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Clean Electricity Payment Program and EPA Performance Standards – Beautiful Dance Partners

August 31, 2021 Work Area: Power Plants

The latest report from the Intergovernmental Panel on Climate Change provides the strongest statement yet on the climate impacts the U.S. and other nations will experience without significant action to cut the emission of carbon dioxide, methane, and other greenhouse gases.

It is clearer now than ever that the U.S. and other developed nations can and must act quickly and decisively to avoid the worst effects of climate change, and that we need an approach that explores all available options.

The passage by both houses of Congress of a budget agreement that would include funding for a Clean Electricity Payment Program (CEPP) would be a good step towards decarbonizing the economy. When coupled with enhanced clean energy tax incentives, the CEPP would provide additional financial incentives to increase the percentage point share of clean electricity generation each year towards a nationwide average goal of 80 percent carbon-free by 2030.

Investment in the infrastructure and incentives to support a transition to a clean electricity future in the coming decades is critical to efforts to limit the pollution that causes climate change. We must achieve zero, or near-zero, carbon electricity production soon to support increased levels of electrification to help decarbonize other industrial sectors and transportation. Electricity production today remains the most carbon-intensive U.S. industry, and demand for electricity will increase significantly in the coming decades. In short, we have a long way to go in the U.S. to get to net-zero carbon electricity generation.

Establishing a program of incentives and penalties is not enough, alone, however. Enforceability is important—the market alone can’t make improvements permanent. Questions also remain as to how long the greenhouse gas reductions resulting from the investment will last if subject only to the whims of energy markets.

The power sector has been on notice since 2012 that enforceable carbon dioxide limits on new and existing power plants are the new reality. And even that threat of enforceable standards can inspire change in an industry. The Obama Administration’s Clean Power Plan goals for electric utility carbon dioxide—1,812-1,814 million short tons in 2030—were met and exceeded by 2019, although the Clean Power Plan was stayed before it could be implemented. Compare EPA, Regulatory Impact Analysis for the Clean Power Plan Final Rule, at ES-2, tbl. 6 and ES-3, tbl. 7, with EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2019, at ES-7 tbl. ES-2 (Apr. 2021) (reporting power sector emissions of 1,606 million metric tons in 2019, equivalent to 1,770 million short tons).

But those reductions are not enforceable, they are the result of voluntary action. Recent reports of coal’s resurgence could lead to backsliding. Further investment in the infrastructure to support additional reductions will be needed—and in order to stick, those emissions reductions will need to be legally enforceable.

Revised new, modified, and reconstructed coal- and natural gas-fired power plant new source performance standards under the Clean Air Act can dance well together with infrastructure investments to support less carbon-intense electricity production. New source performance standards have been in place since 2015 for new coal and gas plants, and those already provide a meaningful and enforceable floor for the understanding of what constitutes acceptably low-carbon electricity generation. Updating those standards and issuing strong, enforceable performance standards on the significant carbon dioxide emissions from existing power plants can and should be an Administration priority, to provide additional enforceable support for lower-carbon energy production. And the financial incentives in the CEPP can help shift the cost of the transition to a clean electricity system from utility ratepayers to the more progressive base of taxpayers.

Fortunately, the Biden Administration can act right now—Executive Order 13990 directed EPA to take steps based on the best science to limit greenhouse gas emissions, including by revisiting actions taken since 2016. The Clean Air Act itself requires periodic revision and updating of new source performance standards (NSPS), including those for CO2 emissions from new, modified, and reconstructed coal- and gas-fired power plants. The Trump Administration did not change them on review, in part because the Trump EPA did not consider the science or advances in technologies or changes in the electric sector since 2015. The standards should be revisited now, and strengthened, particularly for new natural gas-fired power plants.

This is not a new idea. Several of the standalone bills aimed at addressing the climate crisis include both Clean Energy Standards and requirements for performance standards that can serve as the floor for clean energy production and provide enforceability. For example, the Clean Future Act, H.R. 1512, requires Clean Air Act performance standards to work alongside the clean energy credit system. The Clean Energy Innovation and Deployment Act and the Climate Solutions Act of 2019 also recognize the need for enforceable performance standards—although CEIDA requires them only for methane emissions from the oil and gas sector.

U.S. EPA need not wait for the enactment of any of those bills. It can act right now, relying on its Clean Air Act authority—which has been upheld several times since the Supreme Court considered it in Am. Elec. Power v. Connecticut, 564 U.S. 410 (2011) —to issue strong carbon dioxide standards for the industry. We strongly urge the Agency to move forward expeditiously with both updated and stronger new source standards for coal- and gas-fired power plants, and a robust set of existing source directives for the electricity sector.

The CEPP and investments in infrastructure to support cleaner energy production are essential. But they need a dance partner to secure the emissions reductions they will produce. EPA must use its authority to issue strong enforceable performance standards to work together with the financial supports in the CEPP, and the Agency should do so without delay.

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