The Three Elements of Power Plant Standards: Carbon, Mercury, and Irony

Last week, NRDC proposed an innovative plan showing how the President can slow climate change, save lives, create jobs, and grow the economy by using the Clean Air Act to cut the dangerous carbon pollution from the nation’s power plants.  

Our plan achieves huge health and climate benefits at surprisingly low cost, is fair and flexible for each state and power company, holds power bills down, and triggers huge job-creating clean energy investments that can’t be outsourced.  It’s a plan that even some power companies are praising.

• State-specific standards.  First, our plan recognizes that states start with different mixes of coal and gas in their current electricity generation.  So we recommend that EPA set state-specific standards, in pounds of CO2 per megawatt-hour (lbs/MWh), for that are differentiated based on each state’s starting fossil generation mix in 2008-2010.  We reduce overall carbon emissions 26 percent in 2020 and 35 percent in 2025 by each state making progress from its own starting point.   
• Flexible compliance options.  Second, our plan recognizes that carbon pollution can be cut at much lower cost if one looks at power plants as a system.  Each fossil plant is responsible for meeting the state-specific emission-rate.  The plant owner can move towards compliance, of course, by improving the plant’s heat rate or with other steps that directly reduce its emissions.  But under our plan the owner has additional compliance options.  For example, a company owning both coal and gas plants can shift dispatch towards the cleaner plants and average across its total generation.  If it has wind or solar plants, or hydro or nuclear plants, it can earn compliance credits for increased generation from these non-emitting assets.  And it can earn compliance credits by investing in customer energy efficiency, which cuts emissions by reducing how much electricity is needed to light, heat, and cool our homes and businesses.  The same strategies are also available between companies, which can buy or sell compliance credits from the same actions. 

Because of these key features, the NRDC plan achieves enormous climate protection and public health benefits worth $26-60 billion in 2020, at a reasonable cost of $4 billion. 

Our report demonstrates that state-specific standards and flexible compliance options are consistent with the definition of “standard of performance” and the other requirements in Section 111 of the Clean Air Act.  (See here, pp. 7-12.)

But defenders of the oldest, dirtiest coal-fired power plants are arguing that the flexible compliance structure of our carbon pollution proposal exceeds EPA’s and the states’ authority under the Clean Air Act. 

And here’s the irony:  the same voices attacking compliance flexibility today for carbon pollution were the champions of compliance flexibility a few years ago when EPA, under the Bush administration, attempted to regulate power plant mercury emissions under Section 111.

Consider Jeff Holmstead, an attorney who represents companies with lots of coal-fired plants.  He told Politico (“NRDC puts emission plan on a platter,” subscription required) that our proposal “just doesn’t pass muster under the Clean Air Act.”  Holmstead argued that EPA cannot write a standard with these compliance flexibility options but must stick only to the relatively small reductions that a coal-fired power plant can achieve on its own.  He then said:  “But there are no control devices for carbon. There’s nothing anyone can install at a power plant to reduce its carbon emissions.” 

(He’s actually wrong about that – there are measures from improving combustion efficiency to capturing and sequestering carbon that can reduce an individual plant’s emissions, at a range of costs.  As our study demonstrates, you can get much more pollution reduction at less cost by including additional compliance options.  This link between flexibility and ambition is exactly why Holmstead was for flexibility before he was against it.) 

Nevertheless, Holmstead concluded:  “So NRDC now wants to use the Clean Air Act to force consumers and businesses to use less electricity and to force power companies to shut down their existing plants and build new ones. This goes well beyond what EPA is allowed to do under the act.”

Elementary, my dear Watson?  Not so fast.  Here’s where the element of irony enters in.

Holmstead served a few years ago as the head of EPA’s air program during the Bush years, and in those days he had a different view.  He led the unsuccessful effort then to let mercury-emitting power companies avoid the Clean Air Act’s most health-protective requirements.  Mercury is a potent neurotoxin listed as a hazardous air pollutant under Section 112 of the Act.  EPA had previously determined it was necessary and appropriate to curb power plants’ mercury emissions under these stringent requirements.  But Holmstead tried to shift regulation of power plant mercury from Section 112 to the less demanding provisions under Section 111.  (And as a bonus, he tried to relieve the industry of the need to meet standards for some 80 other hazardous air pollutants that power plants emit.)

