In April, the US Environmental Protection Agency released four regulations on pollution from fossil fuel–fired power plants. Experts broke down these rules at a recent event hosted by Resources for the Future.
On April 25, the US Environmental Protection Agency (EPA) released four rules governing greenhouse gases and other emissions from fossil fuel–fired power plants. These rules have the potential to be the most impactful action on emissions from the electricity sector since the passage of the Inflation Reduction Act in 2022. However, the rules come with significant uncertainty in their ability to survive political or legal challenges and their ultimate economic impact. To help unpack these rules, Resources for the Future (RFF) held a recent webinar that highlighted input and insights from various scholars and regulators who have been tracking the developments. This blog post synthesizes some of the most salient insights from the experts who spoke to the topic during the webinar.
What Are the Rules?
Of the four new rules that EPA has released regarding fossil-fired power plants, one directly addresses carbon emissions by targeting emissions reductions at power plants. The other three rules all aim to reduce other forms of pollution from coal plants; these rules raise the emissions standards for toxic metals and mercury, reduce pollutants that are discharged through wastewater, and set new requirements for the management of coal ash.
The Four New Rules
As RFF’s newly appointed President and CEO Billy Pizer noted, “111(d) is the big enchilada here.” The 111(d) provision refers to the new standards for existing coal- and natural gas–fired power plants under the Clean Air Act, Section 111(d). This is the provision that spawned former President Barack Obama’s Clean Power Plan, subsequently replaced by former President Donald Trump’s Affordable Clean Energy rule, neither of which survived court review. EPA proposed an update last year under Section 111(b) that also includes standards for new natural gas–fired power plants; the agency has been meeting with stakeholders regarding these changes for more than two and a half years.
In brief, Section 111(d) mandates that existing coal plants will cease operations by either 2032 or 2039 (if the power plant co-fires with natural gas), unless the facility manages to reduce carbon dioxide emissions by 90 percent, likely through carbon capture and sequestration. New natural gas–fired power plants are subject to different specific standards under 111(b) depending on their capacity factor (i.e., how often they run). New baseload natural gas plants, which run often (i.e., a capacity factor of more than 40 percent), will need to reduce carbon emissions by 90 percent by 2032, as EPA states in its one-page summary of the rule. EPA has signaled that the agency will consider a future rule on carbon emissions from existing natural gas plants; these facilities are not currently included in the final rules.
How Much Will the Four Rules Reduce Carbon Emissions?
EPA estimates that the rule under Clean Air Act Section 111 will reduce carbon emissions by 1.28 billion metric tons through 2047, equivalent to the annual emissions of 328 million cars or a year’s worth of emissions from the US power sector. The other three rules are expected to have an indirect impact on carbon emissions through affecting the economics and closures of coal-fired power plants.
Carrie Jenks of Harvard Law School argued that “the sector is in a transition to decarbonize, independent of EPA’s rules. What these rules are doing is giving the road map and timing, so companies can make investment decisions about which investments make sense and which do not.”
Jenks and Emily Fisher of Edison Electric Institute (the trade association for investor-owned utilities) agreed that EPA’s rules provide a road map for the closure of coal plants before 2032 without requiring facilities to make additional investments. They pointed out the concern that requiring any immediate investments could extend the life of these power plants by increasing the costs of early retirement.
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Fisher argued that closing coal plants is still the “biggest bang for your buck in terms of reducing carbon emissions from the power sector.” She also emphasized the importance of not rushing the closure of coal plants, so that enough time will be available for new generation to be brought online to maintain reliability. Jenks reasoned that the standards for emissions most affecting coal generation in the long term is the one under 111(d), but the other rules may have a bigger impact on power plants that are anticipated to retire before 2032 (or 2039 if co-firing with natural gas).
Fisher observed that the new rules and standards will increase the efficiency of new natural gas–fired units. She argued that the thresholds of capacity factors that differentiate the emissions guidelines are somewhat arbitrary. Nevertheless, units are built to serve different purposes, and it may not make sense to require expensive carbon capture and sequestration for units that do not run very often.
Some experts, such as University of North Carolina Professor of Practice Stephen Arbogast and former Chair of the North Carolina Utility Commission Edward Finley Jr., have expressed concern that utilities may adapt by building natural gas–fired power plants with low capacity factors that are not bound to the strict requirements for reducing carbon emissions. In theory, this potential workaround by utilities could increase both electricity prices and carbon emissions compared to a scenario of utilities building more efficient gas plants that are designed to run at a higher capacity factor. Fisher acknowledged this concern but mentioned uncertainty over how much this practice may materialize in practice and that outcomes likely will depend on local and regional factors.
Will These Rules “Stick”?
The webinar audience overwhelmingly wanted to know if these rules would survive legal and political challenges. This concern is unsurprising, given that critics already are promising legal action to undo the regulations, arguing that EPA has overstepped its authority; thus, critics argue that the rules fail to conform to the Supreme Court ruling in West Virginia v. EPA, which limits EPA’s ability to regulate greenhouse gas emissions.
Recent history suggests that the Section 111 rule in particular may face substantial legal challenges. The Obama administration attempted to regulate carbon emissions through Section 111 in an effort called the Clean Power Plan. Under the Trump administration, EPA proposed replacing the Clean Power Plan with a new, less stringent rule called the Affordable Clean Energy rule. In 2021, the US Court of Appeals for the DC Circuit vacated the Affordable Clean Energy rule, including the repeal of the Clean Power Plan. Subsequently, the Supreme Court reversed the Circuit Court ruling and upheld the repeal of the Clean Power Plan in its West Virginia v. EPA decision.
Our approach under this rule was, I would argue, 100 percent aligned with almost every other rule in which we’ve applied Section 111 to a range of pollutants.
