EPA Issues Its GHG NSPS: Cap and Trade Never Looked So Good

On Tuesday, EPA announced release of its proposed New Source Performance Standards for carbon pollution from new power plants. I’m feeling like a broken record here. Everyone’s acting on rational motives (if not rationally), but the result remains, to put it mildly, suboptimal. On the paramount environmental issue of the day, we’re going about it all wrong, when we know that there is a better way.

I cannot really blame EPA or the environmentalists.  Indeed, at a certain level they cannot be faulted unless you don’t believe in climate change, and I am not in that camp. Since climate change is real, they have to do something. In fact, as they have pointed out in the recent arguments before the D.C. Circuit Court of Appeals, they have statutory obligations to act – but they haven’t been given the right tools. 

On the other hand, no matter how much effort EPA puts into describing the flexibility it has put into the rules (for example, coal plants may comply based on a 30-year window, allowing time to install CCS down the road), this rule remains a dinosaur among regulations – a technology-based standard when we know that market-based rules provide equal levels of environmental protection much more cheaply (or more protection for the same cost). As I’ve opined in the past, the entire NSPS program should wither away and die, and instead we’re pegging arguably our most important environmental initiative to it.

By the way, when EPA was rolling out its GHG BACT guidance, I considered whether BACT for a coal plant is now gas. While EPA has not yet answered the technical question regarding whether requiring coal plants to consider gas plant emissions as BACT would be to “redefine the source”, the broad answer to that question was provided in Tuesday’s proposal. BACT for a coal plant is indeed gas.

I wish I saw a way out of this dilemma. The long run solution remains either a cap-and-trade system or a carbon tax, and the quid pro quo should be elimination of technology-based standards. I will not speculate on how long it will take for cooler heads to prevail so we can get to that outcome.

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