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The EPA is planning a notice of final rulemaking for model rules to implement greenhouse gas emission guidelines for existing fossil fuel-fired electric generating units (EGUs). Emission guidelines were signed 8/3/15 as the Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units (the Clean Power Plan). This plan is part of the President's Climate Action Plan announced in June 2013 to reduce carbon emissions from the power sector by 30 percent below 2005 levels. This action offers States model trading rules that they can follow in developing their own plans in order to capitalize on the flexibility built into the final Emission Guidelines.

Statement of Need:

The Federal plan and model trading rules proposal is part of President Obama's Climate Action Plan (CAP). The CAP called for the reduction of carbon emissions from the power sector by 30 percent below 2005 levels. In this action, the EPA has proposed a Federal plan to implement the Clean Power Plan emission guidelines (EGs) for affected fossil fuel-fired EGUs operating in States that do not have approved State plans. Specifically, the EPA has co-proposed two different approaches to a Federal plan to implement the Clean Power Plan EGs--a rate-based trading approach and a mass-based trading approach. The proposal also serves to provide a model rule that States can tailor for implementation as a State plan. A State program that adheres to the model trading rule provisions specified in this rulemaking would be presumptively approvable. The Federal plan will achieve the same levels of emissions performance as required of State plans under the EGs. The agency has proposed a finding that it is necessary or appropriate to implement a Clean Air Act (CAA) section 111(d) Federal plan for the affected EGUs located in Indian country. The agency has also proposed certain enhancements to the process and timing for State submittals and EPA action in the CAA section 111(d) framework regulations of 40 CFR part 60, subpart B (these proposals are not a part of the Federal plan or model trading rules).

Summary of the Legal Basis:

Greenhouse gas (GHG) pollution threatens the American public's health and welfare by contributing to long-lasting changes in our climate that can have a range of negative effects on human health and the environment. The U.S. Supreme Court ruled that GHGs meet the definition of ‘‘air pollutant'’ in the CAA, and this decision clarified that the CAA's authorities and requirements apply to GHG emissions. GHGs, including carbon dioxide (CO2) from power plants, may persist in the atmosphere from decades to millennia, depending on the specific GHG. This special characteristic makes it crucial to take initial steps now to limit GHG emissions from fossil fuel-fired power plants, specifically emissions of CO2, since they are the nation's largest sources of carbon pollution. Section 111(d)(2) of the CAA, 42 U.S.C. 7411(d)(2), provides the EPA the same authority to prescribe a plan for a state in cases where the state fails to submit a satisfactory plan as the agency would have under CAA section 110(c) in the case of failure to submit an implementation plan. In addition, the EPA has authority under CAA section 111(d)(1) to prescribe regulations that establish procedures similar to CAA section 110 with respect to the submission of state plans, and the EPA also has general rulemaking authority, as necessary, to implement the CAA under CAA section 301. This rule will provide model rules that states can tailor for implementation as a state plan to ensure that emission standards under authority of section 111 of the CAA (the Clean Power Plan EGs) are implemented for affected EGUs.

Alternatives:

The final Clean Power Plan EGs are related to, but separate from the model trading rules and the federal plan. The final EGs detail the CO2 reduction goals for sources by state. The purpose of the model rules is to provide states an example that the states can follow in developing their own plans in order to capitalize on the flexibility built into the final Clean Power Plan EGs. The purpose of the federal plan is to lay out mechanisms to achieve reductions in CO2 emissions from affected EGUs that are not covered by an EPA-approved state plan. The EPA has co-proposed two basic approaches to a federal plan, a rate-based emission trading program and a mass-based emission trading program. Within these two approaches, the EPA has presented a range of options for comment through which affected EGUs would meet a rate-based goal or a mass-based equivalent. The EPA has incorporated flexibility to the extent possible into the proposed federal plan so affected units can achieve these reductions in a cost-effective way.

Anticipated Costs and Benefits:

The EPA estimated the annual incremental compliance cost for the rate-based Federal plan approach to be $2.5 billion in 2020, $1.0 billion in 2025 and $8.4 billion in 2030. The EPA estimated the annual incremental compliance cost for the mass-based Federal plan approach to be $1.4 billion in 2020, $3.0 billion in 2025, and $5.1 billion in 2030. The Federal plan would be implemented only in those States that do not have a fully approved State plan as required under the final Clean Power Plan. In those States where a Federal plan may be required, a final Federal plan will implement the same emission guidelines for affected power plants outlined in the Clean Power Plan. The model trading rules and the Federal plan would not require additional control requirements or impose additional costs. States operating under a Federal plan may adopt complementary measures outside of that plan to facilitate compliance and lower costs to the benefit of power generators and consumers. Implementing the proposed action will generate benefits by reducing emissions of CO ₂ and criteria pollutant precursors, including sulfur dioxide, nitrogen oxides, and directly emitted particles. The estimated benefits associated with these emission reductions are beyond those achieved by previous EPA rulemakings including the Mercury and Air Toxics Standards rule. The health and welfare benefits from reducing air pollution were considered co-benefits for the proposal. We were only able to quantify the climate benefits from reduced emissions of CO ₂ and the health co-benefits associated with reduced exposure to PM 2.5 and ozone. There were many additional benefits which we were not able to quantify, leading to an underestimate of monetized benefits. In summary, we estimated the total combined climate benefits and health co-benefits for the rate-based Federal plan approach to be $3.5 to $4.6 billion in 2020, $18 to $28 billion in 2025, and $34 to $54 billion in 2030 (3 percent discount rate, 2011$). Total combined climate benefits and health co-benefits for the mass-based Federal plan approach were estimated to be $5.3 to $8.1 billion in 2020, $19 to $29 billion in 2025, and $32 to $48 billion in 2030 (3 percent discount rate, 2011$).

Risks:

The risk addressed is the current and future threat of climate change to public health and welfare, as demonstrated in the 2009 Endangerment and Cause or Contribute Finding for Greenhouse Gases Under Section 202(a) of the Clean Air Act. The EPA made this determination based primarily upon the recent, major assessments by the U.S. Global Change Research Program (USGCRP), the National Research Council (NRC) of the National Academies and the Intergovernmental Panel on Climate Change (IPCC).