Joseph Goffman, EPA Assistant Administrator for Air and Radiation
All of these rules and subsequent legal challenges has made Sushma Masemore, Assistant Secretary for Environment at the North Carolina Department of Environmental Quality, picture “a sandcastle on a beach that you work so hard to build and then gets washed away or never really survives.”
EPA Assistant Administrator for Air and Radiation, Joseph Goffman, argued that the rule governing greenhouse gas emissions aligns with West Virginia v. EPA. “Our approach under this rule was, I would argue, 100 percent aligned with almost every other rule in which we’ve applied Section 111 to a range of pollutants,” he said. “If you look at the way the agencies applied Section 111 to [sulfur dioxide or nitrogen oxides], for example, in making [best system of emission reduction] determinations, this is very much a standard-issue methodology. Our predecessors who did 111 rules for criteria pollutants would instantly recognize what we did here … which we believe is entirely faithful to the way the [Supreme] Court outlined the boundaries of our remit and authority” in the West Virginia decision.
Jenks predicted that litigation is inevitable. She agreed with Goffman that the standards governing carbon emissions constitute a more traditional rule under Section 111 than the previous regulatory approach that led to the West Virginia v. EPA decision. Therefore, she thinks the legal arguments will be based on what power plants can reasonably install to reduce carbon emissions. The key debate will be if carbon capture and sequestration is an “adequately demonstrated” and “available” method for reducing emissions with reasonable costs. Jenks cautioned, “There is no doubt the Supreme Court is skeptical when it’s climate and EPA, and this rule has a long litigation background.”
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Fisher agreed with Jenks’s analysis of where the litigation will be focused. She highlighted that robust debates will surround the statute in terms of how to interpret whether emissions reductions through carbon capture and sequestration are “adequately demonstrated,” or if a standard is “achievable.”
Fisher noted that EPA’s perspective on how to gauge that carbon capture and sequestration is adequately demonstrated, as laid out by Goffman, contrasts with other perspectives. “Certainly, at minimum, I don’t think there is a facility out there that captures 90 percent [of carbon emissions] consistently,” Fisher said. “For the people who have to worry about compliance, that is a concern—definitely.” Goffman offered a different take, saying, “We expect that the 45Q incentives [tax credits for carbon capture and sequestration] may actually incentivize some operators to beat that [2032] timeline.”
Fisher also noted potential legal challenges over whether EPA has properly incorporated lead times into the compliance schedule, especially when it comes to building infrastructure to facilitate carbon capture and sequestration.
What Will Implementation Look Like?
The first step will be for states to develop plans for submission to EPA that detail how the states will comply with these rules. In generating such state implementation plans under the Clean Air Act, states tailor their strategies to their own specific circumstances, taking into account reliability and cost, among other metrics.
Goffman emphasized that EPA designed these rules to offer flexibility in terms of compliance. States with existing carbon-reduction programs, like California, could demonstrate compliance with 111(d) through state policies that achieve emissions impacts that are equal to or greater than what’s required by the emissions standards. Similarly, the use of clean hydrogen remains an option for compliance, though hydrogen was removed as a standard for setting the best system of emission reduction.
Goffman also stressed that the regulations aim to provide grid operators with flexibility to ensure that the rules do not affect electricity reliability. He noted that the rules resulted from more than two and a half years of discussions with utilities and stakeholders. “EPA is not a reliability regulator—other entities like the [Federal Energy Regulatory Commission] and [the North American Electric Reliability Corporation] are charged with that responsibility. But we wanted the EPA to … provide us with opportunities to avoid noncompliance because we would run units to serve reliability purposes,” Fisher said. “The tools that Joe [Goffman] outlined largely help us do that and reflect some of the thinking that we tried to provide.”
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RFF’s Dallas Burtraw posed a question about electricity reliability to Masemore, asking how North Carolina would comply with the 111 rule despite fast-growing electricity usage, obstacles in deploying more clean generation resources, and poor geology in the region for carbon capture and sequestration. Masemore argued that the state is ready to meet the standards for compliance with the rules.
She added that North Carolina’s success in attracting new business and the population growth that accompanies economic growth will present one challenge to meeting the new EPA standards. She noted that Duke Energy, the primary electricity generator in North Carolina, estimates that peak load growth from 2023 to 2030 will be eight times what was projected just two years ago. Rapid load growth leads to greater uncertainty as to the level of generation needed in the future and was not considered when EPA began formulating these rules.
Masemore also cautioned that the rule will have a ratepayer impact eventually. Her office is working diligently with other stakeholders to limit the increases in electricity prices and will consider all options for compliance. “It’s going to take a lot of creativity,” Masemore said. “A lot of questions will need to be answered between now and two years [in the future] as we develop our state plans.”
Was Environmental Justice Considered in These Rules?
Environmental justice is a priority for the Biden administration. Federal agencies are actively trying to account for environmental justice in agency decisionmaking to protect disadvantaged and low-income communities from “disproportionate and adverse human health and environmental effects and hazards, including those related to climate change, the cumulative impacts of environmental and other burdens, and the legacy of racism or other structural or systemic barriers.”
Jenks argued, “There are important health benefits that will flow from these four rules being implemented, including for environmental justice communities.” While no statute directs EPA to account for environmental justice, the president does have the authority to direct agencies to consider it. Therefore, in Jenks’s view, EPA is thinking about environmental justice and what the impacts are, but these considerations alone cannot drive rulemaking. She also noted that EPA’s final rules are not the end point for considering environmental justice, as the states are required to engage with stakeholders who may prioritize these issues.
The four rules finalized by EPA could have a significant impact on carbon emissions and the US electric grid. Stay tuned for updates from RFF’s Electric Power Program for ongoing analysis of these rules and much more.
