The Clean Power Plan: Achieving Clean Air Act Goals with Flexibility and Cleaner Energy

When Congress extensively amended the Clean Air Act in 1970 to form the air pollution laws that we know today, it spoke in no uncertain terms about the breadth of federal authority in this area while also centrally involving states in the effort to clean up the nation's air. Congress directed the EPA Administrator to list the pollutants "which in his judgment" have "an adverse effect on public health and welfare" and are generated from "numerous or diverse" sources – pollutants known as "criteria" pollutants that threaten public health and the environment.1

To protect our health and the nation's valuable crops, buildings, and ecosystems, the EPA is required to establish maximum acceptable concentrations of these criteria air pollutants, and states have to write plans to keep them below those concentrations.2 If the plans do not meet the requirements of the law, Congress provided that the federal government should write its own plan.3 Further, out of concern that state plans would not do enough to keep pollution below acceptable levels, Congress in the 1970 Amendments also directed the EPA to write national emissions standards ("new source performance standards") that limited the amount of pollutants that newly constructed sources could emit.4

 The 1970 Amendments additionally mandated that the EPA list hazardous air pollutants that "in the judgment of the administrator" had more serious, acute effects on health.5 But despite giving the federal government these broad mandates to identify and regulate problematic pollutants, Congress knew that it likely had not covered all potentially harmful air pollutants, and that old sources of air pollution – those existing at the time of new regulations – also contributed substantially to the problem. Thus, Congress specifically directed the EPA, in section 111(d) of the 1970 act, to "prescribe regulations" by which states would write plans to control pollutants from existing sources that emitted pollution other than criteria and hazardous air pollutants. If the state failed to submit a plan for controlling these additional pollutants or failed to adequately enforce the plan, the federal government was to implement its own plan.

In subsequent years, Congress – frustrated by continuing air pollution problems that caused premature deaths, illness and hospitalization, and decreased worker productivity – continued to expand federal authority over air pollution while also continuing to centrally enlist the states in carrying out federal air quality mandates. Specifically, in 1977, Congress added a program to the Clean Air Act requiring more stringent regulation of pollution from newly constructed and modified sources of pollution through new federal emission standards to be written by the EPA and implemented by states.6 And in 1990 – in the wake of the EPA's failure to list or regulate many hazardous air pollutants, Congress wrote its own list and required the EPA to regulate them.7

Over the years, the EPA worked to implement these ongoing directives, and air quality largely improved, although stubborn problems such as smog and mercury pollution remained. At the same time, the EPA worked to address air pollution for which further knowledge of risks had developed since the 1970 act, such as greenhouse gases that contribute to climate change. In 2015, the EPA – following its duties under the Clean Air Act to address non-criteria and non-hazardous pollutants from existing sources of air pollution – published the Clean Power Plan (CPP), which limits greenhouse gases emitted from coal and natural gas-fired plants that were under construction as of January 8, 2014 (when the Plan was first proposed). Congress has long given the EPA broad authority under the act while also providing that states have the primary responsibility to carry out this authority under the EPA's review and oversight. And the CPP perhaps goes farther than any other rule in giving the states broad flexibility to implement the EPA's directives. 

The CPP is exceedingly flexible in several important ways. First, in estimating the amount of carbon that regulated plants could reduce – and thus setting guidelines for the total permitted emissions from each plant – the EPA set a national standard based on the plants that would have the most difficulty reducing carbon emissions. Specifically, the EPA investigated coal and natural-gas fired power plants that operate in three different regional electric grids – the Eastern, Western, and Texas Interconnections. These interconnections are the portions of the U.S. electrical grid that are substantially intertwined. Utilities within these portions of the grid often draw electricity from different power plants within different states depending on how much electricity is needed at a given time and which plants prove the least expensive source of electricity, among other considerations.

In other words, utilities regularly "fuel switch," drawing from various power plants throughout a given day or month. In determining how coal-fired or natural gas-fired power plants might be able to reduce carbon emissions by fuel switching within their interconnection, the EPA looked to the interconnection in which fuel switching was most difficult, and then set that limit as the national guideline.

After determining how much carbon each type of plant could feasibly reduce, and thus setting a national guideline for total annual emissions (or a rate of emissions per unit of electricity produced) from each type of plant, the EPA then set state goals. Specifically, it identified the number of coal and natural gas-fired power plants in each state and estimated how long each plant would run. Then, taking the national emission guideline, which provides a total amount or rate of carbon that each plant could emit, the EPA multiplied this guideline by the number of plants and how long they could run and determined the total amount or rate of carbon that could be annually emitted in each state. This number became a "goal" for each state.

States can meet their goals in a variety of ways. They do not have to require each individual coal and natural gas-fired plant in the state to meet the national carbon emission guideline. Rather, as long as state plans demonstrate that the overall goal will be met, certain coal-fired and natural gas-fired plants may far exceed the national emission guideline.

And state plans may incorporate a variety of measures for ensuring that the goal is met. The plan provides three official building blocks that states may require power plants to implement, including making coal-fired plants more efficient, running existing natural gas plants more often and coal plants less often, or relying more on new plants powered by renewable energy and less on coal and natural gas. But states may choose other courses of action within their plans, such as planning for utilities to run existing nuclear plants more often and to reduce reliance on coal and natural gas plants.

States may also allow the operators of coal and natural gas-fired plants to trade credits or allowances with operators in other states, thus substantially reducing the cost of compliance. Provided that the states choose the same method of accounting for carbon emissions (either "mass-based" – total carbon emissions, or "rate-based" – emissions per unit of electricity) and submit an otherwise compliant trading program, this will give many utilities the opportunity to sell credits around the country. And through a proposed "Federal Plan," the EPA provided model plans to show states how they could write a plan and include trading options within it if they chose to do so. 

Finally, the plan rewards states with plans that include early moves toward more renewable energy. It allows states to give power plants that are early adopters of renewable energy extra allowances for this energy – allowances that can then be sold to entities that have more difficulty meeting plan requirements. For the states that currently rely most heavily on coal, the plan through a proposed "POWER+" program would, and already has begun to provide, "economic and workforce development assistance."

The flexibility created by many parts of the CPP, as well as opportunities for beneficial trading, have encouraged some large utilities to support the rule despite certain states in which they operate opposing it. Indeed, the CPP provides the regulatory certainty that many utilities have asked for over time, and it will reward the many utilities that already have been moving toward natural gas and renewables due to the rapidly dropping costs of these resources. For power plants in some areas, the plan speeds up this transition, but it gives states a range of feasible options for a smoother transition to lower-carbon energy and greenhouse gas emission reductions.