EPA Offers ACE Rule To Trump Clean Power Plan

Outlined in an Environmental Protection Agency ("EPA") proposal published on August 31, 2018, the Affordable Clean Energy ("ACE") rule would replace the Obama Administration's Clean Power Plan ("CPP"). A 60-day public comment period on the proposal ends on October 30. This Jones Day White Paper examines the differences between the two rules and concludes with an analysis of the costs and benefits of CPP vs. ACE.

The EPA issued a proposal on August 31, 2018, to replace the CPP with the ACE rule (83 Fed. Reg. 44,746). Both rules adopt emission guidelines for greenhouse gas emissions from existing electric generating units using authority provided by Section 111(d) of the Clean Air Act. That is just about the only similarity between the two rules.

This White Paper highlights the differences between the two rules with a focus on topics that may draw significant comment during the 60-day comment period that ends on October 30.

HEAT-RATE IMPROVEMENTS VS. BUILDING BLOCKS

The CPP issued by the Obama Administration adopted greenhouse gas limits that were projected to be achievable by states through the use of three building blocks—(i) construction and use of more renewable sources, (ii) shifting generation from coal to gas, and (iii) heat-rate improvements. The Supreme Court stayed the CPP in early 2016. The Court did not explain the basis for the stay, but it presumably reflected a determination that the parties challenging the CPP were likely to succeed on the merits.

After the Trump Administration took control, EPA initially proposed to repeal the CPP based on a revised legal interpretation of its authority under Section 111(d). The revised interpretation stated that Section 111(d) emission guidelines had to be based on emission controls that could be installed or operated at a particular source rather than measures taken outside of the source. Using this interpretation, EPA now believes that the first two building blocks in the CPP were not available under the Clean Air Act. This position is reflected in ACE, which relies solely on heat-rate improvements to set the Section 111(d) emission guidelines.

EMISSION GUIDELINES VS. STATE LIMITS

The CPP established a greenhouse gas emissions rate limit for all of the existing generating units in a state collectively based on the projected application of the building blocks. Each state had authority to set emission limits for its units, but those individual limits could not result in a state-wide emission rate that exceeded the limit set by EPA. EPA proposed a model emissions trading program that states could use as the basis for their electric generating units to demonstrate compliance with the CPP. Some specific types of sources suggested that subcategories should be established that would favor their operations.

ACE takes a wholly different approach. It identifies a menu of heat-rate improvement techniques that have been demonstrated to be effective for coal-fired units and instructs the states to determine the techniques that are applicable to each unit and set an emission rate for each unit based on that determination. It is unclear how states will view this mandate. Many states advocated for a similar procedure in response to the CPP approach that did not provide a clear way to consider remaining useful life or other unit-specific factors that could affect the achievable emission limits. At the same time, the specific determinations required by ACE for each unit could place a significant burden on state agency time and resources, but they also would...