Will the Clean Power Plan Hold Up in Court?

By Kolby Hoagland | June 06, 2014

On Monday, the EPA released its long-awaited plan to reduce carbon dioxide emissions from existing power generation facilities. The rule is estimated to result in a 30% reduction of total U.S. carbon emissions from 2005 levels by letting the states determine how each will achieve their portion of the reduction target. Named the Clean Power Plan and currently in a comment period, the proposed rule aims to establish state-by-state carbon intensity reduction goals for existing power plants so that, in sum, a 30% reduction in total carbon emissions across the country is realized by 2030. The rule does not put a cap on total carbon emissions, as has been conveyed in the media. Rather, the Clean Power Plan sets targets for the rate of carbon emissions per unit of power generated in a state. The Clean Power Plan, in theory, could increase total emissions if, for example, demand for electricity increased at a greater rate than the decrease in carbon intensity. That, however, is unlikely as electricity demand has been waning the past years and is only estimated to decrease as efficient lighting and appliances further penetrate the market.

The state targets are not created equal. The map below by SNL Financial shows the varying reduction targets proposed by the EPA. Each state’s current emissions reduction plan (RPS, carbon markets, etc.) along with entrenched generation technologies were considered in the establishment of the individual state targets. The result was considerably different emissions reduction targets for each state. The progressive state of Washington has a reduction target of 72%, while the coal-friendly state of Wyoming is only expected to reduce carbon emissions per MWhr by 19%.

Clean Power Plan by State (2)

In setting state-by-state targets, the EPA is positioning the Clean Power Plan in a regulatory space that has historically been safe from court rulings that could overturn the rule. The exact percentages for each state will invariably change once the official rule is rolled out, but the Clean Power Plan sets a broad while direct path towards carbon emissions reductions.

States with coal-leaning and climate-denying tendencies will likely contest the Clean Power Plan in court as either unconstitutional or unduly burdensome on states with carbon intense generating capacity. The chance of success in these litigation efforts against the Clean Power Plan is unlikely. In what would be a similar case, the Supreme Court ruled in May that the EPA had the authority to regulate pollution sources that crossed state lines (NOx and sulphur in this case). With carbon dioxide and other GHGs resulting in ubiquitous pollution that cross state and national boundaries, the Clean Power Plan solicits states to cut carbon emissions through a plans that they devise on their own. Section 111(d) of the Clean Air Act guides the EPA to set broad rules in limiting pollution that allow states to fine-tune these rules and execute them in how they best see fit for their state. By allowing states to create their own path towards the reduction targets, the federal government has relieved itself of dictating a path, thus eliminating the argument of burden. The courts are unlikely to rule that the EPA has overstepped its boundaries, particularly given the flexibility of the Clean Power Plan as laid out in the Clean Air Act.

Biomass is one of many cost effective options outlined in the Clean Power Plan for how states will generate power at lower carbon intensities. In states where feedstock is available and existing forest industries are depressed, state regulators should look to biomass as a viable option in their state’s Clean Power Plan. The most cost effective option on the generation side is likely co-firing scenarios where existing coal assets remain in operation and biomass replaces a percentage of the coal. Rather than litigate a likely unwinnable case, I encourage the coal industry to embrace biomass and use it as a means to preserving the value of their assets and presence in the power generation sector.