The Clean Power Plan: What, Why and How
AgMRC Renewable Fuels Monthly Report
September 2015
Don Hofstrand
Retired Agricultural Extension Economist
agmrc@iastate.edu
This article will delve into the Clean Power Plan (CCP) final rules announced in August of 2015. The final rules were determined after extensive interaction with stakeholders after the initial proposal was announced in June of 2014.
We will answer three questions: what is it, why are we doing it and how will it work? How it will work is divided into how will state goals be set and how will they be met.
What is it?
The CCP was created to reduce carbon emissions from the U. S. electricity generating sector. The overriding goal of the CCP is to reduce carbon pollution from the electricity generating sector 32 percent below 2005 levels by 2030. To put this in perspective, these reductions in carbon pollution equal the emissions from 70 percent of the nation’s passenger vehicles.
Although fossil fuels will continue to be a critical component of U.S. energy future, the CCP requires fossil fuel plants to operate more cleanly and efficiently by creating carbon pollution standards for new, modified and reconstructed power plants. There are about 1,000 fossil fuel fired power plants in the U.S. The average age of coal fired plants is 43 years, 46 years for oil fired plants and 15 years for natural gas combined cycle plants.
The CCP expands the capacity of zero and low-emitting power sources like wind and solar while advancing clean energy innovation, development and deployment. Renewable energies like wind and solar are expected to account for 28 percent of generation capacity.
The CCP also reduces pollutants which cause soot and smog harming health. Under the CCP, sulfur dioxide pollution will be reduced by 90 percent below 2005 levels and nitrogen oxides by 75 percent below 2005 levels by 2030.
Why are we Doing It?
Greenhouse gases in the atmosphere trap heat and warm the earth. As greenhouse gas concentrations increase, the earth warms and impacts the earth’s climate. These climate changes are expected to negatively impact humans and the ecosystems in which we live.
The U.S. is the second largest emitter of greenhouse gases behind China. In the U.S., power plants for electricity generation are the largest source of greenhouse gas emissions as shown below. Carbon dioxide is the most prevalent greenhouse gas. Carbon dioxide accounts for 82 percent of the U.S. greenhouse gas emissions.
Greenhouse gas emissions from the electricity generation sector, along with total U.S. emissions, started to decline in 2007. CPP continues the reduction in electricity generation emissions and accelerates the rate of decline.
As shown below, about 67 percent of the electricity generated is from fossil fuels (coal, natural gas, and petroleum). Nuclear and hydropower generate 25 percent. Other renewables account for 7 percent of which wind is the largest.
2014 U.S electricity energy sources and their percentage shares are shown below:
- Coal = 39%
- Natural gas = 27%
- Nuclear = 19%
- Hydropower = 6%
- Other renewables = 7%
- Biomass = 1.7%
- Geothermal = 0.4%
- Solar = 0.4%
- Wind = 4.4%
- Petroleum = 1%
- Other gases < 1%
Source: EPA http://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3
The environment benefits from CCP are projected to reach 20 billion dollars by 2030.
Public health benefits from the reduction of soot and smog are expected to be from 14 to 34 billion dollars by 2030. The health benefit payoff is projected to be $4 for every $1 invested. These reductions are projected to avoid:
- 1,500 - 3,600 premature deaths
- Up to 1,700 heat attacks
- 90,000 asthma attacks in kids
- 1,700 hospitalizations
- 300,000 missed work and school days.
The combined environmental and health benefits are projected to be 34 to 54 billion dollars. The cost is expected to be 8.4 billion dollars. This yields a net benefit of 26 to 46 billion dollars.
The CCP results in a significant reduction in U.S. carbon emissions from electricity generation by 2030. However, when compared to the world’s carbon emissions, the reduction is small. Probably the biggest impact of the CCP is to show the U.S. commitment to reducing carbon emissions. It will support President Obama’s pledge to reduce emissions across all U.S. economic sectors by 26 to 28 percent below 2005 levels by 2025. Also, the CCP will signal the commitment of the U.S. to combating climate change and support negotiations for a global greenhouse gas emissions agreement in Paris in December.
How will State Goals be Set?
In general, the U.S. Environmental Protection Agency (EPA) sets carbon pollution reduction goals for each state and each state in turn determines how the goal will be achieved. The goals differ for each state and take into account each state’s current electricity generation mix to allow states flexibility in meeting these goals.
To establish emissions goals, EPA determined the “best system of emissions reduction” (BSER) standards of various emissions sources by examining existing strategies, technologies and measures that are already being used to reduce carbon dioxide emissions from fossil fuel power plants. The BSER is based on the ranges of reductions that can be achieved at coal, oil and gas plants at a reasonable cost.
The BSER consists of the following three building blocks or carbon cutting measures:
- Building Block 1 – reduce the carbon intensity of electricity generated by existing coal fired power plants.
- Building Block 2 – substitute increased electricity generation from low emitting existing natural gas plants for reduced generation from high emitting coal plants (coal emits approximately twice as much carbon pollution as natural gas).
