On June 2, the Environmental Protection Agency (EPA) is expected to release its proposal to cut carbon dioxide (CO2) emissions from existing power plants. This proposal is a key element of President Obama’s Climate Action Plan, and will be critical to reducing U.S emissions of CO2, the most common greenhouse gas contributing to climate change.

The proposed rule, being developed under EPA’s authority under Section 111(d) of the Clean Air Act, could be groundbreaking for at least two reasons. First, it has the potential to drive major reductions in the highest emitting sector in the United States – the power sector – which is responsible for nearly 40 percent of U.S. carbon emissions.  Second, EPA has indicated that the proposal will include a number of novel policy provisions to advance low-emitting generation and energy efficiency.

At C2ES, we’ll be looking for answers to four key questions as we read through EPA’s proposal. These questions are expanded upon in our new brief, Carbon Pollution Standards for Existing Power Plants: Key Challenges.

1.Will the standard be based on emission reductions outside of the power plant fence line?

Traditionally, EPA emission standards are based on what is achievable within the fence line of the emission source. Unfortunately, there are limited opportunities to reduce power plant CO2 emissions through plant improvements, and modifying coal-burning plants to use gas or biomass can be expensive. This leaves outside-the-fence-line measures, such as reducing electricity demand and shifting electricity generation from coal plants to gas plants, as possible ways to achieve meaningful cuts. A few of EPA’s major options are illustrated in Figure 1.

2.How much flexibility will states have?

Section 111(d) is notable for directing the states, rather than EPA, to craft emission standards. That said, EPA still has the authority to reject inadequate state plans and institute a federal plan if necessary. We’ll be looking closely at EPA’s proposal to learn exactly what states would be allowed to do and prohibited from doing to set and achieve a standard. For example:

• Will states be allowed to use a clean energy standard or carbon pricing mechanism in lieu of a strict annual emissions maximum?
• Will states be allowed to give power plant operators credit for offsets – i.e., emission reductions in other sectors?
• Will states be allowed to convert a rate standard (tons of emissions per unit of electricity produced) to a statewide carbon budget (tons of emissions per year)?

3. Will the proposal account for regional variation in generation mix?

Total emissions and even per capita emissions from electricity consumption vary widely by state due to a number of factors, including the state’s mix of coal, natural gas, nuclear, and renewable energy, as shown in Figure 2. Additional factors that impact electricity emissions include climate, the types of industry located within a state, and policy measures such as those that drive energy efficiency and reduce consumption. We are curious to see if, and how, EPA can set a standard that is achievable, yet ambitious for all states.

4. How smoothly will existing state programs be integrated?

Most states already have policies in place that directly or indirectly reduce CO2 emissions from the power sector, such as Renewable Portfolio Standards. The most prominent examples are the cap-and-trade programs in California and the nine Northeast states’ Regional Greenhouse Gas Initiative (RGGI). We will be looking to see what additional actions these states will have to take to comply with EPA’s guidelines.

Although EPA has a year to finalize its carbon pollution standards for existing power plants, the forthcoming proposal is a major milestone in the rule’s development. It will answer our initial questions and serve as a basis for discussion as we engage with EPA to continue crafting a rule that drives meaningful cuts while being flexible and cost-effective.