The Environmental Protection Agency on Monday released the final version of the Clean Power Plan (CPP), which mandates a 32 percent reduction in carbon-dioxide emissions from the U.S. power sector by 2030.
The final rule is broadly similar to the original proposal from June 2014. However, there are some key differences. Among the most striking is the EPA’s retreat from using energy efficiency in calculating its reduction targets.
Let’s unpack this a little. The EPA set its reduction targets based on a process known as the Best System of Emissions Reduction (BSER). In layman’s terms, the EPA looked at the different ways you feasibly could reduce emissions, and combined them to get an overall standard. A power plant in a given state isn’t obligated to use the specific methods EPA lays out, so long as it meets the emissions standard somehow.
As originally proposed, the CPP relied on four “building blocks” to calculate the BSER standard. The first involved traditional means to increasing efficiency at power plants. Building blocks 2 and 3 focused on ways states could give preference to lower-carbon forms of power, like natural gas, nuclear and renewable energy. Finally, building block 4 involved ways a state might reduce use of high-carbon electricity by reducing consumers’ overall demand for power.
Building blocks 2, 3 and 4 raised more questions than building block 1, as they involved action “outside the fence” of regulated power plants. Building block 4 was especially contentious, as it seemed to depend on states passing laws that establish various energy-efficiency mandates. Since the legal basis for the Clean Power Plan was the EPA’s authority over emissions from power plants, it wasn’t clear how the agency could mandate reductions in emissions that could only be achieved by entities it doesn’t regulate.
When the final rule was released this week, building block 4 was gone. Which just might have something to do with a recent federal appeals court decision invalidating a Federal Energy Regulatory Commission rule that, similarly, was designed to encourage energy efficiency by providing incentives to reduce power consumption.
According to the D.C. Circuit, FERC lacked authority to issue rules on the subject. Since FERC’s legal authority over electricity far exceeds the EPA’s, the decision would appear to bring into question the viability of building block 4. FERC has since appealed the decision, which is set to be heard by the Supreme Court this fall. While there’s no proven link, it certainly seems the EPA decided it was better not to proceed with such a legally questionable portion of the rule.
Ultimately, the impact of EPA striking building block 4 will be minimal. While the EPA isn’t using the building block to determine emissions standards, the final rule still allows states to use energy-efficiency measures to comply with those standards.
One would think that abandoning energy-efficiency calculations when setting the standard would lower the bar for how much emissions reduction each state would be asked to meet. But in fact, the total reductions required by the final rule are higher than in the proposed rule. Essentially, that means that whatever leniency states received has been more than offset by expansions to the other building blocks.