A detailed Q&A on Obama’s Clean Power Plan

Tuesday 4 August 2015

Simon Evans

On Monday, President Obama launched his Clean Power Plan designed to cut emissions from the power sector by 32% in 2030, against a 2005 baseline.

It’s more ambitious than a draft, published for comment last year, which targeted a 30% reduction. Obama says it is the “single most important step” the US has taken to tackle climate change.

It has attracted a  huge quantity of  news coverage, comment and analysis. However, the final rule is 1,560 pages long, making it hard to unpick the impact of the plan from the spin. It also has international significance in advance of the impending UN climate talks in Paris.

Carbon Brief’s Q&A aims to help cut through the noise, explaining the why, how and what next of the Clean Power Plan.

Why is Obama doing this?

The Clean Power Plan is one part of the Obama administration’s  Climate Action Plan, launched in June 2013. The president  hopes climate action will be a  legacy issue, says the National Journal.

In a video released the over the weekend, Obama justifies his approach, saying that the changing climate is threatening the economy, security and health. He says:

If you believe like I do that we can’t condemn our kids and grandkids to a planet that’s beyond fixing, then I’m asking you to share this message with your friends and family…We can do this. It’s time for America, and the world, to act on climate change.

Obama’s other climate policies includes vehicle efficiency standards, rules to limit methane emissions from the oil and gas sector, controls on warming HFCs and a range of other efforts. Vox has a good  summary of Obama’s other climate initiatives.

Collectively, these are designed to meet the US  pledge to the UN climate process, known as an  INDC. The US is the world’s second largest emitter, responsible for 12% of global emissions in 2012. It has promised to cut its emissions by 26-28% by 2030, against a 2005 baseline.

The power sector was responsible for 31% of US carbon dioxide emissions (CO2) in 2013, so any plan to cut to tackle overall emissions has to address the power sector.

There is also a legal imperative to regulate after the  Supreme Court ruled in 2007 that emissions endanger public health, a ruling that has since been upheld. The US Environmental Protection Agency (EPA) says it is effectively bound to establish emissions targets for existing sources of CO2 under section 111(d) of the Clean Air Act, though this is disputed (see below).

How will it affect US emissions?

On its own, the Clean Power Plan will reduce US emissions in 2030 by 10% against the 2005 baseline. This makes it a sizeable contribution to the US climate pledge, though opinions differ on how ambitious it is.

US power sector emissions were already 15% below 2005 levels by 2013, a reduction of nearly two percentage points per year. With a further 17 percentage points to fall over 17 years — just one percentage point per year — the plan could be seen as reducing progress.

Indeed, the plan is specifically designed to be relatively easy to achieve, with some states barely needing to change course. On the other hand, much of the emissions savings since 2005 were down to the recession that followed the global financial crisis.

The closure of older and less efficient coal plants in response to federal air pollution rules has also had a big impact on emissions. So locking in those savings and achieving further gains may not be as easy as it first appears.

What about the international impact?

US leadership is seen as essential to the Paris climate talks. The Obama administration is trying to push climate action at home and abroad. Secretary of State John Kerry is said to be raising climate during all his overseas engagements, whether or not it is officially on the agenda.

More importantly, with the US refusing to accept binding carbon-cutting commitments as part of a global climate deal, the credibility of its offer to other countries rests on its policies at home being seen as ambitious, effective and lasting.

That means its domestic climate policies are as much about presenting a picture to the outside world as they are about achieving emissions reductions at home. On this front and given the huge political barriers he faces in Congress, Obama’s efforts deserve applause, says Michael Levi at the Council on Foreign Relations.

A spokesman for UN leader Ban Ki-Moon called the plan an example of the “visionary leadership” needed to tackle emissions. He said: “We believe that this plan shows the United States’ determination to address global warming.”

You can expect to hear more comments like this. Jonathan Chait, a commentator for New York magazine, goes further and argues that the whole point of the Clean Power Plan is to strengthen the hand of US negotiators in Paris.

How will the plan work?

Each state is set two equivalent targets for 2030 based on reducing its power sector CO2 emissions, or its emissions per megawatt hour of electricity use. Interim goals apply from 2022 in three stages of increasing stringency. The EPA has a short summary of the plan.

EPA calculated the targets by assuming each state applies a “best system of emissions reduction” of three “building blocks”.

These are: making existing coal plants more efficient; running existing gas plants for longer hours; and increasing electricity generation from renewables. A draft fourth building block of increasing end-user energy efficiency was dropped because it was legally risky (see below).

