The Clean Power Plan and Statutory Interpretation: Is the 'Building Block' Approach Permissible Under §111(d)?

• Date: 01 July 2015

45 ELR 10650 ENVIRONMENTAL LAW REPORTER 7-2015

The Clean Power Plan and

Statutory Interpretation:

Is the “Building Block” Approach

Permissible Under §111(d)?

by David R. Baake

David R. Baake is a Ford Foundation Post-Graduate Fellow and Associate Advocate at the Natural Resources Defense Council.

I. Introduction

Section 111(d) of the Clean Air Act (CAA)1 requires the

U.S. Environmental Protection A gency (EPA) to promul-

gate emission guidelines for existing stationary sources

that emit air pollutants not regulated u nder the national

ambient air qua lity standards (NAAQS) program or the

hazardous a ir pollutant program.2 A guideline must spec-

ify an emission rate that “reects the degree of emission

limitation achievable through t he application of the best

system of emission reduction which (taking into account

the cost of achieving such reduction a nd any nonair

health and environmental impact a nd energy require-

ments) the Administrator determines has been adequately

demonstrated.”3 Once EPA promulgates a guideline, each

state must develop a plan that establishes emission stan-

dards for the aected sources within its jurisdiction.4 ese

standards may include a variety of exible, ma rket-based

compliance options,5 provided they are cumulatively suf-

cient to achieve the statewide emission reduction target

specied in the guideline.6

In June 2014, EPA proposed an emission guideline for

emissions of carbon dioxide (CO2) from existing fossil

fuel-red electric generating units (EGUs). is rulemak-

ing—commonly known as the Clean Power Plan (CPP)—

identies as the “best system of emission reduction” a set of

1. 42 U.S.C. §§7401-7671q, ELR S. CAA §§101-618.

2.  42 U.S.C. §7411(d)(1); 40 C.F.R. §60.22(a).

3. 42 U.S.C. §7411(a)(1).  40 C.F.R. §60.22(b)(5).

4.  42 U.S.C. §7411(d)(1); 40 C.F.R. §60.23-.24.

5.  42 U.S.C. §7410(a)(2)(A) (state implementation plans may include

“economic incentives such as fees, marketable permits, and auctions of

emissions rights”); id. §7602(y) (federal implementation plans may include

the same compliance options).

6.  40 C.F.R. §60.24(c) (“emission standards shall be no less stringent than

the corresponding emission guideline(s)”).  American Elec. Power

Co. (AEP) v. Connecticut, 131 S. Ct. 2527, 2537, 41 ELR 20210 (2011)

(states establish plans “in compliance with [EPA’s] guidelines and subject to

federal oversight”).

four “building blocks” that electric utilities can undertake

or purchase credits for to reduce emissions from regulated

EGUs.7 e building blocks include heat-rate improve-

ments at individual units, redispatch from higher emitting

units to lower emitting units, displacement of fossil-fuel

generation by zero-emission generation, and displacement

of fossil-fuel generation by demand-side energy conserva-

tion.8 e proposal contemplates that states will establish

allowance or credit-trading systems to facilitate the imple-

mentation of building block measures and other activities

that reduce emissions from EGUs.9

is Comment considers whether the building block

approach is permissible under §111(d). Par t II exa mines

whether emission guidelines may reect the degree of emis-

sion reduction that regulated entities can achieve using

emission credits, concluding that this question is reason-

ably answered in the armative in light of the statute’s

text, structure, design, and history. Part III considers what

type of activities EPA can credit in a guideline, surveying

the history of §111 and similar CAA provisions to con-

clude t hat EPA may credit any adequately demonstrated

activity that reduces or prevents emissions from regulated

sources. Of particular relevance, the history of fuel pre-

treatment under §111 demonstrates that EPA may credit

activities implemented at o-site locations by third parties,

and recent practice in the mobile source context illustrates

that EPA may credit low- or zero-emission output that is

expected to substitute for high-emission output. e Com-

ment thus concludes that EPA’s building block approach is

permissible under §111(d).

7. Carbon Pollution Emission Guidelines for Existing Stationary Sources:

Electric Generating Units, 79 Fed Reg. 33830, 34855 (proposed June 18,

2014).

8.  id.

9.  id. at 34927 (“section 111(d) plans may include standards of per-

formance that authorize emissions averaging and trading”).

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