The 'Advancing Coal Energy' Rule? EPA's Misguided Approach to Carbon Emissions from the Dirtiest Power Plants

The EPA released its finalized rule for carbon emissions from existing power plants last week. The agency calls the rule the "Affordable Clean Energy" (ACE) rule, but it would be better named the "Advancing Coal Energy" rule given its explicit aim to keep old, dirty coal-fired power plants running.

A bit of background first for those who aren't familiar with the rule. The United States has made a great deal of progress cleaning up its power plants so they emit less air pollution – not just carbon dioxide, but also particulate matter, sulfur dioxide, and other damaging pollutants. But much of the remaining air pollution comes from older power plants built before health-promoting clean air regulations were in place. Pollution from coal plants alone accounts for one-quarter of the value of all environmental damage in the United States, and all power plant pollution contributes to approximately 52,000 premature deaths in this country every year.

The Clean Power Plan, which was the EPA's previously finalized rule for carbon emissions from existing (older) power plants, set a numerical limit on carbon emissions from these facilities. It then set state "goals" (which were actually requirements). These goals established emission reductions that states had to achieve from plants within their jurisdiction to ensure that carbon limits would be met, and the goals were based on a careful assessment of what each state could realistically achieve given its existing mix of  power sources. 

The EPA left states the flexibility to determine how plants within their borders would meet those limits. States could choose one or a combination of three specific "building blocks" defined by the EPA – making coal plants more efficient, switching from coal to natural gas, and switching from coal and natural gas to renewable energy. States could also choose other approaches, such as those that increased reliance on nuclear energy or energy efficiency. The rule also allowed extensive trading of emission credits among plants within states – and even among plants in different states – thus expanding the range of compliance options and potentially reducing emission reduction costs. 

The ACE rule throws all of this out. At its best, the rule is a suggestion for how states might, if they choose, make old, dirty coal-fired power plants ever so slightly less dirty. It contains no numeric limits on carbon emissions. It expressly prohibits the most effective means of reducing carbon and other forms of pollution from coal-fired power plants – having coal plants run less and relying more on natural gas and renewables (generation switching) – as a means of complying with the rule. And it expressly prohibits trading, even among different units located at one power plant, thus making the rule more expensive than it would otherwise have to be.

More specifically, rather than relying on generation switching, the ACE rule identifies just one method for reducing carbon emissions from old, dirty power plants – making these plants more efficient. The term for making an old plant more efficient is "heat rate improvement" (HRI), meaning the plant has to burn less fuel per unit of electricity produced. The EPA identifies six technological and operational changes – called "candidate technologies" – that might result in heat rate improvements at existing coal-fired plants, and it then identifies the range of potential carbon emission reductions that would result from these technologies. But nowhere does the rule specify the range of carbon emission reductions that states must achieve. Indeed, the ACE rule makes clear that states "may ultimately establish standards of performance for one or more existing sources within their jurisdiction that reflect a value of HRI that falls outside of these ranges."

Beyond the fact that the rule contains no identifiable or enforceable limit on carbon emissions, even if these ranges were enforceable, they are pitifully weak from the perspective of addressing carbon emissions. In its earlier analysis in the CPP, EPA had concluded that the heat rate approach alone results in "only small emission reductions" and would not get the United States even close to the carbon emission reductions needed "to address climate change." As commenters have noted, the carbon reductions from heat rate improvements are so miniscule that day-to-day operational changes at plants – such as differences in "load" (demand), weather, or maintenance schedules – can sometimes erase them. The ACE rule provides vague reassurances that it will somehow guard against this happening – with few details on how it will do so.

The EPA also noted the potential for a "rebound effect": If coal plants are made to run more efficiently, utilities might run them more often. Thus, even if a given plant produces fewer carbon emissions per unit of electricity, the overall increase in emissions from electricity production might dwarf carbon reduction gains from efficiency. The Trump EPA says it conducted new modeling that shows that the rebound effect will not be a problem for most plants and that the plan will not result in higher emissions, but they provide scant evidence to support the assertion.