Importantly, states need not use these approaches to comply with their targets. Instead, they have two options. The first is to put the onus on power plants, effectively applying an emissions performance standard to each unit. For coal, the 2030 limit is 592 kilograms of CO2 per megawatt hour (kg/MWh) in 2030. For gas, the limit is 350kg/MWh.

These would have to be met through emissions trading or efficiency upgrades combined with carbon capture and storage. The final rule attempts to make inter-state trading of emissions, clean energy or efficiency credits easier to manage.

Option two is to adopt state- or regional plans so as to cut emissions across the whole power sector. States would then have a free hand to comply through emissions trading, carbon taxes, coal-to-gas switching, building new nuclear, installing renewables, or improving energy efficiency.

States must submit a compliance plan by 6 September next year, or apply for an extension until 2018. Compliance begins in 2022, two years later than initially planned.

States that don’t submit a plan will be subject to default federal rule that includes emissions cap-and-trade or clean energy targets as standard.

Since the draft plan, the EPA has introduced a Clean Energy Incentive Program to reward wind and solar installation or energy efficiency improvements during 2020 and 2021. This is being seen as a boost for renewables at the expense of gas, though in reality it is coal that is losing out (see below). The details of the incentive scheme are yet to be worked out.

If you want an even more detailed step-by-step guide to how the Clean Power Plan works, Vox’s Brad Plumer has you covered.

Alongside the final Clean Power Plan the EPA has released rules covering new power plants. It would require any new coal-fired power stations to use carbon capture equipment.

How will the US power sector change?

The EPA expects retail electricity prices to be unchanged in 2030, compared to a scenario without the Clean Power Plan. Improved efficiency will mean that average bills fall by $85, it says.

This is despite the plan costing an estimated $8.4bn in 2030, according to EPA projections. Benefits that year would be worth $45bn, it says, mainly in terms of improved public health.

The clearest impact will be seen in a shift in the US electricity mix, with coal use falling by a quarter. In 2013, coal was the largest source of power in America (dark grey chunk, below). If the plan has the impact EPA expects, coal’s share of the mix will fall to 27% in 2030.

Renewables will grow from 12% of the mix to 20% (green chunks). Gas will gain a small share of the mix from coal (blue chunks), while nuclear’s share will stay about the same (pink chunks).

These charts show clearly that it is neither a “war on coal” nor a major loss for shale gas. Despite headlines to the contrary, gas is expected to claim the same 33% share of the 2030 power mix as was anticipated under the draft Clean Power Plan.

While the expected gas share in 2030 is the same (below left), EPA is now seeing a different split in the gas generation mix, with fewer new gas plants but increased operation of existing plant (below right). The more significant shift between the draft and final rules is a decrease in the expected 2030 share for coal and a corresponding increase for renewables.

It’s also important to remember that states have maximal flexibility in meeting their targets. The EPA projections are uncertain and the final impact on the power sector are unknowable.

Where does the plan bite?

States with high levels of coal-fired power generation tend to have the most work to do (darker blues, below). However, the gap in ambition between states is smaller than in the draft plan.

Some 16 states have more stringent targets than they were expecting, including several ‘purple’ swing states, where senators on both sides face a tough 2016 election. More importantly, the change leaves coal-heavy states like Kentucky with much tougher targets.

There are three main reasons for this. First, the EPA has taken a more uniform approach, expecting equivalent plants to make the same effort wherever they are located. Second, it has updated its assumptions to reflect the rapidly falling cost and growing availability of renewables and, third, it assumes more inter-state trading sending clean power across borders.

Click through for our interactive map showing state by state emission reduction targets.

For comparison, the Georgetown Climate Center has a series of maps showing how different states get their energy, while Vox has maps showing where in the US different types of electricity generation plant is located, from coal to sun and wind.

A nice series of graphics from the Washington Post shows the split of electricity generation in each state, from West Virginia, Kentucky or Wyoming with around 90% coal down to Oregon or Vermont, which get more than three quarters of their power from renewables.

Alaska and Hawaii are effectively exempt from the rule, as they are not required to submit a state compliance plan for now. The EPA says it doesn’t have enough information to draw up targets for these states. Vermont is exempt because it has no fossil fuel power stations.

How has America responded?

A coalition of coal companies and 14 coal-reliant states failed in their attempt to block the Clean Power Plan before it had been finalised. We explore the likely grounds for the legal challenges that are certain to follow, in the final section, below.

The critics say the plan will push up energy prices and destroy jobs. While the plan does have a jobs impact it has already been independently established that solar jobs now exceed those in the coal industry. There are also more Americans working in the clean energy sector than oil and gas.

The White House attacks the job and economic arguments against its approach in a blog on the “myths and facts” of the plan. The EPA also has a blog setting out “six things every American should know” about the Clean Power Plan.

