This is the seventh in a series of questions that highlights RFF’s Expert Forum on EPA’s Clean Power Plan.
RFF asks the experts: Should EPA credit early action taken by the states? If so, how?
A key question when developing any new climate policy is how to treat existing policies that already reduce emissions. In EPA’s Clean Power Plan, the agency proposes that actions taken by states since June 2, 2014 could count toward compliance efforts—which are slated to be measured from 2020. However, some feel that EPA is penalizing early adopters by not recognizing actions taken before this date. If EPA counted all actions taken by states before 2020 toward compliance, early adopters would likely be more fully rewarded; but such an approach might also award credit to actions that would have happened regardless of the Clean Power Plan and consequently decrease the emissions reductions achieved under the plan.
“Unquestionably, the proposed Clean Power Plan would establish more aggressive targets in states that committed early to clean energy leadership. This is bad policy on every level.”
—Frank Prager, Vice President, Policy and Strategy, Xcel Energy (See full response.)
“There are, of course, highly compelling reasons to begin to take action now to reduce carbon pollution. . . . These are simply common sense actions, with tremendous co-benefits—and the existence of an initial compliance date for the long-awaited carbon pollution standards does not alter that common sense.”
—Megan Ceronsky, Director of Regulatory Policy and Senior Attorney, Climate and Air Program, Environmental Defense Fund (See full response.)
“Michigan does not agree with this proposed cutoff date and instead recommends adopting EPA’s proposed option of recognizing emissions reductions that existing state requirements, programs, and measures have achieved starting from the end of 2005.”
—G. Vinson Hellwig, Senior Policy Advisor, Michigan Department of Environmental Quality (See full response.)
Frank Prager
Vice President, Policy and Strategy, Xcel Energy
Since 2005, Xcel Energy and the states in which we operate have made clean energy leadership among the highest of our energy priorities. Working in concert with our customers, state policymakers, and the environmental community, our company has transformed its electric system. Xcel Energy is a renewable energy leader and has been the nation’s number one utility wind provider for a decade. We have some of the nation’s leading customer energy efficiency programs. We have implemented innovative coal plant modernization and retirement initiatives that have dramatically reduced our system emissions.
The clean energy programs developed in Minnesota, Colorado, and the other states we operate in should serve as models for carbon abatement strategies across the nation. In fact, these programs are exactly the kinds of initiatives that the proposed Clean Power Plan is designed to encourage. They have already resulted in dramatic reductions in greenhouse gas emissions within our system. Xcel Energy has already reduced its carbon dioxide emissions by 19 percent from 2005 levels and will achieve a reduction of at least 31 percent by 2020, 10 years earlier than the administration’s 2030 target.
Although we are proud that our clean energy leadership has achieved so much while maintaining reasonably priced power, these initiatives have not been free. Our customers are funding billions of dollars of investments to make them a reality.
Unfortunately, the Clean Power Plan virtually ignores these investments. It would provide very little credit to existing state clean energy programs. The proposal would give an easier compliance path to states that resisted clean energy in the past. Even worse, the Clean Power Plan actually punishes states that are clean energy leaders.
For example, building blocks 1 and 4 of the proposed rule discount the fact that the cheapest coal plant and customer efficiency projects and programs have already been completed in leading states. Building block 2 requires greater emissions reductions in states such as Minnesota that, prior to 2012, replaced aging coal plants with natural gas combined cycle units. Block 2 also punishes states that balance their intermittent renewable energy with natural gas plants. Finally, block 3 requires greater emissions reductions in states and regions that have moved forward with renewables under progressive renewable standards. In other words, the proposed rule takes clean energy leadership for granted.
Unquestionably, the proposed Clean Power Plan would establish more aggressive targets in states that committed early to clean energy leadership. This is bad policy on every level:
It tells states that they are better off fighting EPA rather than leading the way to cleaner energy.
It tells companies that the value of a proactive clean energy strategy may be swept away by future regulation.
It tells customers that they will pay twice if they commit early to clean energy leadership.
It tells the public that the most beneficial emissions reductions—those that have already occurred—are environmentally irrelevant.
Over the last decade, our states committed to clean energy on the promise that leadership would give them a head start under federal climate policy. There is still time to make this promise a reality. We believe that a few simple changes to the Clean Power Plan will credit early emissions reductions without significantly altering the structure or environmental benefits of the rule. Xcel Energy will continue to work with EPA to ensure that the nation’s climate policy recognizes the value of clean energy leadership.
Megan Ceronsky
Director of Regulatory Policy & Senior Attorney, Climate & Air Program, Environmental Defense Fund
Under the Clean Power Plan, the United States will finally have Clean Air Act standards to address carbon pollution from existing power plants. During the long wait for these standards, a diverse group of states and companies have acted, leading the way in reducing carbon pollution. They have done so by deploying renewable energy, harvesting demand-side energy efficiency, and by shifting utilization away from high-emitting and toward lower-emitting power plants.
State and private sector leadership in addressing pollution is something that should be recognized and supported. Action at the federal level to address climate-destabilizing pollution is lagging perilously far behind the scope and pace of action that scientists tell us is necessary to mitigate harmful climate impacts and reduce the risk of catastrophic climate change. For these reasons, we have long supported the recognition of early action in the context of the Clean Power Plan. Yet the question of how to do so is complex.
