On October 23, 2015, the Environmental Protection Agency published its final rule known as the Clean Power Plan, a state-centered plan to reduce carbon emissions from fossil-fueled power plants, the single largest source of carbon pollution. The Clean Power Plan, which was promulgated by the EPA under Section 111(d) of the Clean Air Act, is one part of a larger effort by the Obama administration to combat climate change. According to EPA Administrator Gina McCarthy, “by 2030, the Clean Power Plan will reduce carbon emissions by 32% below 2005 levels.” Under the Clean Power Plan, each state environmental agency must create a compliance plan setting forth how the state will limit and reduce carbon emissions. The plans are to be submitted to the EPA by September 2016. States have the option of requesting a two-year extension; however, states that request an extension must provide a progress report to the EPA by September 2017. The compliance period begins on January 1, 2022.
The Clean Power Plan provides flexibility to state regulators to meet their respective carbon emission targets. The plan incentivizes trades within an individual state as well as across state lines. Under the plan, power plants have the ability to trade carbon credits with other power plants in designated states or create a trading coalition with multiple states in a specific region. By utilizing market-based programs, the plan is intended to promote energy efficiency across the nation.
States’ responses to the Clean Power Plan have been mixed. The majority of states oppose the Clean Power Plan, with twenty-seven states filing lawsuits seeking to overturn the plan. On the other hand, eighteen states have chosen to defend the plan. At least two of the five remaining states who have not entered the litigation arena – Pennsylvania and Nevada – appear willing to leave it to the other states to fight their own battle.
According to Pennsylvania Department of Environmental Protection Secretary John Quigley, the Commonwealth’s response to the Clean Power Plan has been focused on a process of “transparency and integrity.” In anticipation of drafting its compliance plan, the Commonwealth held a total of fourteen public listening sessions, the last of which was held on November 4, 2015, to discuss how the state will design and implement its plan. The Department has set what the Secretary has termed an “ambitious but achievable” goal of a 33% decrease in carbon emissions by 2030. Since the public comment period’s closing on November 13, 2015, the Department has started to write its draft compliance plan with the aim of submitting its final plan in September of 2016. The Department hopes to avoid the need to seek a two-year extension from the EPA.
The Pennsylvania House recently passed House Bill 1327, legislation related to the state’s 2015-2016 budget. Before returning to the House, the bill was amended by the Senate in a way that will likely – according to House Democrats – interfere with the Department’s desire to avoid seeking a two-year extension. Included in the Senate amendments is a provision that would lengthen the amount of time – from 100 days to 180 days – the Pennsylvania General Assembly has to approve the Department’s compliance plan under the Clean Power Plan before it is sent to the EPA. According to a DEP official, it would be nearly impossible for the Department to meet such a deadline. The bill was recently referred to the Senate Rules and Executive Nominations Committee.
While many stakeholders support the reduction of carbon emissions across the Commonwealth, the question remains as to how the Commonwealth should best meet its goal. Some commentators have recommended implementation of a mass-based carbon emissions trading program that establishes a cap on total carbon emissions from power plants and reduces the cap on a yearly basis. This would allow the Commonwealth to gradually reduce carbon emissions each year and achieve full compliance by the year 2030. The program would require power plants to purchase and pay an “allowance” for each ton of carbon dioxide emitted. The money generated by selling the allowances could be used by the state to invest in greener technology such as energy efficient and zero-emission generation.
With the anticipated retirement of many coal-fired power plants across the state, other commentators argue that Pennsylvania has the ability to reduce carbon dioxide emissions 13% below 2012 levels by 2030 under existing energy policies. As a result of the abundance of low-priced natural gas in Pennsylvania, market forces are encouraging conversion of electric generating facilities from use of high-emission coal to lower-emission natural gas. The remaining carbon reductions can be met by strengthening the state’s clean energy policies. In particular, commentators call on legislators to expand the Act 129 energy efficiency law and Pennsylvania’s Alternative Energy Portfolio Standard past their present 2020-2021 targets.
Although many argue that the Clean Power Plan will negatively impact the power sector and increase energy costs, the implementation of a mass-based carbon emissions trading program may be a win-win. Reducing the cap on emissions over time provides a mechanism for the Commonwealth to reduce carbon emissions output. In addition, the sale of credits or allowances would enable the Commonwealth to invest funds from its sales into energy efficiency and renewable energy. Other states have benefited environmentally and economically from programs similar to a mass-based carbon emissions trading program. Now it is time for Pennsylvania to try and do the same.