Harvard Law School Report Affirms Energy Efficiency Can Be Part of Clean Air Act Standards for Power Plants

There’s no question that improving energy efficiency in households, factories and commercial buildings is the most cost-effective way to reduce carbon pollution. A newly released paper from Harvard Law School experts should help resolve the debate about whether energy efficiency can legally be used as a way to comply with soon-to-be-proposed Clean Air Act standards for carbon pollution from power plants.

The debate

When NRDC released a report in December 2012 on how the Environmental Protection Agency could achieve significant reductions in carbon pollution from power plants at reasonable cost by relying on a mix of compliance options including energy efficiency, attorneys representing the oldest dirtiest power plants responded by attacking the inclusion of flexible compliance options. This was a reversal of their previous endorsement of such options. They now argued that the Clean Air Act only allows consideration of pollution reductions made within a power plant’s fenceline. 

Harvard Law School’s Environmental Law Program’s Policy Initiative has taken on this question and after a thorough legal analysis, concluded that the Clean Air Act does allow energy efficiency to be part of new standards for carbon pollution from power plants. This paper, authored by Kate Konschnik and Ari Peskoe, is particularly timely since EPA is fast approaching the June 2014 deadline for it to propose standards for existing power plants.

The paper's legal analysis

I’ll highlight just a few aspects of the Harvard paper’s legal analysis here. First, the paper explains that Section 111(d) of the Clean Air Act provides a broad delegation to the Adminstrator of the EPA to determine the “best system of emission reduction.” Nothing in the language restricts EPA or states to emission reduction measures that can be achieved only within a source’s fenceline.  Second, the paper points out that Section 111(d) incorporates, through a reference to Section 110 of the Act, the mix of beyond-the-fenceline emission reduction measures explicitly recognized in that Section. Third, the paper notes that the use of energy efficiency as a compliance option is particularly appropriate in the electricity sector because the system is a closed loop – electricity generators operate only to meet their consumers’ demand so energy efficiency directly reduces generation and emissions.

Finally, the Harvard paper points out that EPA has already issued 111(d) standards that extended beyond the fenceline by allowing pollution trading programs, first for municipal waste combustors and later for mercury emissions from coal-fired power plants. These precedents support use of the flexible compliance options in the carbon pollution standards.

The “symmetry principle”

The Harvard Paper also addresses the relationship between compliance options and the level at which carbon pollution standards are set. The paper identifies in the Clean Air Act and caselaw a “symmetry principle” -- the strength of the pollution standards must match the compliance options available. If cost-effective compliance options like energy efficiency will be available, then the standard should be set based on what those compliance options can achieve. Some have asked to have their cake and eat it too by limiting EPA to inside the fenceline options when it sets standards but letting power plants use flexible options like efficiency at the compliance stage.  The Harvard Paper shows that this approach fails to meet the Clean Air Act requirements. “Any system that has been adequately demonstrated, … must be considered when setting the standards.”

Demonstrated success of energy efficiency

Finally, the Harvard paper shows that the capacity for energy efficiency to reduce emissions has been well demonstrated. Energy efficiency programs already are proven as a reliable and cost-effective way to reduce greenhouse gases because they lead to reduced electricity generation --  and the pollution that generation creates. The paper points out that energy efficiency has been recognized as an available resource by grid operators, states, utilities and energy service companies for a range of purposes including assuring grid reliability. Indeed, at least 44 states and the District of Columbia run energy efficiency programs with a combined budget of $6 billion and more than half of the states have energy efficiency targets for utilities.

There can be little doubt that energy efficiency, which saves consumers money at the same time it reduces pollution, makes sense as a matter of policy. Indeed, NRDC’s most recent analysis shows that by incorporating flexible compliance measures even bigger carbon savings can be achieved than NRDC originally thought. Fortunately, Harvard’s new analysis helps demonstrate that this approach is grounded in both good policy and good law.