White paper looks at state compliance with Clean Power Plan

EPA's Clean Power Plan

Cost-effectiveness, electric system reliability and achievement of the environmental goal “with integrity,” are key factors that state must consider in light of the Environmental Protection Agency (EPA) Clean Power Plan, according to a recent white paper distributed by the Bipartisan Policy Center.

In mid-summer 2015, EPA is expected to issue its final “Clean Power Plan” regulations, which aim to reduce carbon dioxide emissions from existing fossil fuel-fired power plants under section 111(d) of the Clean Air Act. The final rule will require states to develop and submit state plans as early as mid-summer 2016, to achieve the federally prescribed state emissions goals.

The paper is titled “Choosing a Policy Pathway for State 111(d) Plans to Meet State Objectives.” It was authored by Franz Litz and Jennifer Macedonia for the Bipartisan Policy Center and the Great Plains Institute.

Both mass-based and rate-based policy pathways are then discussed in light of likely state objectives. “For example, achievement of a mass-based goal requires that emissions are accurately measured and tracked over time in order to assess whether the goal has been achieved. In a rate-based context, assessing compliance is likely to be more complex,” according to the white paper.

The authors say that mass-based approaches “may present fewer implementation challenges on both an individual and multi-state basis because they capture emission reductions without the need to develop cumbersome crediting mechanisms and coordinate the design of those mechanisms across states.”

The authors note in the paper that over time policy makers have moved away from “rigid approaches” to reducing air pollution in favor of increased flexibility. At the same time, regulated electric utilities also crave certainty, the authors said.

“Electricity sector investment decisions involve long time horizons and uncertainty makes those decisions riskier,” according to the BPC white paper. “Because energy planning has largely remained the purview of state elected leaders and policy makers, a number of states and their stakeholders have expressed a desire to retain state-level control over energy decisions wherever possible,” according to the BPC white paper.

“Some states will seek to moderate impacts on existing coal plants, for example. Others may wish to avoid over-reliance on new natural gas plants, including potentially at the expense of existing natural gas units,” the authors go on to say. “Still others may wish to expand the share of renewable energy and/or energy efficiency serving customers,” they add.

EPA’s final regulations are expected to establish emissions goals for each state as well as the requirements that apply when states develop plans to achieve those emissions goals.

Some states might elect to participate in a multi-state CO2 emission trading system. “Rather than set up a system of full trading among power plants, a state could delegate the decision whether to participate in trading to the utilities and other plant-owning entities,” according to the BPC analysis.

Although states will not know the specifics of the final regulations until EPA releases them in mid-summer 2015, states can nevertheless begin understanding their policy options for 111(d) plans, the authors say.

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