Setting State Carbon Pollution Targets

In June, EPA proposed  the first-ever carbon pollution standards for fossil-fuel power plants.  Since then, a bevy of pundits have been busy finding fault with various aspects of the proposal.  For the most part, these critiques are off-base, failing to highlight the most important issues with the proposal, while spilling a lot of virtual ink without pointing out available remedies where there are shortcomings.

The most important questions are how much of a clean-up in power plant carbon pollution does the EPA standard accomplish and what are the best ways to improve its performance.  But that is not what many bloggers want to talk about.

A popular theme is the apparent disparity in the emission rate targets EPA has proposed for each state.  This is the focus of a recent article by two Brookings Institution authors in the Washington Post.  The article gets a few things right, several things wrong and ignores the most important issues confronting EPA: does EPA’s proposal adequately tap the potential for clean energy resources, like wind, solar, energy efficiency, to reduce the carbon footprint of the U.S. power fleet, and if not, how can the standard be improved?

To start, we should recognize what a tremendous accomplishment the EPA proposal is.  It is a flexible, innovative approach that ends a decade of delay that was triggered by President George W. Bush’s Canute-like declaration that “carbon dioxide is not a pollutant.”

In the course of eleven months EPA carried out a number of challenging tasks.  EPA reached out to hundreds of individuals and institutions to gather the best ideas on how to cut carbon pollution from America’s biggest sources---existing coal and gas-fired power plants.  The Agency then took all those ideas and, adding many of its own concepts, developed a detailed roadmap for reducing power plant carbon pollution on a state-by-state basis.  This was hard work and would have been impossible without EPA’s dedicated professional staff and strong leadership from President Obama and EPA’s top officials.

Now to some details.

The Brookings authors are correct that the proposal does not achieve much pollution reduction from the most carbon-polluting states (such as Kentucky, West Virginia, and North Dakota).  But they speculate without any evidence that this may be due to political considerations.  In fact, the reasons these states have lax targets are due to the relative weight EPA’s technical formulas assign to the various alternatives to burning coal to make power.

There are two major reasons EPA’s current formulas produce a wide range of state targets.  First, the formulas estimate reductions from increasing generation at natural gas power plants to displace coal plant generation.  This results in a lot of reduction potential in states with a large amount of natural gas power plants but it results in no reductions in states (like Kentucky, West Virginia, and North Dakota) with few or no gas plants.  Second, the current formulas do not incorporate large amounts of the cleanest resources: energy efficiency and renewable energy.  So, under EPA’s current formulas those cleaner resources, which every state can use more heavily, fall short of their potential to reduce carbon pollution in all the states.

The full portfolio of electricity services that are available to meet our power needs with less carbon pollution includes demand-side energy efficiency, renewables like wind and solar, continued operation of those nuclear plants that can be operated safely and economically, operation of efficient natural gas plants, and, where needed, use of existing coal plants that are made more efficient (and in some cases, co-fire lower carbon fuels to further cut emissions).  EPA does and should examine each of these approaches in its assessment of the amount of carbon pollution reduction that states can feasibly achieve.  But we will get the cleanest and safest results by relying most heavily on the resources at the top of the list. 

The biggest missed opportunity in EPA’s approach is that the Agency underestimates the potential for energy efficiency and increased renewable energy generation to reduce coal and gas plant pollution.  Also, the technical manner in which EPA’s formula accounts for renewable energy and energy efficiency understates their potential to displace coal and gas generation. 

There are straightforward remedies to the problem of lax reduction targets in some states.  First, EPA can adopt a better approach to estimating the growth potential for renewable energy and adopt stronger targets that more accurately reflect that potential.  EPA does not ignore this option.  Indeed, it specifically solicits comment on an approach that would result in a more realistic estimate of renewables potential—one that is not anchored to what some states already have done but rather rests on solid assessments of what states can do beyond the steps they have already taken.  Second, EPA can capture more of the benefits of energy efficiency with more ambitious assessments of what is possible.  The leading states have shown what is possible.  Third, EPA can revise its formulas so that additional generation from renewables and power savings from energy efficiency will displace coal generation, thus eliminating the pollution from that generation.

The Brookings authors also argue that the proposal is “unfair” to states that have substantial natural gas power capacity or nuclear capacity, or have adopted policies to promote renewables and energy efficiency.  This too is off-base. 

In writing the Clean Air Act, Congress adopted a common-sense policy: it authorized EPA to set pollution standards based on methods that are shown to be technically feasible and economically reasonable.  Thus, EPA would be following the law and acting fairly if it based its assessment of how much a state could clean up on all the circumstances in the state, including its potential to use more renewable energy, opportunities for energy efficiency, the availability of unused natural gas power plants, and contributions from nuclear plants. 

In fact, EPA’s proposed formulas stop well short of harvesting all the emission reduction potential of current state activities.  For example, the authors are incorrect about EPA’s treatment of nuclear generation.  First, EPA includes only the potential contribution of a mere 6% of the state’s 2012 nuclear generation in developing the state’s target rate.  In addition, EPA excluded announced retirements from its calculation of “existing” nuclear capacity.  Thus, a state’s emission rate target would become appreciably more difficult to achieve only if it retired substantial amounts of nuclear capacity in addition to already announced retirements and replaced that generation with higher carbon pollution sources.

For renewables and energy efficiency, a number of states have adopted ambitious deployment policies.  EPA did not base each state’s target on the policies already adopted in that state, although that would have been a reasonable approach.  In fact, for some states, the EPA formulas assume less renewables generation and energy efficiency savings in 2030 than the state already achieved in 2012.

The most important steps to achieving greater carbon pollution cleanup at reasonable costs under EPA’s standard are to increase reliance on efficiency and renewable energy and expand the techniques used to cut emissions from the fossil power plants that continue to operate.  This ought to be the focus of informed commentary on this important rule.

But instead of applying their talents to developing specific modifications to the EPA formulas, the Brookings authors and others are using the EPA proposal to beat the currently moribund horse of new legislation to cut power plant carbon pollution. 

News Flash Number 1: We have a legislative approach to cutting this pollution.  It is called the Clean Air Act, passed back when Congress was a functioning institution.  News Flash Number 2: The current Congress cannot be conjured into a body that would enact any sensible carbon pollution reduction program. Calling for that rather than proceeding to use the current Act in a common-sense fashion is as misguided as destroying the village to save it.

EPA has done an enormous amount of work to produce a detailed proposal that is based on the core concept of allowing power plant operators to cut carbon pollution by using all the tools that these operators use in their daily operations to deliver electric services.  By and large those services are reliable and affordable.  When EPA and state standards require it, these services will be less carbon-polluting too.  Let’s use our brainpower and powers of persuasion to solve the problem at hand with the tools Congress has already provided.