Specifically, Holmstead issued mercury standards that interpreted Section 111 to allow states to participate in a “cap-and-trade” program for power plants.  This program would have given each power plant a range of flexible compliance options.  A power plant that could not meet its mercury limit on its own would be allowed to comply using mercury credits ("allowances") acquired from another plant. 

Holmstead’s mercury standard earned support and high praise from the very segments of the power industry that he now represents.  Here are excerpts from the utility industry’s 2004 comments:

• The Utility Air Regulatory Group “agrees with EPA’s proposed determination that an interstate cap-and-trade program provides the ‘best system’ of mercury reduction for electric utility steam generating units. EPA is administering cap-and-trade systems successfully in the Acid Rain program and the NOx SIP Call rulemaking. These programs have demonstrated that a cap-and-trade system provides industry with the flexibility to comply with national emission levels in a cost-effective manner.”
• The Edison Electric Institute said:  “A multi-emission cap-and-trade program is the most cost-effective means to achieve substantial additional emission reductions from the power generation industry.…  This approach also provides the system-wide flexibility necessary to mitigate risk associated with trying innovative control technologies….  If EPA decides to pursue cap-and-trade under §111, EEI believes that EPA’s explanation of its legal authority to propose a cap-and-trade program under §111 of the CAA is reasonable.”

In the subsequent court challenge, the joint brief of state and industry intervenors said this:

EPA has offered compelling legal justifications for a mercury cap-and-trade program. …  [It] maximizes reductions in U.S. mercury deposition while providing EGUs flexibility to achieve those reductions in a cost effective manner. … A cap-and-trade program also benefits State citizens by allowing market forces to govern the choice and timing of emission controls.

Our carbon proposal does not include a cap; it sets only an emission-rate limit.  But our proposal and Holmstead’s mercury regulations both involve compliance flexibility:  they both harness market forces by allowing a power plant to comply through measures that effectively reduce total power sector emissions, but take place beyond the borders of the plant. 

And even though we’re not proposing a cap-and-trade program, if you examine the legal analysis of Section 111 supporting NRDC’s recommended carbon standard, you’ll find that it’s quite similar to the legal analysis that Holmstead put forward to support his mercury standard.

Ultimately, the U.S. Court of Appeals for the District of Columbia Circuit rejected Holmstead’s mercury standard in New Jersey v. EPA.  The court did not address the availability of flexible compliance techniques under Section 111.  Rather, the court held that EPA had violated the law by removing power plant mercury emissions from the more stringent protections of Section 112. 

Holmstead will doubtless point out that NRDC was a petitioner in the New Jersey case and opposed his mercury cap-and-trade program under Section 111.  True enough, but our primary concern was that cap-and-trade or other compliance flexibility provisions that shift the location of emissions are utterly inappropriate for a potent brain poison with localized consequences, like mercury.  Mercury and other toxic air pollutants from power plants belong under the stringent technology- and public health-driven provisions of Section 112.  That is why our primary argument was against the attempt to shift the mercury regulations from Section 112 to Section 111.

Unlike carbon pollution, mercury is a highly toxic nervous system poison with disproportionate local impacts.  People who live in the shadow of mercury-emitting plants, especially pregnant women and young children, are exposed to higher levels of this toxin than people who live elsewhere.  This is true even though some part of the mercury pollution burden circulates globally.  With toxic pollutants that have localized impacts, cap-and-trade and other flexible compliance methods that shift the location of emissions and reductions from one community to another are ethically and legally unacceptable. 

That’s why NRDC joined the successful suit to block Holmstead’s mercury plan, and we’re pleased that the Obama EPA has replaced it, as the law requires, with the strong Mercury and Air Toxics Standard (MATS) issued last year under Section 112.

The dangers from carbon dioxide and other climate-changing pollutants are severe, but they are not localized threats to the people living near the pollution-emitting plants in the same way as with mercury and other toxic pollutants.  And now that we have the MATS standard and updated limits for power plants’ soot- and smog-forming pollutants, health protections for nearby residents have been greatly strengthened.  Given the different characteristics of carbon pollution, it is appropriate to set carbon standards for existing power plants under Section 111.  Flexible compliance options will allow for a greater total carbon pollution reduction at lower cost, and that’s why we have included them in our plan.

The power sector favored compliance flexibility options when the subject was mercury.  So why oppose similar options when the subject is carbon?  That’s the element of irony.