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EPA Uses Flexible Approach in Setting GHG Standard for New Fossil-Fuel-Fired Power Plants

The long-awaited proposed New Source Performance Standards for greenhouse gas emissions from certain fossil-fuel-fired power plants ensures new power generation will be at least as clean as new natural gas combined cycle plants. Specifically, EPA is proposing that new fossil‐fuel‐fired power plants meet an output‐based standard of 1,000 pounds of CO2 per megawatt‐hour (lb CO2/MWh). As any new electricity capacity would be expected to last for at least forty years, this standard prevents new high-emitting plants from coming on-line and remaining uncontrolled for the life of the plant. CCAP applauds the EPA for taking this important step.

Notably, in setting the standard, EPA has offered new compliance flexibility in the form of 30-year averaging. Essentially, new coal plants can be built now and controlled later, so long as the 1,000 lb CO2/MWh standard is met on average over a 30-year period. This is in addition to the “innovative compliance waiver” already offered by the Clean Air Act. We think this openness to flexible approaches is important, not just for this rule, but also more broadly in how EPA can use the Clean Air Act to achieve effective and cost-effective policy outcomes going forward. In this too, EPA should be applauded.

While this measure sets an important precedent on use of the Clean Air Act to achieve climate goals in a way that permits flexibility and innovation, it is critical to note that the trend towards cleaner electricity production is already happening based purely on the economics. Natural gas prices are at a historic low (today, $2.23/MMBtu), which is already leading power generators to shift towards natural gas. New plants are increasingly NGCC anyway (or in some markets, renewable generation), and the dispatch of existing plants is also shifting to favor existing (and previously underutilized) natural gas-fired power generation resources. In fact, coal-fired power represents less than 40 percent of total generation in the US—for the first time since March of 1978—and the Energy Information Administration’s preliminary Annual Energy Outlook for 2012 projects only 900 MW of new coal will come on-line to meet demand in the next two decades. And even this estimate of new unplanned coal capacity would be expected to come down, as natural gas prices have declined since that study was completed. So in essence, this rule will not have adverse impacts on jobs and coal because the shift in the energy market has already driven the shift to cleaner fuels and dramatically reduced the potential for new coal plants to be built.

Finally, this proposed standard sends a signal to the rest of the world that the U.S. is indeed serious about limiting its climate change footprint. It also sets the stage for additional discussion on ways to use the Clean Air Act to make meaningful and cost-effective emissions reductions.

For additional blog posts, or more information, please go to www.ccap.org.

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