- Building Block 3 – substitute increased electricity generation from zero emitting renewable energy sources for reduced generation from high emitting coal plants.
States need to submit a plan of how they will meet their goal. By September 6, 2016, states are expected to submit either a final carbon reduction plan or an initial plan accompanied by a two-year extension request.
All states do not need to submit a plan. Exceptions are Vermont and the District of Columbia because they don’t have affected electricity generation units. Also, performance emission goals were not set for Alaska, Hawaii, Guam and Puerto Rico at this time.
Information on each state’s emission goal including related information for each state is shown at E&E Publishing, LLC, “E&E Power Plan Hub”.
How Will each State Meet its Goal?
Each state must develop and implement a plan of how power plants in the state will meet its goal for an interim performance rate (2022 – 2029) and the final performance rate (2030).
States have the option of implementing the standards for goals in three ways.
- A rate-based goal requires the state to achieve a certain level of carbon emissions per unit of power produced -- measured in pounds of carbon dioxide per megawatt hour.
- A mass-based goal requires the state to achieve a fixed level of carbon emissions per year -- measured in total tons of carbon dioxide.
- A mass-based state goal with a new source complement measured in total tons of carbon dioxide.
In addition to achieving emissions reductions from the power sector, states have the option to utilize other methods of reducing emissions. States can use energy efficiency and renewable energy to reduce carbon emissions and help meet their emissions goal. As an added incentive, the Clean Energy Incentive Program was created to stimulate early investment in demand-side energy efficiency measures and renewable energy deployment in low-income communities.
Also, states and their power plants have the option of trading allowances or credits with other states and power plants. Essentially, this is similar to a cap-and-trade system where compliance can be achieved by purchasing excess emission reductions (more than need to meet their goal) from others.
Concerns were raised by stakeholders that the significant changes required for meeting the CCP emission reduction may impact the reliability of electricity during this transition period. In response, EPA will allow states to amend their plans if unexpected reliability challenges arise. Also, a “reliability safety value” is available that, under certain circumstances, a state can depart from its plan for 90 days by using electricity generation methods that may be in conflict with the state’s plan
Several states have indicated that they don’t plan to participate. In response, EPA has published a proposal for dealing with states that don’t submit plans. Essentially, the proposal indicates that a federal carbon trading program would be imposed on non-complying states. EPA is expected to issue a final report next year after discussions with stakeholders.
However, most states have already implemented programs to reduce emissions as show below.
- 50 states have demand side energy efficiency programs.
- 37 states have renewable portfolio standards or goals
- 10 states have market based greenhouse gas emissions programs.
- 25 states have energy efficiency standards or goals.
References and Further Reading
- United States Environmental Protection Agency -- http://www2.epa.gov/cleanpowerplan/clean-power-plan-existing-power-plants#CPP-final
- FACT SHEET: Overview of the Clean Power Plan
- FACT SHEET: Clean Power Plan By The Numbers
- FACT SHEET: Clean Power Plan Benefits of a Cleaner, More Efficient Power Sector
- FACT SHEET: Components of the Clean Power Plan – Setting State Goals to Cut Carbon Pollution
- FACT SHEET: Clean Power Plan and the Role of States
- FACT SHEET: Clean Power Plan - Built on a Solid Legal and Scientific Foundation
- FACT SHEET: Clean Power Plan - Clean Energy Now and in the Future
- FACT SHEET: Clean Energy Incentive Program
- FACT SHEET: Energy Efficiency in the Clean Power Plan
- FACT SHEET: Clean Power Plan - Keeping Energy Affordable and Reliable
- E&E Power Plan Hub, E&E Publishing LLC, http://www.eenews.net/interactive/clean_power_plan
- Five Myths About New U.S. Climate Plan: What You May Not Know, National Geographic, Wendy Koch, Aug 02, 2015 http://news.nationalgeographic.com/energy/2015/08/150802-clean-power-plan-myths/
- Five Ways The Final Clean Power Plan Puts States At The Helm Of Their Energy Future, thinkprogress, Alison Cassady & Myriam Alexander-Kearns, Aug 5, 2015 http://thinkprogress.org/climate/2015/08/05/3688236/carbon-rule-state-flexibility/?utm_source=newsletter&utm_medium=email&utm_campaign=cptop3&elq=f254be9f06bf4238a5ddf881512ccc33&elqCampaignId=3543&elqaid=26678&elqat=1&elqTrackId=cfee18c536494a20a15667382a9b76b6
- Global Community Looks to EPA Rule as Big Boost for Paris Talks, E&E News, Lisa Friedman, August 4, 2015, http://www.eenews.net/climatewire/2015/08/04/stories/1060022943
- EPA Proposes Carbon Trading to Deal with Reluctant States, E&E News, Emily Holden and Evan Lehman, August 4, 2015 http://www.eenews.net/energywire/2015/08/04/stories/1060022941
