Lindsay Kishter

On June 2, the Environmental Protection Agency (EPA) issued proposed rules to curb carbon emissions from the nation’s biggest CO2 emitters: existing coal-fired power plants that emit nearly a third of U.S. greenhouse gases today. It’s a big deal for energy—aside from placing the first carbon limits on existing power plants, the rules could drive smart grid upgrades that enable clean energy use, reduce customer demand, and improve transmission efficiency.

All sides are now rushing to weigh in. Here are the key facts you need to wade into the debate:

What is the end goal?

By 2030, the proposed Clean Power Plan will cut power-sector carbon emissions by 30% and soot and smog pollutants by more than 25% below 2005 levels. That’s about 545 million to 555 million metric tons of CO2 annually by 2030.

What are the states goals and why?

Each state receives a specific rate-based goal it must meet for CO2 emissions reductions in the power sector that, combined, meet the national goal. (Check out your state on this interactive map). The goals represent what the EPA believes the states can achieve using the “best system of emission reduction”—or BSER—as required under Section 111(d) of the Clean Air Act.

EPA calculated the BSER for each individual state by examining opportunities for:

  • Heat rate improvement
  • Substituting less-emissions-intensive units
  • Expanding low- or zero-carbon generation
  • Demand-side energy efficiency

Two proposed options are now on the table under the proposal: Option 1, with more aggressive state reduction goals but a longer timeline to implement (by 2030); and Option 2, with lower reduction but a shorter timeframe (by 2025). EPA is proposing Option 1 and taking comments on Option 2 over the next year.

How do we get there?

The rules build in substantial flexibility for state plans to meet their goals. States can choose the combination of reduction measures and policy-enforcement mechanisms they use, regardless of EPA-provided suggestions for meeting state goals.

They can either work alone or collaborate within their region to meet a multi-state goal—an option the EPA’s impact analysis finds to be cheaper. States can combine a wide variety of measures to meet their targets, including:

  • Improving demand-side or plant energy efficiency and conservation
  • Transmission efficiency improvements
  • Renewable energy standards and expansion of renewables, nuclear, or energy storage
  • Co-firing or switching to natural gas
  • Plant retirements
  • Market-based trading programs

When will it all happen? 

The proposed rules will go through a comment period and are expected to be approved a year from now. States have 2–3 years after that to submit final plans and up to 15 years to implement all emission- reduction measures.

What Will It Cost?

Using 2011 dollars, the EPA projects the annual incremental compliance cost will be:

  • For Option 1: $5.4 billion to $7.4 billion in 2020 and $7.3 billion to $8.8 billion in 2030.
  • For Option 2: Between $4.2 billion and $5.4 billion in 2020 and between $4.5 billion and $5.5 billion in 2025.
  • For both options, monitoring, reporting, and recordkeeping will add an estimated $68.3 million in 2020, and $8.9 million in both 2025 and 2030.

How Much Will Customers Pay?

Under Option 1, average nationwide retail electricity prices in the contiguous states may increase 6%–7% in 2020 and 3% in 2030 compared to base case estimates. For customers, average monthly bills are expected to increase by roughly 3% in 2020—which might equate to an average annual increase around $42.29. By 2030, monthly bills will actually decline by roughly 9% due to energy efficiencies.

What do we get for it?

Expected climate and health benefits from the plan total $55 billion to $93 billion in 2030. This includes an avoided 2,700 to 6,600 premature deaths and 140,000 to 150,000 asthma attacks in children. The soot and smog reductions alone have a payoff of $7 in health benefits for every $1 spent in implementation. We can expect an estimated 310,000 fewer lost work days and 180,000 fewer lost school days.

From a national perspective, the benefits far outweigh the costs—and that’s only considering the factors that the EPA was able to quantify or monetize in its extensive regulatory impact analysis. Reducing exposure to SO2, NOx, and hazardous air pollutants will also improve visibility, lessen harmful effects on fishing and agriculture, reduce corrosion and materials damage, and introduce a bevy of other unquantified health benefits.

What about jobs?

Detractors have predicted the loss of hundreds of thousands of jobs annually under the proposed rules. However, the EPA finds investments in new equipment and assets could increase labor demand on the supply side in the energy sector. In 2020, this could result in an increase of about 28,000 to 25,900 job-years (Option 1) or 29,800 to 26,700 job-years (Option 2). In addition, demand-side energy-efficiency programs could result in an increase of 78,800 jobs (Option 1) or 57,000 jobs (Option 2).

Where does this fit with national climate goals?

President Obama has committed to reduce U.S. greenhouse gas emissions by 17% below 2005 levels by 2020, in part by addressing power plant emissions.

These proposed rules come less than a year after the EPA announced rules to limit emissions from new stationary sources, including new coal-fired units and natural gas-fired turbines, which are expected to go into effect at the end of this year.

Both rules are likely to face court challenges and coal-state lawmakers have already said they will pursue legislation to block the regulations. But UN top climate official Christiana Figueres said the rules send “a good signal to nations everywhere” regarding America’s commitment in advance of international climate negotiations scheduled next year in Paris.

Keywords: Energy