FMR. EPA CHIEF: GHG RULES SHOULD BE FLEXIBLE AND ACHIEVABLE

Karen Frantz
GHG Monitor
12/13/13

Former Environmental Protection Administrator under President George H. W. Bush, William Reilly, said last week that expected Agency rules that will set greenhouse gas emission standards for existing coal-fired power plants should provide flexibility state-by-state and a “reasonable” timeframe for meeting the standard. “A key question is the stringency of the standard,” Reilly said in prepared keynote remarks at an event at the Bipartisan Policy Center in Washington, D.C. “While EPA and the states may embrace and agree on the use of flexible compliance strategies, many states are likely to want to see those flexible strategies used as a justification to increase the stringency of required actions. That is, in my opinion, the biggest uncertainty in terms of 111(d): how stringent is the emissions limitation likely to be adopted by EPA and upheld by the courts? There may be a tradeoff between flexibility in measures and in timing on the one hand and stringency on the other.”

The public workshop explored policy design considerations for the new standards that the EPA is expected to unveil in June 2014 and finalize in June 2015. EPA plans to issue guidance to states, which will then pitch individual implementation plans to the Agency that will specify which types of emissions technologies they would like to use to comply with the new standards.

Reilly said there “is every reason” for EPA to draft rules that will be “achievable and cost-effective” and that timing of compliance will be “important.” He outlined ways the EPA could carve out wiggle room for states in their timeframes in return for other tradeoffs. “States and companies may have the opportunity to defer compliance and capital outlays to reduce carbon dioxide reductions in return for tight commitments to convert to natural gas or shut down a non-complying facility by, say, 2025, which would assure amortization of plants built in the 1980s,” he said. “If I were EPA Administrator, I would make that deal. The states also may have an opportunity to include renewable commitments in lieu of plant retrofits. (The approach many European plants are taking to reduce CO2 generation per megawatt includes adding wood pellets to the coal fuel stream.) These flexible options are not enshrined at this point but they are certainly on the table as suggested by recent discussions with EPA. There may also be opportunities in some states to trade, to buy permits for sources that can reduce emissions at lower cost than you can.”

Looking to 2015

Reilly said that the new standards, which President Barack Obama directed the EPA to develop in his Climate Action Plan, are being worked on in the context of international negotiations to form an agreement to curb climate change—of which the upcoming 2015 Conference of Parties is a part. He said that it was critical to bring fast-growing economies into the fold and that China and the U.S.—the world’s largest carbon emitters—should set the pace. “Underlying the President’s directive to EPA in his Climate Action Plan is not only the seriousness of the problem, but a desire to enter international negotiations in 2015 with a stronger hand based on U.S. performance so as to bring China and other high CO2 emitters to take action,” he said. “So let’s remember why we’re doing these new regulations. There’s no practical way to reduce CO2 emissions without impacting the power plants that produce more CO2 than any other source in our country.”

But he said that there is “legitimate concern” about how the rule may affect reliability, rates and “basic business decisions about where to go with investment in existing plants.” “Some states currently rely on coal for 80 to 90 percent of electricity generation, so this is no small matter,” he said. “As challenging as the coming regulatory decisions are for the electricity power industry, I can assure you they are equally vexing for EPA as it moves to impose serious and expensive requirements on America’s total existing fleet of CO2-generating power companies.” He also said that the rule will likely face legal challenges. “There will be litigation-protracted, costly, time-consuming, no doubt—and, depending on how carefully the rule is drafted, it may survive intact, be sent back to the Agency for revision, or be scuttled outright.”