Thursday, November 5, 2015

The CO2 Diet Update

On Friday, October 23rd the Environmental Protection Agency (EPA) published the final Clean Power Plan rule in the Federal Register, starting a 90-day comment period. The publication of the rule gives states and energy companies the opportunity to comment or in this case file lawsuits to challenge the legality of the rule. As expected 26 states immediately filed suit in Federal Court to stop the regulations from taking effect. Twenty four of the states joined together lead by West Virginia and filed a Petition for Review and Stay Motions, in the U.S. Court of Appeals for the District of Columbia Circuit, where the states argue the rule is illegal and will have devastating impacts on the states and their citizens. Virginia did not join the suit.

The states claim that the rule promulgated under Section 111(d) of the Clean Air Act exceeds EPA’s authority by unlawfully forcing states to fundamentally alter state resource-planning and energy policy by shifting from coal-fired generation to other sources of power generation that has a significant emphasis on natural gas fired generation and renewable sources. The states also say the rule is illegal because it seeks to require states to regulate coal-fired power plants under Section 111(d) of the Clean Air Act, even though EPA already regulates those same plants under Section 112 of the act.

In its final form the Clean Power Plan attempts to create a nationally consistent standard for each type of electrical generating plant. This is consistent with the requirements of section 111 of the Clean Air Act- to create nationally uniform standards that do not favor one region or state over another. The final rule’s “best systems of emission reductions” focuses only supply‐side measures that reduce CO2 emissions from power plants, and does not mandate any consumer demand‐side energy efficiency. Though EPA removed demand side measures from the rule to align with section 111; nonetheless, EPA expects that demand‐side energy efficiency will be a significant component of state plans under the Clean Power Plan. As a matter of fact, EPA is forecasting that people will use less electricity because the cost of electricity will go up. The Clean Power Plan is projected to reduce electric bills by about $7 per month by 2030 despite electric prices increasing.

The states in their arguments are attempting to have the court issue a stay because it will take years to adjudicate the case and in the meantime this regulation will reshape the power generation and energy infrastructure, natural gas production and environment to meet the demands of the. There will also be significant fiscal impacts. With this regulation the EPA is now taking control of the power generation sector of the economy to remake that industry in a less carbon intensive and more efficient vision.

These regulations will mark the end of the era of using coal to generate electricity in power plants. This era began with the oil crisis in 1972 and will end with the EPA issuing CO2 “budgets” and potentially creates a regional or national carbon trading market for “carbon credits.” These regulations require the shift towards natural gas as the fuel of choice for a significant portion of the power generation. Using natural gas to fire power generation plans will require the building of more gas pipelines and the expansion of Fracking. This will certainly impact the economy and natural environment of states with coal mining and limited gas delivery infrastructure like Virginia. The DMME is proposing fracking regulations in Virginia and there are proposals for additional gas pipelines in the Commonwealth.

Power plants are the largest single source of greenhouse gas emissions in the United States accounting for about 33% of greenhouse gas release (and slightly more of carbon dioxide). Greenhouse gases are: carbon dioxide (CO2), fluorinated gases, nitrous oxide and methane (CH4). According to the EPA CO2 represents 84% of mass of greenhouse gas emissions and that the climate models indicate to be the cause of climate change. The new regulations will require power plants to cut their CO2 emissions by 30% from 2005 levels or 18% from 2013 levels by using a combination of approaches.

EPA mandates the interim and final goal for each state in the regulation. The EPA expects the regulations to result in a reduction in the electricity used per capita and in the CO2 generated per megawatt hour of electricity produced. The states must provide a plan for achieving that limit that is acceptable to the EPA by June 30, 2016. If the U.S. Court of Appeals for the District of Columbia Circuit does not grant a stay, then the states will have to move forward with implementation to be in compliance. The Congressional Review Act is unlikely to be able to stop this regulation. This act passed during the Clinton administration allows Congress to disapprove and vacate new regulations within 60 days, but operates essentially like any other legislation. Majority votes in both the house and senate are required. In addition the legislation would need presidential approval or enough votes to override a presidential veto, unlikely.

Despite legal challenges to the regulation, states must provide a plan for reaching their mandated goals acceptable to the EPA by June 30, 2016. The EPA is offering “incentives” to early adopters. The EPA is ensuring early adoption of plans so that even if legal challenges prevail, the rule cannot be undone. The EPA is ensuring early adoption of plans so that even if legal challenges prevail, the rule cannot be undone. EPA is providing a Clean Energy Incentive Program (CEIP) to reward early investments in renewable energy generation that generate carbon dioxide-free electricity or demand-side energy efficiency measures that reduce end-use energy demand like electrical meters that can shut down certain appliances during periods of peak demand.

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