The Center for Clean Air Policy applauds President Obama’s announcement of the final Clean Power Plan, which, in his own words, promises to be “the single most important step America has ever taken to fight against global climate change.” As finalized, the Clean Power Plan will reduce greenhouse gas emissions from the power sector by 870 million short tons in 2030 below 2005 levels. This makes a substantial contribution to the U.S. goal of reducing economy-wide greenhouse gas emissions by 26 to 28 percent in 2025 from 2005 levels. Ned Helme, CCAP’s President commented, “The increase in effort over the proposal sends a clear signal that the United States is prepared to lead this December in reaching an ambitious and durable agreement on climate change.”
Beyond setting up a high level of ambition, the final Clean Power Plan is designed to be cost-effective and flexible while ensuring electric reliability. In particular:
The final plan encourages the lowest cost mitigation solutions through emissions trading. In offering guidance on trading-ready approaches, EPA supports low cost compliance solutions under rate- and mass- standards.
The final plan offers a powerful incentive to invest in low cost, low-emitting solutions, including both renewable energy and energy efficiency. Incentives set up ahead of the official start date provide states added inducement to deploy these emissions-free strategies. Aggressive use of such measures can help states lower their future compliance targets while also lowering energy costs.
The final plan gives states extra time to develop and comply with their state plans. First, all states can potentially benefit from a two year extension to submit a final plan, not just those that are part of a multi-state plan. Second, in offering two extra years until the beginning of the interim compliance period, EPA’s final plan allows extra time to ramp down higher emitting generation technologies and make use of lower (or zero-) emitting alternatives. Moreover, states are able to design the trajectory of their interim compliance pathway, offering the possibility to phase in initial compliance more slowly in return for more aggressive actions later in the decade.
The final plan offers states three options for the design of the standard, helping to prevent emissions leakage. Whereas previously EPA allowed use of rate- and mass-based goals, there is now a third alternative, a mass-based goal that includes new natural gas combined cycle units. This third option gives states adopting a mass standard a powerful tool to prevent emissions leakage.
The plan includes added elements to ensure reliability, including through a mechanism where a state can apply to adjust its plan in the event of unanticipated electric system reliability challenges, and also through use of an emergency reliability safety valve for individual sources.
In the coming days CCAP looks forward to understanding how EPA addressed individual state goals, the solution used to convert rate standards to a mass goal, and the rules it sets for participation by the different control technologies. We will also seek to better understand the impacts of early reduction credits on compliance and approaches states might use to handle emissions leakage, among others.  Emissions leakage occurs when there is an increase in emissions by a jurisdiction or emissions source as a result of an emissions reduction by a second jurisdiction or source. Under the Clean Power Plan, it is possible that a strict emissions limit or standard applicable to covered sources in a given state could lead to an increase in power generation and emissions from outside the covered source boundary—whether from new sources not covered by the Clean Power Plan, or in nearby jurisdictions with more relaxed standards. Such leakage can lower the cost of compliance at the cost of not reducing emissions as expected. EPA’s final Clean Power Plan gives states the ability to prevent leakage to new natural gas combined cycle plants in their own states. At the same time, in not giving states that adopt a rate standard the option to include new NGCC units in the state goal, EPA is helping to prevent emissions leakage through a rush to new natural gas. New natural gas-fired power plants whose emissions rates are below their state emission rate goals would not receive an added incentive to operate.