet that’s beyond fixing, then I’m asking you to share this message with your friends and family,” he said. “Push your own communities to adopt smarter, more sustainable practices. Remind everyone who represents you that protecting the world we leave to our children is a prerequisite for your vote.”