With U.S. EPA set to release its final Clean Power Plan over the next few weeks, what are the key changes to watch for in the agency's rollout of the rule? During today's OnPoint, Jonas Monast, director of the climate and energy program at the Nicholas Institute for Environmental Policy Solutions at Duke University, discusses the critical elements of the draft proposal that are likely to face changes in the final rule. He also talks about the range of options that exist for states that are considering a multistate compliance mechanism.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Jonas Monast, director of the climate and energy program at the Nicholas Institute for Environmental Policy Solutions at Duke University. Jonas, thank you for joining me.
Jonas Monast: It's my pleasure.
Monica Trauzzi: Jonas, with EPA set to release its final Clean Power Plan over the next few weeks, you've identified in a new report the key things to sort of watch out for in that final rule. Day of, what are you going to immediately put eyes on?
Jonas Monast: Yeah, so it's a long list. I think that the top three issues are did the state targets change, and if so that means that the formula for calculating the state targets changed. Another point that I'll be looking for is the timing, right, so when do the states have to submit the plans and when do utilities actually have to start taking action. And then the final, does EPA say more about the potential for easing market-based mechanisms under the Clean Power Plan, and how?
Monica Trauzzi: So in terms of the formula, is the sense that there will be a change to how they determine targets?
Jonas Monast: I think there's a good chance. You know, the EPA has received -- well, first off it started with a blank sheet of paper when it created the proposal, and now it's received over 4 million comments. There's been a really robust stakeholder conversation since then, and the EPA is I think well-aware of where those conversations are. I suspect that the formula is going to reflect changes both in the individual building blocks, what's included, and how they apply those building blocks to the states.
Monica Trauzzi: Right. So those building blocks, I mean, how could -- that's kind of the critical foundation of the plan. How could those change?
Jonas Monast: Well, I'll tell you. So for one example, so for Building Block 1, which was looking at efficiency potential for coal-fired power plants, there have been more studies on the efficiency potential for coal-fired power plants. EPA can incorporate that new data into the final rule. And also considering the potential for co-firing, so co-firing with natural gas or biomass in coal-fired power plants as a way to reduce the CO2 emissions.
Monica Trauzzi: There, as you said, have been robust stakeholder conversations with EPA over the draft rule. Which states have made the strongest case for having their overall emissions reduction target reduced?
Jonas Monast: Yeah, you know, that's an interesting question. A lot of states have an argument for why they're being treated unfairly. Some of the states that have really taken action for quite some time to reduce CO2 emissions now have a stringent target and they have fewer options available to them to reduce emissions. Other states that have made investments in coal-fired power plants based on other regulatory requirements, past Clean Air Act requirements, also have an argument for fairness. They don't want to have stranded assets there. So I think you see the arguments coming from states really across the political spectrum that the targets should change as applied to those states.
Monica Trauzzi: The nuclear lobby has made a big push for great inclusion.
Jonas Monast: Sure.
Monica Trauzzi: Is your expectation that nuclear will play a greater role in that final rule?
Jonas Monast: I think the EPA absolutely will address nuclear. I think there are two ways that nuclear plays into the proposal. The first way that the nuclear question comes in is nuclear power plants that were already under construction as of 2012, so that's Georgia, South Carolina and Tennessee, they have some concerns that including the nuclear power plants in the state target as opposed to allowing the states to take advantage of new nuclear as part of the compliance, that that makes their target more stringent than it would have been otherwise. And then for every state that has nuclear power in this state -- the EPA's proposal has that 6 percent number of at-risk nuclear, incorporated that into the building block. So I suspect that that's going to change as well.
Monica Trauzzi: In terms of legal defensibility, what will you watch for sort of on wording and how the document is crafted?
Jonas Monast: Yeah, so this is going to -- the legal arguments are going to come down to two points. The first point is the difference between the language in 111(d) passed by the U.S. Senate and the language of 111(d) passed by the House of Representatives. There's some conflicting language that was never resolved. The courts are going to address that. And the EPA is going to have to defend why it's making the choice that it's making to move forward under 111(d) in the first place. The other part is going to be how the EPA defines the best system of emission reduction, and it's going to have to come up with an objective standard that's defensible as it applies the best system of emission reduction to each state.
Monica Trauzzi: There is growing momentum, particularly following the Supreme Court's mercury decision, for a stay on the Clean Power Plan as sort of this middle-of-the-road option. Do you think that that would be a reasonable approach ahead of what is expected to be very heavy litigation on this rule?
Jonas Monast: Yeah, it depends on the timeline. It depends on when the states have to submit the plan. And really what it depends on is when the utilities have to start making investments in order to comply with it. In order to prevail on a request for a temporary stay the litigants would have to demonstrate they are likely to secede on the merits, but they also have to demonstrate that they would be harmed if the rule goes into effect at that point. In order to demonstrate that they would be harmed they have to demonstrate they would actually have to be making investments. So if the utilities don't have to start complying until 2020, that's actually long enough for the litigation process to play out. If it turns out that the utilities would have to start making investments soon in order to reach an aggressive interim target, then they may have a stronger argument there.
Monica Trauzzi: The Nicholas Institute has done quite a bit of work digging into multistate options and sort of what the different approaches are there. Is this a net positive approach across the board, or are there certain states where this would work better? And sort of what are the options within the multistate option?
Jonas Monast: Yeah, so modeling, both that comes out of the Nicholas Institute and from other organizations, suggests that on the whole the multistate approach would be lower cost than states going at it on their own. Now of course that's going to be -- that's going to depend on the individual state circumstances. What we've been working on is trying to figure out how to address the political hurdles and the administrative hurdles that may prevent states from implementing markets, and what we think -- and other groups have come to the same conclusion -- is that the EPA and the states could set this up in a way that allows electric generators to opt in to markets, but without the states being in a position of explicitly endorsing markets or explicitly designing markets.
Monica Trauzzi: All right, we'll end it there -- a lot to watch for over the next couple weeks. I appreciate your time.
Jonas Monast: Thanks so much.
Monica Trauzzi: Thanks for watching. We'll see you back here tomorrow.
[End of Audio]