With the publication of the final Clean Power Plan, the United States can finally claim some leadership in curbing CO2 emissions at the federal level. The final rule is, on balance, technically, economically and environmentally coherent. The actual goal is short of what it needs to be, but it is better than in the draft plan. And the direction is right, which is the most important thing. Thanks to all of you who worked with us and supported us in the process, especially Scott Denman, Diane Curran, Lisa Heinzerling, Elena Krieger, and my co-author, M.V. Ramana..

We asked for many things in our comments on the draft EPA Clean Power Plan. The EPA agreed not only with the substance, but more important, the reasoning underlying our policy positions in the final Clean Power Plan (CPP) rule.

Most of all we asked for a coherent, technology-neutral rule that would be more protective of climate. Here are some of the big picture items:

  1. Existing nuclear plants and license extensions will not be subsidized by the CPP: We asked that both existing nuclear power plants and existing renewable energy be removed from the calculation of emission targets because they do nothing to reduce CO2 emissions. We asked that they be treated consistently. (Neither have significant onsite emissions of CO2 and both have some offsite lifecycle emissions that are much less than natural gas per unit of generation). Existing generation should not be part of the “Best System of Emission Reduction” (BSER) because we want to reduce CO2 emissions from where they are now (or in 2012, the baseline year). The EPA agreed. Both are gone from the final rule. Further, in its draft rule, the EPA implicitly assumed (in its modelling of the electricity sector) that licenses of existing plants would be extended. The relicensing issue has been removed from the CPP since existing generation is not in the calculation of emission reductions. It is simply the baseline generation, as is clear from page 345 of the final plan (italics added):

    …we believe it is inappropriate to base the BSER on elements that will not reduce CO2 emissions from affected EGUs below current levels. Existing nuclear generation helps make existing CO2 emissions lower than they would otherwise be, but will not further lower CO2 emissions below current levels. Accordingly,…the EPA is not finalizing preservation of generation from existing nuclear capacity as a component of the BSER.

    The same reasoning was applied to license extensions. Only uprates (increases in licensed capacity of existing plants) would be allowed to be counted. This is consistent and technology neutral (in the same way that increasing the capacity of a wind farm would be counted). The rule does not seek to “preserve” existing power plants. Or to shut them down. That will happen on the merits without an EPA hand on the scale in favor of nuclear.

  2. New and under-construction nuclear reactors are not part of the best system of emission reduction; renewable energy is: We pointed out that new nuclear plants are very expensive; even the State of Georgia, whose ratepayers are forced to subsidize two nuclear units through their electricity bills, noted that in its comments. Since the “Best System of Emission Reduction” (BSER) has a cost criterion, new nuclear should be excluded from the BSER. (We also cited other reasons for that.) The EPA excluded new nuclear from BSER but included new renewable energy (p. 345, italics added):

    Investments in new nuclear capacity are very large capital-intensive investments that require substantial lead times. By comparison, investments in new RE generating capacity are individually smaller and require shorter lead times. Also, important recent trends evidenced in RE development, such as rapidly growing investment and rapidly decreasing costs, are not as clearly evidenced in nuclear generation. We view these factors as distinguishing the under-construction nuclear units from RE generating capacity, indicating that the new nuclear capacity is likely of higher cost and therefore less appropriate for inclusion in the BSER.

    This is a critically important statement. We don’t have a shortage of low CO2 sources. We have a shortage of time and money to reduce CO2 emissions. The EPA recognized (very delicately!) that renewable energy is better on both counts. As a result, one or more the four new reactors under construction at Vogtle and Summer can proceed or stop on the financial merits, rather than these units being pushed into existence with the Clean Power Plan playing the role of midwife.

    The EPA also “seeks to drive the widespread development and deployment of wind and solar, as these broad categories of renewable technology are essential to longer term climate strategies” (p. 874). This is an excellent goal. The EPA recognized that costs of solar and wind are declining.