Under Section 111(d), EPA identifies the “best system of emission reduction” available to address dangerous air pollution from stationary sources, and sets emissions performance targets achievable using that best system. This framework—like other frameworks under the Clean Air Act—looks at existing pollution problems and how they can be addressed going forward. It does not provide for an assessment of past emissions reductions by those sources (or that state).
Of course, under the Clean Power Plan, states and companies that have already transitioned toward lower-carbon and zero-carbon energy and energy efficiency are closer to the full deployment of the best system of emissions reduction than others—and EPA should consider clarifying that states that go beyond their targets under the Clean Power Plan would receive credit for those actions under future updating of the carbon pollution standards for power plants.
The years between 2012 and 2020 present a distinct quandary. EPA uses 2012 data on power sector infrastructure in assessing the potential for emissions reductions to be secured under the best system during the 2020 to 2029 compliance period. Crediting emissions reductions secured between 2012 and 2020 would encourage states and companies to act earlier, moving emissions reductions forward in time. All else being equal, earlier action to reduce emissions is certainly better than later action. But the potential to reduce carbon pollution during 2012 to 2020 was not taken into account in setting the state targets. As such, giving compliance credit to those actions taken during this time that would have happened regardless of the Clean Power Plan—take, for example, renewable energy deployed under a renewable energy standard in a state strongly committed to clean energy—would create a bank of compliance credits. Those banked credits would be used by that state during the compliance period in the place of other, beyond business-as-usual actions to reduce emissions—and the overall emissions reductions achieved by the Clean Power Plan would be reduced by the same amount.
There are, of course, highly compelling reasons to begin to take action now to reduce carbon pollution. States and companies can take advantage of the five years between the finalization of the standards and the beginning of the compliance period to gradually build out renewable generation and build up energy efficiency programs so that these resources are ready to deliver carbon reductions. The reductions in co-pollutants that will result will help states deliver cleaner air for their citizens and meet other clean air standards. Companies can develop business models built on a foundation of clean energy and efficiency, and investments in cleaner energy and efficiency will create jobs. Improvements in energy efficiency will cut utility bills for homes and businesses, and spending those savings in their communities will stimulate the local economy. These are simply common sense actions, with tremendous co-benefits—and the existence of an initial compliance date for the long-awaited carbon pollution standards does not alter that common sense.
G. Vinson Hellwig
Senior Policy Advisor, Michigan Department of Environmental Quality
The proposed Clean Power Plan currently states: “Emission impacts of existing programs, requirements, and measures that occur during a plan performance period may be recognized in meeting or projecting CO2 [carbon dioxide] emission performance by affected EGUs according to § 60.5740(a)(3) and (4), as long as they meet the following requirements:
Actions taken pursuant to an existing state program, requirement, or measure, such as compliance with a regulatory obligation or initiation of an action related to a program or measure, must occur after June 18, 2014."
Michigan interprets the proposed rule as not allowing emissions reductions from measures designed to reduce energy waste installed before June 18, 2014 to count toward achievement of the interim and final goals, even though these measures provide pollution reductions in later years. Michigan does not agree with this proposed cutoff date and instead recommends adopting EPA’s proposed option of recognizing emissions reductions that existing state requirements, programs, and measures have achieved starting from the end of 2005. Otherwise, states that have proactively invested in measures to prevent pollution would be economically disadvantaged compared to neighboring states that have not made these investments. These measures are typically paid for through the electric service. States that have not made this program choice have touted lower electric rates as an economic incentive tool. For this reason, Michigan is urging EPA to credit the avoided CO2 emissions resulting from measures installed before 2012 in a state’s plan. At a minimum, EPA should allow the pollution reductions from all measures installed after January 1, 2012 to count toward Clean Power Plan compliance.
The agency should also be aware that only counting emissions reductions from 2020 to 2029 creates a perverse incentive for states and utilities to defer implementation of programs that reduce energy waste, and thus prevent pollution of many kinds, until 2017 or later. In Michigan, for example, Public Act 295 of 2008 set requirements for increased renewable energy and for programs that incentivized energy waste reduction—and implementation continued despite the deep economic crisis and rising energy costs in the state during the intervening years. If the federal Clean Power Plan disallows counting of such measures toward the state’s goal— or worse, would disallow credit for pollution reductions achieved by such measures until 2017 or later—EPA is actually creating an incentive to repeal Michigan’s (and other states’) laws that currently reduce all pollutants. Moreover, it is clear that many states do not have mandatory energy efficiency requirements in place, and as drafted, the rule would further discourage their adoption prior to 2020. This will likely result in more CO2 (as well as increases in other pollutants, including mercury, acid rain precursors, and particulate matter) being emitted into the atmosphere than might occur under a final rule that encouraged early investment in pollution prevention.
EPA states that concerns over the “acceptable” lifetime of various measures led to the decision to propose not crediting earlier reductions. Although it can be argued that some waste reduction measures have a shelf life, these should not be difficult to establish, as “payback” figures are abundant in available information and other parts of the federal government have expertise setting depreciation schedules that assume reasonable lives of a variety of assets. Additionally, the “shelf life” of measures such as added insulation and replacement windows is so long that there should be no concern. In most cases, the emissions reductions will not be “lost,” but continue to provide quantifiable pollution reductions for years to come.
Given the facts that (a) energy waste reduction and pollution prevention measures continue to positively impact our air quality now and in the future, (b) investments were made by Michigan and other states with required programs, and (c) the rule as drafted creates a competitive disadvantage for states that have implemented those measures, credit for early action should be provided for in the final EPA regulation.
