As the Office of Management and Budget reviews U.S. EPA's draft rule for existing power plants, how might the agency build flexibility for states into its proposal? During today's OnPoint, Kyle Aarons, a senior fellow at the Center for Climate and Energy Solutions, discusses current state programs that could fit into a federal rule. He also weighs in on the possible role of the debate over the social cost of carbon in the response to the existing source proposal.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Kyle Aarons, a senior fellow at the Center for Climate and Energy Solutions, better known as C2ES. Kyle, thank you for joining me.
Kyle Aarons: Hi, Monica. Thanks for having me.
Monica Trauzzi: Kyle, EPA has sent its rule for existing power plants over to the Office of Management and Budget for regulatory review. We're starting to hear little hints from the administrator on what the agency has planned for the rule. There's still a big question on how achievable these rules will be and at what cost, and we hear the term flexibility a lot. What might that actually mean in terms of state options when it comes to compliance?
Kyle Aarons: Right. Flexibility is a key issue in this regulation, and the way we like to think of it is EPA is setting the traffic rules, setting the destination, and the states all are driving the cars, and they have 50 different cars and get to their destination in a number of different ways. So states have been doing a variety of things to cut carbon pollution from the power sector over the past decades. They've got renewable portfolio standards, energy efficiency resource standards, cap-and-trade programs, power plan performance standards. There's this wealth of options available at the state level. So what's great about this is that EPA doesn't have to start from scratch when it think of, and come up with new ways to cut carbon pollution because states are already doing it. So what's important is that EPA sets an aggressive standard so we get meaningful cuts, but they allow states to get there however they choose, and that's what we've been hearing, that's what we expect EPA to do.
Monica Trauzzi: Right, so what is the red line on flexibility because the administrator also said that the whole goal here is to cut emissions, so they want to be flexible but not too flexible, so is there a red line?
Kyle Aarons: States will have to hit the target that EPA sets. So that's really what's critical, and states will have to, in their state plans that they'll submit to EPA in saying how they propose to get to the target, that will have to include monitoring and verification methods so that they can show EPA not only how the plants reach the target, but how they'll prove it. So states can't just say, for example, you know, we'll have a renewable portfolio standard of 20 percent and that's that. They'll have to show exactly what that will mean in their power sector, how they'll enforce it, how they'll verify it. So states will have to have some rigor in terms of showing EPA precisely how they'll use their tools to get to the target, but again, they'll be able to do so through a variety of means.
Monica Trauzzi: So how closely do you think the agency should look at programs like the Regional Greenhouse Gas Initiative as an example for what other states could be doing?
Kyle Aarons: So EPA is very unlikely that they'll require a state to enter a cap-and-trade program. We expect and hope that they'll just give states enough latitude to either use RGGI if they're already in it for compliance or to, for new states to enter RGGI or perhaps states to form a new regional initiative. So we think that's a, you know, these are good market-based measures to reach the standard. So we expect EPA to allow such a thing, but not require it.
Monica Trauzzi: EPA has made a point of speaking to just about every stakeholder involved in this discussion at this point, and they've said that they've listened to what they had to say, but with so many different voices at the table and with the opinions so varied, how does the agency create a fair rule that still keeps in mind those targets?
Kyle Aarons: Yeah, EPA has definitely a tough job here, and I don't think anyone envies the role that they have in balancing, as you said, all of these stakeholder interests and, again, we want to see meaningful cuts, we want to see flexibility. What does that mean and how do they deal with these different stakeholders pulling them in different directions? So it's tough to say until we see the proposal, of course, exactly what they do. we've heard that the proposal won't have one specific rule of this is what we propose, this is how we propose you get to the emissions target, but we'll see some options and the EPA will lay out, you know, here's one way of getting to the target, here's one way of setting the target, here's another way. We think that's what EPA might do here, so that will give another round of discussion between stakeholders and EPA to really refine and narrow in on the final rule.
Monica Trauzzi: Reliability is a key element here. How does EPA ensure that reliability will not suffer?
Kyle Aarons: Yeah, so EPA will have to work closely with energy offices and public utilities commissioners as well as environment offices. So they've been doing, not only has their outreach been across a lot of states, it's been across a lot of different state agencies, and so they'll also have to work with FERC and other regulators to ensure that reliability isn't damaged by this rule, and we suspect that EPA will be able to craft a rule that does that.
Monica Trauzzi: There's been a big lobbying effort here in Washington right now on the social cost of carbon and why there are not the metrics the administration is using are accurate. How do you expect that debate, the social cost of carbon debate, to play into the 111(d) release once we finally see it?
Kyle Aarons: That's a good question, and we haven't really seen much of a connection yet. We don't know if, for example, EPA will say, "States, you have to get as many cuts as you can up to this social cost of carbon." We haven't heard that they'll do that. It's a possibility, but so far, I haven't seen much of a connection between the two.
Monica Trauzzi: OK, we'll end it there. Thank you very much for coming on the show.
Kyle Aarons: Thank you, Monica. It was my pleasure.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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