  3. New natural gas plants are not part of the best system of emission reductions: This is perhaps the best and most solid indication that the Obama administration takes long-term reductions seriously. New natural gas combined cycle plants, even though they have lower CO2 emissions per megawatt-hour (using EPA leak rates and global warming potential for methane), will not be part of the BSER even though they meet the cost test and emission rate test. The reason: they will be emitting CO2 for decades (p. 346, italics added):

    However, our determination not to include new construction and operation of new NGCC capacity in the BSER in this final rule rests primarily on the achievable magnitude of emission reductions rather than costs. Unlike emission reductions achieved through the use of any of the building blocks, emission reductions achieved through the use of new NGCC capacity require the construction of additional CO2-emitting generating capacity, a consequence that is inconsistent with the long-term need to continue reducing CO2 emissions beyond the reductions that will be achieved through this rule. New generating assets are planned and built for long lifetimes –- frequently 40 years or more –-that are likely longer than the expected remaining lifetimes of the steam EGUs whose CO2 emissions would initially be displaced be the generation from the new NGCC units. The new capacity is likely to continue to emit CO2 throughout these longer lifetimes….

  4. Increased capacity factor of existing natural gas plants is BSER: The EPA is still allowing increased capacity factor of existing natural gas combined cycle power plants to displace coal. This is the result of its estimate of methane leak rates and global warming potential. So long as new central station natural gas plants are not encouraged, the rate of use of existing plants is a problem that can be sorted out in the coming years. It would have been very difficult to argue only on the grounds of the BSER rules and existing methane leaks estimates that increasing capacity factor of existing natural gas combined cycle units to displace coal is not BSER. The job now is to get the EPA to recognize a wider array of methane leaks rates (that have ample empirical support) and to use both a 20-year and 100-year warming potential screen in the design of its CO2 reduction programs. The recent report from the IPCC uses a global warming potential of 28-34, including feedback effects. It would be entirely appropriate for the EPA to adopt a similar evaluation metric. The 20-year warming potential, which is about three times higher would be even more appropriate given that the climate crisis is developing more rapidly than previously anticipated.
  5. The EPA has incentivized early investment in low-income efficiency programs (p. 864 onward): This is a very important feature of the CPP. States that want to make very sure that low-income households are not adversely impacted by the rule will take advantage of the additional emission reduction credits the EPA is offering for early action. This also promises to provide other benefits such as reduction of the cost of energy assistance programs and lower adverse health impacts due to inability to pay for health care or medicines.
  6. The cap-and-trade provision is OK in the electricity context, though with reservations: Carbon permits from new generation can be traded. For instance, existing nuclear plants cannot generate tradeable CO2 credits (unless they are from a licensed uprate). I am not a fan of expansive cap-and-trade but the EPA formulation in the CPP makes sense to me. It is the same as if emission limits were set for a group of states or at the grid level, such as the PJM grid in the mid-Atlantic region but extending inland to Ohio and beyond, or the MISO grid in the upper Midwest. The EPA seeks not to impose a model of reductions; only to get to a certain level of reductions. In the cap-and-trade system permitted by the EPA, the CO2 reduction could happen in one state or in another, but it will have to happen. One of my reservations is that the EPA also allows the trading of energy efficiency credits across state lines. It is difficult enough to account for program-induced efficiency improvements within a state and distinguish them from say, the effects of federal appliance standards. Bundling these efficiency gains into tradeable credits is not a good idea. Another issue is that the method of calculating the reduction in emission rate is not the best as applied to efficiency. We had asked for a more global and comprehensive approach to CO2 accounting, but did not succeed on this point.
  7. Conclusion – The CPP is a real tour de force; it gives me hope. Of course, there is much work to do now that the final CPP has been published (besides making it stick). We need to advocate for states to mandate GHG reduction targets of 40 to 50 percent by 2030 from all sources; we need to accelerate electrification of transportation and restructuring of the grid….But the CPP is a great springboard from which to make these leaps.