U.S. EPA's Clean Power Plan is expected to reduce carbon dioxide emissions from power plants 32 percent below 2005 levels by 2030.
For each state, the rule establishes a target emissions rate, or the amount of carbon dioxide that could be emitted per megawatt-hour of power produced.
The emissions rate reductions required of states range from 7 percent in Connecticut to 47 percent in Montana. (Alaska, Hawaii, Guam and Puerto Rico are excluded from the rule because they are noncontiguous. Vermont and Washington, D.C., are excluded because they don't have power plants that would be considered under EPA's framework.) The percentages represent how much states must reduce their power fleet emissions rates below 2012 levels.
State deadlines are on hold under a Supreme Court stay halting implementation of the rule. States originally were expected to submit final carbon-cutting plans or initial plans with two-year extension requests by Sept. 6, 2016.
They were expected to start working toward interim emissions goals beginning in 2022 and meet final goals in 2030 and beyond.
What decisions must states make?
States first must decide whether they want to pursue rate-based or mass-based plans.
A rate-based plan would require the power fleet to adhere to an average amount of carbon per unit of power produced. A mass-based plan would cap the total tons of carbon the power sector could emit each year.
States may adopt either an "emissions standards plan," which assigns standards to generators, or a "state measures plan," which can include a combination of enforceable emissions limits and additional programs — such as renewable energy and energy efficiency standards.
Both types of plans may involve trading programs — whereby generators can purchase compliance credits from entities inside or outside their state that offset carbon emissions, including zero-carbon renewable power producers.
States that refuse to comply with the rule or submit inadequate plans would be subject to a federal plan, which EPA proposed options for Aug. 3 and will finalize this year. That federal plan will likely assign goals to power generators and require them to trade credits or allowances to comply.
How soon must states act?
Before the Supreme Court stay, states were to submit final plans by September 2016 or submit initial plans and request an extension until September 2018. They were supposed to start working toward an average emissions rate for the 2022-30 period in 2022.
EPA broke the interim emissions rate into two-year "step" periods for 2022-24, 2025-27 and 2028-29. States must either reach a specific emissions rate for each of those periods or set their own steps and explain how they will achieve them. The steps must equate to an average interim emissions rate, which EPA has assigned.
How did EPA set state goals?
EPA divided states into three regions — the Eastern Interconnection, Western Interconnection and Electric Reliability Council of Texas.
In each region, the agency calculated the potential for using three "building blocks," or carbon-cutting measures.
EPA used the building blocks as the "best system of emissions reduction" to determine what the power system could "reasonably" do to cut CO2. Section 111(d) of the Clean Air Act requires EPA to set a BSER.
The building blocks are operating coal plants more efficiently, running existing gas plants more often to allow for running existing coal plants less often, and ramping up renewable power. States aren't required to employ the building blocks.
For the first building block, EPA looked at how coal plants in the three regions could improve their "heat rates" to run more efficiently and burn less coal. EPA assumed the following heat-rate improvements:
- Western Interconnection: 2.1 percent
- Eastern Interconnection: 4.3 percent
- ERCOT: 2.3 percent
For the second building block, EPA examined how much more existing natural gas plants could run to offset coal use. EPA assumed plants could run at 75 percent capacity, ramping up to that level over a number of years.
For the third building block, EPA looked at historical trends for renewable power to project what zero-carbon energy growth could be possible.
To apply the building blocks to the state goals, EPA calculated the average emissions rate in each of the three regions for two subsets of types of power plants: coal, oil and steam turbine gas plants and natural gas combined-cycle plants. EPA applied the building blocks to each of those rates, to determine how much the carbon-cutting measures could reduce them. The agency tapped the least stringent of these three rates to create two separate standards for coal- and natural-gas-fired power plants. The standard emissions rate for coal-fired generators across the country will be 1,305 pounds per megawatt-hour for coal/steam plants, while the rate for natural gas plants is 771 lb/MWh.
EPA then applied those lowered rates to states, based on each state's fossil fuel generation mix. A state that has only coal-fired power will therefore have a rate limit of 1,305 lb/MWh, while a state with only gas plants must hold its emissions to 771 lb/MWh. A state with a mix of coal and gas units will have a rate that reflects its mix and that falls somewhere in between the two rates.
For more information on how EPA set state goals, see the agency's "Technical Summary for States."
For an explanation of key decisions states must make, see EPA's "State Plan Decision Tree."