States opposed to the plan face a dilemma. If they refuse to implement it, as Republican senator Mitch McConnell urges, then they would have to accept a federal plan that imposes carbon cap-and-trade rules by default. Republicans opposed cap-and-trade legislation in Congress.

Bob Perciasepe, president of the Washington-based thinktank the Center for Climate and Energy Solutions, says:

I know from my conversations with state leaders and utility CEOs that even those who may openly oppose the rules are thinking hard about how to meet them.

He hopes that states will find implementation is easier than expected. Once implementation plans are in place it may prove financially and administratively unattractive to alter the rules of the game for the energy industry, even if the rule is ultimately struck down in court.

As well as opposition from states and energy firms, the plan faces vehement criticism from Republican presidential hopefuls. The New York Times quotes several Republicans — all opposed to the clean power plan — who were speaking at an event hosted by the climate-sceptic billionaire Koch brothers.

The NYT says the Clean Power Plan “could force robust climate discussion” from presidential candidates. With Hillary Clinton promising to make climate an campaign issue, the 2016 presidential election is shaping up to be a referendum on support for tackling climate change.

Her campaign strategists will be banking on polling that shows a majority of Americans in every state are in favour of climate action.

The release of the Clean Power Plan has been widely covered by the media. For instance, The New York Times calls it tough yet achievable. It is “unquestionably the most important step the administration has taken in the fight against climate change”, the Times says, but in truth there is “nothing radical about it”.

An editorial in the Washington Post says those cheering for the plan are “on target”, as it “sets an important example for other nations”. Environmentalists and public health advocates also welcomed the news, the Hill reports. Over at the Dot Earth blog, Andy Revkin rounds up a bunch of different responses to the launch.

What legal hurdles will it face?

The EPA’s right to regulate under the Clean Air Act’s section 111(d) is disputed. Of two amendments to the act passed by the Senate and House of Representatives in 1990, one would allow for CO2 rules covering existing plants and the other would not.

The EPA says it has the right to choose which amendment to follow. Convention dictates that the courts should give EPA “deference” on this and other matters of interpretation. However, recent rulings suggest the Supreme Court may be starting to take a less deferential approach.

Another major issue relates to the EPA building blocks used to determine state targets. As well as measures at power plants, which EPA already regulates, its building blocks are based on action “beyond the fence line”, such as at non-regulated renewable installations.

Opponents say the regulation should only target emitters, not states’ whole electricity systems. This issue is why the EPA dropped its energy efficiency building block, which relied on measures being implemented in homes and businesses statewide.

Though this issue remains a legal risk, EPA has set out power plant-only targets that it can fall back on, for those that refuse to contemplate measures affecting the wider power system.

Another risk comes from the states that attempted to pre-emptively push back against the Clean Power Plan. Their case was heard by three conservative justices, thought to be opposed to broad EPA regulation. In theory any new legal challenge should constitute a new case, but the states have filed for a rehearing, meaning they may be able to roll over their case with the same judges.

This could spell bad news for the EPA, as these judges are more likely to grant a “stay” that would suspend implementation of the Clean Power Plan pending the result of the legal process. A stay remains a remote possibility, however.

Green NGOs say they are confident the EPA’s plan is legally robust, despite expecting a “tsunami of litigation” to be unleashed against it.

As well as direct challenge through the courts, the plan could face attack from the next president. This isn’t as straightforward as it sounds, however. A Trump or Bush administration, for example, would not be able to simply tear up the Clean Power Plan at the stroke of a pen. It would have to go through the same lengthy legal process that the rules have been through in the first place.

Huffington Post looks at five ways Obama’s successor could undermine his climate rules, while Mashable explains why it would be difficult to erase them. The most likely line of attack would be a go-slow on implementation and enforcement of the Clean Power Plan. NGOs litigation against non-compliance would only go so far in the face of a reluctant administration.

The legal dispute is sure to run for years and has its own cast of characters. One is Laurence Tribe, Obama’s former law professor at Harvard, who has been employed by the coal industry to fight the clean power plan.

Tribe has employed detailed legal arguments and colourful language to this end, calling it akin to “burning the constitution”. Two of Tribe’s Harvard law colleagues disagree with his views.

Another name to watch is Jeff Holmstead, senior EPA insider during the second Bush administration and long-time lobbyist for power firms. Holmstead recently said: “I find it very hard to believe that the courts will ultimately uphold the rule”.

For a comprehensive run-down of the legal issues facing the Clean Power Plan, head over to the Resources for the Future blog.

Main image: President Barack Obama addresses the National Clean Energy Summit at the Mandalay Bay Resort Convention Center in Las Vegas, August 24, 2015. 

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