Power Plant Rule Is Flexible But Reductions Are Aggressive, Complex, State Officials Say

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By Andrew Childers

Oct. 14 — The Environmental Protection Agency's proposed carbon dioxide standards for existing power plants provide states tremendous flexibility, but the emissions targets are complex and very aggressive, officials said at a forum Oct. 14.

States are still assessing how the EPA's proposed rule will affect their power sector and which of the options the agency poses will be the most attractive, state officials said at a forum sponsored by Resources for the Future and the Electric Power Research Institute. State officials said they have concerns about the EPA's proposal, including front-loading required emissions reductions, the choice to use a single year for the emissions baseline and whether the rule would provide the flexibility necessary to respond to changing power market conditions.

The EPA in June proposed carbon dioxide emissions standards for existing power plants under Section 111(d) of the Clean Air Act (RIN 2060-AR33), a program that state air officials would administer (79 Fed. Reg. 34,830). The EPA anticipates its proposed rule would reduce carbon dioxide emissions by 30 percent from 2005 levels by 2030.

Impacts on States Vary

Part of the complexity comes from the EPA's decision to propose carbon dioxide emissions rates for each state, expressed as carbon dioxide emitted per megawatt hour of electricity produced, rather than set a mass-based standard that would limit total emissions of carbon dioxide.

“We're used to dealing with mass,” said Victor Niemeyer, program manager for the Electric Power Research Institute's energy and environmental analysis program.

Setting a rate-based standard will affect states differently, depending on their unique mix of electricity generation, he said. For example, the EPA's proposal would allow Rhode Island to double its power sector emissions by 2030, while other states face significant emissions reduction targets.

As another example, two new nuclear reactors are under construction in Georgia, but the EPA has already built those power plants into the state's emissions rate target and assumed that both will be operating at 90 percent capacity as soon as they begin operation, Niemeyer said. Georgia could have difficulty meeting its emissions target if either of those units is delayed or forced to cease or limit operation, he added.

In a Sept. 25 speech at Resources for the Future, EPA Administrator Gina McCarthy said she is open to revising the proposed rule based on state concerns.

States Seek ‘Off-Ramp.'

State officials said the EPA's proposed rule front-loads much of its required emissions reductions between 2012 and 2020, with final targets to be achieved in 2030.

G. Vinson Hellwig, chief of the air quality division at the Michigan Department of Environmental Quality, said he was concerned about the EPA's use of a single year, 2012, to establish each state's emissions baseline. Taking a multiyear approach would have allowed the EPA to compensate for fluctuations such as abnormal weather patterns or economic changes that could skew a single year's performance, he said.

To protect states against unexpected market or power industry changes, states recommended the EPA consider an “off-ramp” that would allow states to revise their emissions rate targets if economic conditions change or if anticipated new, cleaner generating facilities are not available to perform to expectations.

“EPA would be well advised to have a secondary approach to account for those types of issues should they arise,” John Lyons, Cabinet assistant secretary for climate policy for Kentucky.

The EPA's intermediate target in 2020 does not provide utilities with sufficient time to make the investments that may be necessary to achieve each state's emissions rate target, Lyons said.

In addition, states also are concerned that adding a renewable portfolio requirement to their plans to implement the carbon dioxide standards would make those targets federally enforceable.

“We don't want to see EPA taking enforcement out on this,” Hellwig said.

Trading Seen as Option

David Cash, commissioner of the Massachusetts Department of Environmental Protection, said many of the concerns states have raised with the EPA's proposed rule could be mitigated through a multistate emissions trading program, such as the Regional Greenhouse Gas Initiative in the Northeast or California's emissions trading program. Trading programs simplify administration of the carbon dioxide standards because power plants can simply demonstrate compliance by showing they have obtained the proper credits for their emissions, Cash said.

The Northeast states' experience with RGGI has shown that trading programs can produce greater emissions reductions at lower cost than previously anticipated, Cash said, and that suggests the EPA could consider setting even more aggressive emissions targets for states.

“All of the analysis before RGGI was it would be far more difficult and more costly to get where we are now,” Cash said.

The forum was the first in a series of events hosted by Resources for the Future and the Electric Power Research Institute. The next event will be a Nov. 4 webinar on energy efficiency's role in the EPA's proposed rule.

To contact the reporter on this story: Andrew Childers in Washington at achilders@bna.com

To contact the editor responsible for this story: Larry Pearl in Washington at lpearl@bna.com