After weeks of hints and leaks, yesterday morning (May 11, 2023), EPA proposed a new rule regulating emissions from power plants. The proposed rule would apply to new and existing gas plants and existing coal plants—new coal plants are separately regulated—and promises to significantly cut carbon and other harmful air pollutant emissions from fossil plants over the next two decades and beyond.
EPA’s accompanying Fact Sheet spells out the proposed rule’s emissions reductions estimates:
EPA has evaluated the emissions reductions, benefits, and costs of the proposals to limit CO2 from the existing coal fleet and new natural gas units. EPA projects these proposals would cut 617 million metric tons of CO2 through 2042 along with tens of thousands of tons of PM2.5, SO2, and NOx – harmful air pollutants that are known to endanger public health.
One key facet of the proposed rule is the technologies EPA relied on to calculate its emissions reduction standards:
The proposed standards are based on technologies such as carbon capture and sequestration/storage (CCS), low-GHG hydrogen co-firing, and natural gas co-firing, which can be applied directly to power plants that use fossil fuels to generate electricity. [Emphasis added.]
EPA determined that its standards, based on these technologies, “reflect the application of the best system of emission reduction (BSER) that, taking into account costs, energy requirements, and other statutory factors, is adequately demonstrated for the purpose of improving the emissions performance of the covered electric generating units,” as required by Section 111 of the Clean Air Act.
This language, particularly the bolded text, is important. It was the at the core of the previous challenge to President Obama’s Clean Power Plan, which the Supreme Court rejected in West Virginia v. EPA. The Court found that the Plan implicated a “major question,” because it set emissions reduction standards based in part on so-called “generation shifting.” Fossil power plants could offset emissions by investing in new natural gas and renewable energy generation sources. The Court rejected this approach. It determined that Congress could not have given EPA, in its view, sweeping authority under a little-known section of the Clean Air Act to essentially compel the energy sector to switch from coal to cleaner energy sources. (Of course, the sector largely made the shift on its own because of economics, even though the Clean Power Plan was held up in litigation and never went into effect.) For more on West Virginia v. EPA, see our previous post here.
EPA’s new proposed rule is different. It does not rely on the same kind of generation shifting. Yet because of the politics of climate change, the rule will almost certainly be subject to a similar challenge. Opponents may say that switching to low-carbon hydrogen, for instance, is impermissible generation shifting. They may also argue that carbon capture and hydrogen have not been “adequately demonstrated” and thus cannot be considered BSERs under the Clean Air Act.
One key difference between this rule and the Clean Power Plan, though, is that the proposed BSERs are mainly technology that is deployed within plants themselves. In the relevant lingo, EPA can characterize them as “inside the fenceline” standards. The Supreme Court seemed to think that those types of standards would be more palatable than standards requiring plants to offset emissions with technologies deployed outside the fence.
EPA estimates that the net climate and health benefits from the rule will be on the order of “$64 billion-to $85 billion, an annual net benefit that ranges from $5.4 billion to $5.9 billion.” EPA derived the estimates using the Social Cost of Carbon, a controversial metric that quantifies the impacts of CO2 emissions. EPA relied on the Biden Administration’s interim Social Cost of Carbon, i.e., $51/ton emitted (using 2020 dollars at a 3% discount rate).
The Social Cost of Carbon has served as a punching bag for conservatives. Nine states led by the Louisiana Attorney General recently challenged the Administration’s interim figure in federal court and lost on procedural grounds. The Fifth Circuit Court of Appeals ruled that the states lacked standing because their allegations of injury depended on a “chain of hypotheticals”: federal agencies may or may not use the interim Social Cost of Carbon in regulatory actions that may or may not burden the states. Now, EPA is, in fact, proposing to use the metric to calculate climate benefits. This could affect the standing analysis.
The proposed rule also repeals the Affordable Clean Energy, or “ACE,” Rule—President Trump’s power plant rule that was meant to replace Obama’s Clean Power Plan.
We’ll be diving more deeply into this proposal in the coming days and weeks. Comments on the proposed rule will be due 60 days after the proposed rule is published.