The Temperature Rises: a Hot Summer in Greenhouse Gas Regulation

• Publication year: 2014
• Author: By Julia E. Stein*

The Temperature Rises: A Hot Summer in Greenhouse Gas Regulation

By Julia E. Stein*

INTRODUCTION

The summer of 2014 sizzled in the field of greenhouse gas (GHG) regulation, with three key developments. First, the Environmental Protection Agency (EPA) promulgated a proposed "Clean Power Plan" to address carbon dioxide emissions from existing power plants. Second, the Supreme Court ruled on the scope of EPA authority in Utility Air Regulatory Group v. Environmental Protection Agency, 573 U.S. ___ (June 23, 2014). Third, EPA proposed regulatory updates to existing performance standards for municipal solid waste landfills to reduce emissions of methane-rich landfill gas.

To a large extent, this summer's developments represent the fallout of the Supreme Court's 2007 decision in Massachusetts v. Environmental Protection Agency, which held that EPA's regulatory authority extended to tailpipe emissions of GHGs.¹ In reaching this decision, the majority noted that "greenhouse gases fit well within the CAA's capacious definition of air pollutant"²—a definition which encompasses "any air pollution agent or combination of such agents, including any physical, chemical, biological, radioactive. . .substance or matter which is emitted into or otherwise enters the ambient air."³

Since Massachusetts v. EPA, EPA has forged ahead with its regulation of GHGs. In 2009, EPA issued its Endangerment Finding, which determined that current and projected levels of six key GHGs⁴ "endanger both the public health and the public welfare of current and future generations."⁵ In 2010, EPA issued its "Tailoring Rule." That rule served to "tailor" the Prevention of Significant Deterioration (PSD) applicability criteria that determine which stationary sources and modifications are subject to permitting requirements for GHG emissions.⁶ Various industry groups challenged the rule, resulting in the Supreme Court's final verdict on its validity in Utility Air Regulatory Group.

As the Utility Air Regulatory Group decision closes the loop on the validity of the Tailoring Rule, questions remain for other GHG regulations. GHG regulation of stationary sources poses difficulties because GHGs are emitted, even by small sources, at levels much higher than the other pollutants conventionally regulated by the Clean Air Act; the Tailoring Rule was devised to address this precise issue.⁷ While Massachusetts v. EPA established EPA's authority to regulate GHGs to some degree, Utility Air Regulatory Group makes clear that there are limits to the agency's ability to tweak the language of the Clean Air Act to accommodate GHG regulation. Hanging in the balance lie proposed regulations like the Clean Power Plan.

This article will analyze each of this summer's three key developments—the Clean Power Plan, the Utility Air Regulatory Group decision, and the updated landfill gas regulations—in turn and I discuss the implications of these actions on future GHG regulation.

CLEAN POWER PLAN

On June 18, 2014, EPA published its proposed "Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units"—more commonly known as the Obama Administration's "Clean Power Plan"—in the Federal Register.⁸ The Clean Power Plan is the first proposed guidance to directly address carbon dioxide emissions from existing power plants, which, according to the Administration, constitute the "single largest source" of carbon pollution in the United States.⁹

A. Background

The chief goal of the Clean Power Plan is to reduce carbon dioxide emissions from the nationwide power sector by 30 percent below 2005 levels by 2030; EPA maintains that reaching this goal will result in a significant reduction in particle pollution, nitrogen oxides (NOx) and sulfur dioxide (SOx), as well as the avoidance of thousands of premature deaths and hundreds of thousands of missed work or school days.¹⁰ EPA estimates the Clean Power Plan will result in up to $93 billion in climate and public health benefits.¹¹

The Clean Power Plan consists of emission guidelines for states to follow as they formulate their individual plans to moderate GHG emissions from existing fossil-fuel fired electric generating units (EGUs).¹² Taking into account individual states' power generation needs and systems, as well as emission reduction efforts already being pursued in each state, the Clean Power Plan establishes state-specific rate-based carbon dioxide emission goals and guidelines for states to follow to achieve those goals.¹³ Under the Clean Power Plan, each state is responsible for preparing and submitting a plan for EPA approval that addresses how the emission goals will be met, but states are not locked in to taking a particular approach to meet those goals.¹⁴

