EPA Proposes Rule to Reduce CO2 Intensity from Existing Fossil Fuel Plants
On June 2, 2014, the U.S. Environmental Protection Agency (EPA) proposed a new rule under section 111(d) of the Clean Air Act that would lower CO2 intensity from fossil-fuel generators by 2030. Instead of a single requirement, the “Clean Power Plan” outlines state-specific carbon intensity requirements (lbs CO2/MWh). If all states meet the requirements, the EPA estimates CO2 emissions from the power sector will decline 30% from 2005 levels.
- The EPA developed state intensity requirements using four building blocks: heat rate improvements at coal plants, dispatching gas instead of coal, zero carbon generation (i.e., renewables and nuclear), and end-use energy efficiency
- States will be required to propose compliance strategies in State Implementation Plans (SIPs)
- The regulations provide states flexibility in the development of SIPS; they may choose from the EPA building blocks or propose alternative strategies (e.g., regional market-based trading programs)
- The EPA is entering a public comment period and must finalize the rule by June 2015 according to orders issued by President Obama; individual state plans must be submitted by June 2017; multi-state plans must be submitted by June 2018
- The regulations will require complex formulas since compliance is a composition of real carbon output, offsetting renewable and nuclear generation, and MWhs avoided from energy efficiency
- The power sector accounts for roughly one-third of all domestic greenhouse gas emissions
The rule marks a significant departure from prior policy as this is the first time EPA is regulating CO2 emissions from existing power plants. The rule may experience dramatic changes as the EPA incorporates public comment into a final rule, stakeholders challenge the rule in court, and states develop SIPs.
Bloomberg New Energy Finance Technical Summary: http://bit.ly/1pAyKa1
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