EPA’s Monkey Business Hides ACE Rule Emissions Increases

The U.S. Environmental Protection Agency (EPA) repealed the Clean Power Plan (CPP) and replaced it with a do-nothing dirty power plan last week. This blog digs into the analytical tricks the EPA used to confuse the public and hide the likely negative impacts of its new rule.

The EPA is required to provide the public with a “careful and transparent analysis of the anticipated consequences of economically significant regulatory actions.” Agencies do so through a Regulatory Impact Analysis (RIA). The RIA accompanying the EPA’s so-called “Affordable Clean Energy” (ACE) rule relies on the same dirty tricks used to cook the books on costs and benefits in the agency’s proposals, as we’ve detailed here, here, and here.

Even more nefariously, the final ACE RIA fiddles with baselines for evaluating the new rule and misrepresents both past and present policies to obscure the new rule’s likely costs and negative impacts. The final RIA conveniently scrubs away the EPA’s own projection a year ago that the ACE rule could actually increase harmful pollution, causing up to 1,630 more premature deaths and billions more dollars in climate and health damages annually by 2030 compared to the Clean Power Plan it replaces.

These deceptions are piled on top of other egregious faults with the ACE rule—chief among them the EPA’s failure to consider the enormous, cost-effective potential to strengthen the Clean Power Plan. With climate change worsening before our eyes, the costs of clean energy plummeting, and the industry already surpassing the Clean Power Plan’s initial goals, the EPA should have strengthened that plan, not cynically killed it off. Doing so could prevent thousands of premature deaths each year—up to 5,200 lives saved in 2030 alone—and bring about more than $100 billion in climate and health benefits annually (discussed here). Moreover, the agency’s cramped interpretation of its Clean Air Act authority in this rule is unlawful and serves as part of a broader Trump administration effort to prop up polluters by enfeebling the nation’s health and environmental laws.

Shifting the Point of Comparison

In an attempt to cover up the final rule’s impacts, the EPA scrubbed its analysis of a key point of comparison used in its proposal. 

When the EPA proposes to change a regulation, it is legally required to compare its new rule to what it replaces. The “no action” baseline is a projection of the world without the proposed policy change. Here, Trump’s EPA has repealed the CPP and replaced it with the ACE rule. This means that the “no action” point of comparison should be the CPP. The final ACE rule, however, only includes comparisons to a case in which the CPP never existed. And that deliberately obscures the climate and health costs of the CPP repeal.

When the EPA proposed the ACE rule, the agency found that replacing the CPP with the new rule would result in hundreds to thousands of additional premature deaths—up to 1,630 such lives lost in 2030—due to fine particle pollution caused by the increased emissions of sulfur dioxide and nitrogen oxides allowed by the ACE rule over the CPP. The EPA faced serious backlash for proposing a rule that would increase premature deaths from harmful air pollution.

But instead of improving the rule to avoid this extra pollution and health damage, the EPA manipulated its analysis to change the story. The EPA simply changed the point of comparison from the Clean Power Plan to a world without a standard in place. Even if the ACE rule allowed more pollution than the CPP, the EPA conveniently found that it would clean up power plant pollution a smidgen more than no regulation at all. 

Voila! The EPA simply “disappeared” the unfavorable comparison to the CPP. By shifting the comparison point, the EPA now makes it appear that the ACE rule would save lives instead of taking them.

To make this sleight of hand harder to see, the EPA further fudged its analysis of the CPP in its modeling of regulatory impacts. On three major factors—1) timing of implementation, 2) trading of CO₂ allowances, and 3) leakage mitigation—the EPA used modeling assumptions that don’t reflect how the CPP would actually have been implemented and prevent accurate comparisons between model runs.

Timing

The CPP set final emission reduction targets for the year 2030, with interim requirements beginning in 2022. The EPA’s final ACE analysis arbitrarily assumes a three-year delay in CPP implementation, with interim compliance beginning in 2025 and final targets effective only in 2033. With the power sector already surpassing the CPP’s initial targets—emissions were already down 28 percent from 2005 levels in 2018—the EPA has no reason to push back the CPP target of reaching a 32 percent reduction by 2030. So why do it? Well, the Integrated Planning Model (IPM) that the EPA uses for power sector emissions projections conveniently takes a “snapshot” every five years. Pushing off the CPP’s assumed compliance date to 2033 causes the full benefits of the rule to show up in the IPM modeling only in 2035. IPM projects a much smaller benefit in 2030. This makes the CPP look less effective than it really would have been, further obscuring the impact of the weaker ACE rule.

Trading

The CPP allowed states significant flexibility, including the option of setting up interstate allowance trading mechanisms. Many states would have adopted interstate trading to lower their power plants’ cost of compliance with the CPP targets. In the final ACE RIA, the EPA modeled: regional trading and national trading, as well as a limiting case in which trading is only allowed between power plants within the same state. The scenarios with regional or national trading would be more representative of the CPP than the case with only intrastate trading, but to skew things further, the EPA modeled the regional and national trading cases with the assumption of the three-year implementation delay. The EPA kept the original schedule only for the intrastate case.  

These new trading and timing assumptions further obscure the differences between the CPP and the ACE rule, to the apparent (but deceptive) advantage of ACE.

Avoiding Emissions Leakage

In issuing the CPP, the EPA recognized the need to prevent power companies from shifting generation to new power plants that were not covered by the limits on existing plants. Emissions from increased generation at new plants would erode the emission reductions required of existing plants. As a result, the CPP required states to take steps to prevent or offset this emissions “leakage” by extending emissions caps to new plants or by other methods. Leading analyses of the CPP from the Energy Information Administration, M.J. Bradley & Associates, and Rhodium Group all projected that states would adopt emissions targets covering both existing and new plants as the most likely approach under the CPP.

In the ACE RIA, however, the EPA modeled the new rule without any leakage mitigation measures. This further inflates emissions under the CPP, unfairly flattering the weak ACE rule.

By fiddling with these three factors, the EPA avoided presenting a scenario that’s truly representative of the CPP.

Employing the same IPM model that the EPA uses, NRDC analyzed a scenario that more closely represents the CPP. In our comments on the proposed rule, we showed that when correctly modeled, the CPP—with 2030 targets, national trading, and a leakage-prevention cap on both existing and new sources—would result in 41 million short tons of CO₂ emissions less than the No-CPP case in 2030. This is actually a smaller reduction than the EPA found for the CPP when it stuck to the original implementation schedule and modeled only intrastate trading—that case shows 62 million tons of reductions below the No-CPP case in 2030. But NRDC’s modeling shows much greater reductions than the EPA’s modeling that assumes the unwarranted three-year delay in CPP implementation. 

The figure below compares these NRDC and EPA modeling results.  

In the final ACE rule, the EPA estimated that carbon dioxide emissions would be 11 million tons lower in 2030 under ACE than in the No-CPP scenario, as shown on the far right of the figure above. NRDC’s modeling and the EPA’s sole no-delay case (the two scenarios on the left in the figure) show that, compared to the No-CPP case, the CPP would reduce CO₂ emissions by 30 to 51 million tons more than the ACE Rule. That means the ACE Rule would actually increase carbon pollution compared to keeping the CPP in place.

These details matter: the EPA used inaccurate scenarios and inappropriate comparisons to make it appear that the ACE rule would reduce emissions and save lives, when in fact the opposite is true.