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B. State-Specific Emission goals

The Clean Power Plan establishes state-specific emission goals. EPA cited as regulatory authority for these guidelines Section 111(d) of the Clean Air Act, which requires that state plans establish standards of performance for emissions of air pollutants "which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated."¹⁵ EPA maintains that its state-specific goals have been devised to reflect this concept of "best system of emission reduction" (BSER) as they represent calculations of the emission limitation each state is able to achieve through the application of BSER.¹⁶

1. BSER Methodology: Four Building Blocks

The Clean Power Plan does not mandate that states achieve their emission goals solely by implementing the measures that EPA has determined constitute BSER. Instead, the regulations propose a BSER that is based on a range of measures falling into four "building block" categories: (1) improving operations at EGUs; (2) dispatching lower-emitting EGUs; (3) meeting energy demand by using low- and zero-emitting energy sources; and (4) expanding demand-side energy efficiency.¹⁷

The first building block is comprised of measures that will reduce carbon dioxide emissions from individual EGUs themselves; in other words, measures that will lower the amount of carbon dioxide emitted for each unit of electricity generated.¹⁸ These measures could include carbon capture and sequestration technology,¹⁹ the substitution of lower-carbon fuels like natural gas for higher-carbon fuels like coal, or improvements to EGUs' efficiency in converting fuel heat input to electricity output.²⁰

The second building block involves reducing emissions by moving production between affected EGUs. This approach takes all affected EGUs as a group and suggests substituting electricity generated by EGUs with better heat rates for electricity generated by higher-emitting EGUs.²¹ In particular, electricity generated by natural gas combined cycle (NGCC) units can be used as a substitute for electricity generated by coal-fired steam EGUs where there is a regionally networked electricity system.²² Because system operators may reduce or increase the electricity generation of individual EGUs connected to a system to meet demands, EPA posits that system operators can simply "re-dispatch" generation from steam EGUs to NGCC units to reduce emissions.²³

The third building block represents the ongoing development and use of low- and zero-carbon generating capacity, which provides electricity that can be substituted for that generated by EGUs with higher carbon emissions.²⁴ This category would encompass renewable energy generation—EPA points out that many states have already established renewable energy requirements—and electricity generated by nuclear plants.²⁵

The fourth building block consists of demand-side energy efficiency programs which are focused on producing energy-dependent services that use less electricity with the goal of reducing overall demand from EGUs.²⁶ Such demand-side measures could include the adoption of state appliance standards, benchmarking standards for building energy use, statewide energy efficiency programs, the adoption of building energy codes, and the creation of tax credit incentives for improved energy efficiency.²⁷

2. Application of BSER to State-Specific Goals

EPA used the combination of the four building block categories to calculate each state's emission limitation. Therefore, states do not need to use each of these BSER building blocks to achieve their emission goals, and may also use measures that are not encompassed within the building blocks to meet emission limitations; the proposed rule mandates only that each state achieve the carbon dioxide reductions necessary to meet the goal that EPA has calculated as representing BSER.²⁸ In other words, states simply need to show that their emission goals will align with the limits EPA has set using its BSER methodology—how they get there is not important.

In making its BSER determination, EPA considered existing policies and practices that have been adopted to reduce power sector carbon dioxide emissions.²⁹ Recognizing that these policies and practices vary across states—and that the possibility for emission reductions accordingly varies—EPA applied its goal-setting BSER methodology individually to each state, tailoring state-specific carbon dioxide goals that reflect data from each state's EGUs and other information about states' current electricity systems, such as the available mix of generation resources.³⁰ The result is a rate-based goal for carbon dioxide emissions for each state. Each state must then prepare a plan to meet the goal no later than 2030.³¹ Interim state-specific goals apply to a phase-in period that begins starting in 2020.³²

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C. Guidelines for State Plans

Under the Clean Power Plan, each state would be responsible for devising its own plan to meet the state-specific goals set by EPA...