The failure of the ACE rule to meaningfully reduce carbon pollution or the other damaging "co-pollutants" from coal plants – like particulate matter – is highlighted in the cost-benefit analysis for the rule. Because the rule sets no limit on pollution, the EPA can't realistically measure the actual pollution reductions that will result from it. So instead, the EPA analyzes the costs and benefits of an "illustrative policy scenario" representing "potential outcomes of state" requirements and potential compliance with state standards.

So if we are generous for a moment and assume that this "illustrative" "potential" scenario will actually emerge under the ACE rule's vague guidelines, here are the weak pollution reductions that would result. The EPA estimates that in 2025, CO2 emissions would change from 1,774 million short tons (baseline scenario) to 1,762 million short tons – a change of merely 12 million short tons. These paltry CO2 emissions reductions, as well as some reductions in other pollutants, result in estimated net benefits of $4 to $9.8 billion by 2025, using a 3 percent discount rate and measured in 2016 dollars.

The Clean Power Plan, in contrast, would have reduced CO2 emissions by 232 to 264 million short tons by 2025, depending on the emissions reduction approach adopted by states. Net benefits would have been between $16 to $27 billion by 2025 using a 3 percent discount rate and measured in 2011 dollars, again depending on states' preferred emissions reduction approach.

Not only does the ACE rule fail to reduce emissions meaningfully; it also attempts to defy the reality of today's energy economy. Coal power is no longer the cheapest form of electricity in many regions of the United States. Renewable energy and natural gas now outcompete coal plants, price-wise, in many regions. So coal plants are already retiring, regardless of the regulatory landscape. The Clean Power Plan simply would have hastened those retirements.

Indeed, in one paradoxical part of the ACE rule's cost-benefit analysis, the EPA seems to claim the opposite – that the CPP would not have sped up coal plant retirements because the economy is already shifting away from coal. The EPA argues that due to "[c]hanging circumstances in the power sector . . . as well as commitments many power companies have made to significantly reduce CO2 emissions. . . .  the EPA concludes that even if the CPP were implemented, it would not achieve emission reductions beyond those that would be achieved in a business-as-usual projection." Given that the ACE rule and the associated repeal of the CPP is based largely on EPA's argument that the CPP was far too costly and unwise, this conclusion seems nonsensical, and it suggests that the ACE rule – which makes even fewer carbon reductions than the CPP – would also do nothing beyond business-as-usual to achieve emission reductions.

The retirement of coal plants is a deeply challenging scenario for communities that primarily rely on coal mining or power plant jobs, but the solution is not to prop up an industry that can no longer economically compete. Rather, we should speedily invest in new forms of training and employment in coal communities. Instead of helping coal communities justly transition and find new sources of jobs and economic prosperity, the ACE rule does what the Trump administration has tried to do through a variety of other avenues: support dying coal plants. Indeed, the rule explicitly states that "[t]he goal of these emission guidelines is not to burden or shut down coal-fired EGUs [electric generating units]. . . ." and that "[a] standard of performance that incentivizes reduced utilization and possibly retirements [of coal plants] does not reflect application" of the best system of emissions reduction.

Regulation inevitably poses some burdens. In the case of the CPP that EPA has repealed, it put the burden of preventing or cleaning up pollution back onto the industry that creates it, rather than leaving Americans to endure all of the costs of unhealthy air and the many negative effects of climate change. The ACE rule, by suggesting a range of minimal, potential carbon reductions with no enforceable numeric limit, bends over backwards – way too far backwards – to lighten polluters' regulatory load. Making tiny improvements in the efficiency of coal-fired power plants – just one of the tools in the more realistic arsenal developed under the CPP – is only a drop in the bucket. It's time to develop a rule that provides new, revitalizing investments in coal communities; makes meaningful reductions in carbon and other emissions that accelerate the economic trends in the energy sector; and makes a genuine attempt to improve Americans' health and well-being.