EPA Announces Federal Plan Rulemaking; Encourages States to Incorporate Proposed Trading Rules as Part of Implementation Plans

Abstract

On August 3, 2015, the Environmental Protection Agency published the Clean Power Plan under authority from §111(d) of the Clean Air Act. This is the first ever national standard designed to regulate emissions of carbon dioxide from existing stationary sources, i.e. fossil fuel-fired power plants either in operation before, or under construction by, January 8, 2014, which, according to the EPA, make up 31% of the total greenhouse gas emissions in the U.S. The CPP aims to reduce CO2 emissions from the power sector by 32% from 2005 levels by 2030. To achieve this goal, the EPA prepared emissions guidelines that set both interim and final CO2 performance rates for two subcategories of existing fossil fuel-fired electric generating units. These existing source performance standards were developed using the EPA’s Best System for Emissions Reductions. States have been given the opportunity to implement the CPP using either a State Measures plan or an Emissions Standard plan. The EPA has actively encouraged states to develop implementation plans, although some claim they will abstain from doing so. The EPA has also made it clear that states will not be penalized for refusing to enforce the CPP. If a state does not submit a plan or the EPA does not approve all or any part of a state implementation plan, then “the EPA will develop, implement, and enforce a federal plan to reduce CO2” from stationary sources in that state using a federal plan. To address this situation, the EPA is preparing a rulemaking made up of four separate actions, which this article discusses.The purpose of this rulemaking is to create a federal plan framework based upon emissions trading for states without an implementation plan. It is also attempting to develop two approaches intended to serve as model trading rules for states to consider when developing implementation plans. This article focuses on each model trading approach.