March 10, 2015

States Should Reject EPA’s Power Plant Rule

  • EPA’s proposed power plant rule offers states fake “flexibility” to choose which carbon-reduction measures to implement.

  • For EPA, “flexibility” means allowing states to choose the method of their own economic wounding – and allowing EPA to shift the blame for the rule’s disastrous consequences.

  • States should avoid this trap by refusing to be complicit in the rule that the EPA plans on finalizing this summer.

Last June, the Environmental Protection Agency proposed a rule requiring states to severely restrict carbon emissions from existing power plants. It would radically curtail coal’s share of electricity generation. On Wednesday, Chairman Inhofe will hold a hearing in the Environment and Public Works Committee on this devastating new regulation.

The rule, which is expected to be finalized this summer, claims to offer states “flexibility” to choose for themselves which carbon-reduction measures to implement. Flexibility in this context means little more than an invitation for states to choose the method by which their economic wounding will be performed. It also enables the Obama administration to shift blame to the states. When the rule causes energy prices to rise, electric reliability to diminish, and jobs to disappear, the EPA will argue that state choices, not its rule, are responsible.

38 States have submitted comments objecting to the rule

38 States have submitted comments objecting to the rule

Source: U.S. Chamber of Commerce

Many reasons to oppose the rule

The rule allows states to submit plans to the EPA detailing what energy choices they will make to comply with carbon emissions caps. If a state does not submit a plan that meets the administration’s approval, the EPA will impose a federal implementation plan that makes energy choices for that state.

Forcing the EPA to impose a federal plan may undermine the agency’s ability to implement all of the rule’s provisions. The rule requires a 30 percent reduction in carbon emissions from power plants by 2030 when compared to 2005 levels. EPA assumed four “building blocks” when establishing state carbon emissions-reduction targets: (1) reducing carbon intensity of coal-fired power plants by an average of six percent through heat-rate improvements; (2) re-dispatching generation from coal-fired power plants to natural gas combined cycle power plants and operating them at a 70 percent capacity factor; (3) substituting fossil fuel-fired power plants with additional renewable and nuclear electric generating capacity; (4) reducing electricity consumption from fossil fuel-fired power plants through increased “demand-side” energy management that improves energy efficiency by 1.5 percent annually.

“[A]n enforceable federal plan could only include elements of the first building block, the only building block directly related to a physical power plant facility. The remaining three building blocks are ‘outside the fence,’ and have nothing to do with the physical plants regulated under … the Clean Air Act.”  – Senator Inhofe

A majority of states have submitted comments in opposition to the rule. According to a survey of the comments, 38 states raised at least one major objection: 32 states made legal objections; 28 raised significant concerns regarding compliance costs and economic impacts; 32 warned of electricity reliability problems; and 34 objected to EPA’s rushed regulatory timelines. So far, 12 states have sued the EPA over its authority to promulgate the rule, and six have passed laws restricting how their agencies respond to the rule.

States are concerned about the rule’s projected economic effects. An October 2014 NERA Economic Consulting report concluded that if all four of the rule’s building blocks are implemented, compliance costs could amount to $366 billion in present value terms over the next 15 years. Forty-three states could see double-digit electricity price increases. If only the first and second building blocks were used, the report projected compliance costs could amount to $479 billion over 15 years. 

In addition to the rule’s cost and its questionable legal footing, states are worried that the rule threatens electric reliability. The Electric Reliability Coordinating Council summarized the threat posed by the rule in a February 18 white paper: “It is unconscionable for EPA to finalize a rule that jeopardizes the availability of reliable, affordable electricity to American households and businesses. But, that is exactly what the agency is poised to do absent significant modifications to the proposed rule.”

Real costs, negligible benefits to Americans

For all of the rule’s costs, its climate benefits would be negligible. The American Coalition for Clean Coal Electricity has noted that the EPA “did not project the effects of its proposed rule on climate change, even though the express purpose of the rule is to address the effects of climate change.” The coalition found that in 2050 the rule would: reduce atmospheric CO2 concentrations by less than one percent; lower global average temperature by 0.016 degree Fahrenheit; and reduce sea level rise by 0.3 millimeters – the thickness of three sheets of paper. 

The EPA estimates that climate benefits from carbon-emissions reductions would amount to $31 billion in 2030. This projection rests on a rickety foundation: it counts benefits that would accrue to countries around the globe, not just to the United States. According to a June 3, 2014, paper by the Brookings Institution, the EPA’s methodology for calculating climate benefits represents a “dramatic shift” in policy. In 2010, the administration determined that Americans only receive 7 to 23 percent of a rule’s climate benefits, but pay 100 percent of the costs. Applying this metric to the proposed rule governing carbon emissions from existing power plants, the U.S. would reap climate benefits of $2.2 billion to $7.1 billion, versus compliance costs of $7.3 billion to $8.8 billion in 2030 according to EPA.

The beginning, not the end, of efforts to eliminate fossil fuels

The president’s fiscal year 2016 budget requests that Congress fund additional incentives for states to submit implementation plans. On February 26, EPA Administrator Gina McCarthy asked Congress to provide $25 million for states “so they can work on these plans effectively” and another $25 million for the agency to provide technical assistance to the states. She requested $4 billion to “support the states who want to move faster and farther” in cutting carbon emissions. This demonstrates that the administration views each state’s carbon-emissions reduction rate under the rule as a floor, not a ceiling. Never mind that a majority of states are scrambling to figure out what the rule means and how to comply with it. The EPA has not yet finalized the rule, and is already searching for new ways to ratchet up its requirements.  

If a state submits an implementation plan, it will be taking part in EPA’s scheme and will be responsible for the consequences. It will be blamed for higher energy prices and reduced electricity reliability. Families and businesses in the state will feel the real costs, while the EPA will happily point its finger at the state’s “poor” energy choices.

States should avoid the EPA’s trap by rejecting the administration’s rule. “Don’t be complicit in the administration’s attack on the middle class,” Senate Majority Leader Mitch McConnell urged the states in an op-ed for the Lexington Herald-Leader last week. “Think twice before submitting a state plan.”

Issue Tag: Energy