Through smart regulatory design at both the federal and state levels, Section 111(d) of the Clean Air Act can be used to achieve meaningful and cost-effective greenhouse gas (GHG) emission reductions from existing power plants. Prior to issuing 111(d) regulations, the Environmental Protection Agency (EPA) will set a standard for regulating GHGs from new power plants under Section 111(b). EPA is expected to re-propose this new source performance standard in September 2013, and is set to undertake consultations this fall on the design of the 111(d) guidelines, leading up to a proposed rule in June 2014.
Section 111(d) of the Clean Air Act offers a flexible mechanism for reducing GHGs from existing sources in the sector. The Clean Air Act calls on the EPA to establish guidelines for states to use in setting standards applicable to existing large polluters. Each state will document its standards and its plan to achieve these standards in a State Implementation Plan, which is subject to EPA approval.
While the EPA is required to prepare guidelines for existing power plants pursuant to a December 2010 settlement agreement with environmental groups and states, President Obama’s Climate Action Plan and accompanying memorandum have provided clear direction for the prompt completion of the carbon pollution standards. The President also called for compliance flexibility, which CCAP agrees is critical to an effective and cost-effective outcome. EPA’s recent video also highlights the ability of Clean Air Act standards to allow use of approaches that are creative, innovative and flexible.
Whereas a traditional interpretation of the 111(d) language might focus on control technologies or other systems geared towards reducing emissions at each regulated source, such an approach could be counter-productive. In the case of fossil-fueled power plants, on-site mitigation opportunities would likely be based on modest efficiency improvements. While this compliance approach would lead to somewhat fewer emissions per kWh produced, such investments could result in more emissions overall to the degree that the efficiency improvements lower operating costs, and therefore lead to higher levels of utilization and/or a longer operating life for the unit. Moreover, approaches focused on control measures at each regulated source ignore the fuller range of mitigation actions possible and adequately demonstrated within the electric power sector, including shifts away from inefficient coal-fired electric generation to lower-emitting and more efficient natural gas combined cycle units and/or zero-emitting energy sources. Therefore, in moving forward with issuing standards for existing power plants, a flexible approach is needed to facilitate smarter energy choices and spur significant emissions reductions at a reasonable cost.
A flexible compliance pathway can also help meet the varying needs of the 50 states with their different mitigation opportunities and priorities. States that already have renewable portfolio standards or energy efficiency resource standards on the books should be able to apply the emissions reductions achieved through the incremental clean energy technologies stemming from these policies towards the standard resulting from EPA’s guidance. Similarly, states with existing cap-and-trade programs should be able to apply emissions reductions achieved through this mechanism towards their compliance if they can show that the reductions would be equivalent to what EPA requires.
Finally, a flexible path can create opportunities for economic development. In particular, combined heat and power (CHP) technology—where heat and power are produced together with greater overall efficiencies than when heat and power are produced separately—offers a promising strategy to comply with new power sector standards while at the same time boosting the efficiency and competitiveness of U.S. manufacturing. A flexible approach to GHG standards would also be expected to boost demand for natural gas, renewable energy, energy efficiency, and other low- or zero-carbon energy solutions.
CCAP looks forward to supporting EPA in developing guidance that would permit the compliance flexibility required to achieve meaningful and cost-effective emissions reductions that can align with state priorities and opportunities, and foster economic development. Current plans include working with ICF International and a range of stakeholders to undertake new modeling to understand how a flexible approach to compliance with 111(d) standards can encourage deployment of CHP and boost industrial competitiveness and economic growth. CCAP is also continuing to explore options for crediting combined heat and power and energy efficiency more generally towards meeting state standards.