Part of NRDC’s Year-End Series Reviewing 2022 Climate & Clean Energy Developments
After two momentous events in 2022 – the Supreme Court’s decision in West Virginia v. EPA and Congress’s enactment of the Inflation Reduction Act – new standards to cut carbon pollution from power plants are essential to meeting the nation’s climate protection targets and are high on the Environmental Protection Agency’s priority list for the new year.
In West Virginia the conservative Supreme Court majority announced the “major questions doctrine” and rejected the novel regulatory approach EPA had adopted in its 2015 Clean Power Plan. The decision signals potentially daunting new obstacles for federal agencies trying to address emerging challenges of the modern world. The Court found that Congress hadn’t given a clear enough authorization in Section 111(d) of the Clean Air Act for the “generation-shifting” strategy that EPA had chosen. At the same time, the Court acknowledged EPA’s “traditional” authority to set standards under that section based on pollution controls that “caus[e] plants to operate more cleanly.” That’s why we called the decision “a setback, not a death blow” for EPA climate regulations.
Six weeks later, Congress passed and President Biden signed the Inflation Reduction Act (IRA), breathing new life into the EPA’s carbon-cutting authority. The new law provides large tax credits and grants for technologies that fit the Supreme Court’s description of EPA’s “traditional” authority, as well as for renewable power, batteries, and energy efficiency measures. Those incentives are already shifting power companies’ investment decisions. The IRA also expressly designates greenhouse gases as Clean Air Act “air pollutants” and includes a renewed mandate for EPA action on power plants.
The power sector has made pollution progress in response to market forces and standards for other pollutants – between 2005 and 2021 emissions of sulfur dioxide were down 91 percent, nitrogen oxides 79 percent, and carbon dioxide 33 percent. But the very large remaining emissions still exact a big toll on public health and the climate. Power plants are still the country’s second largest carbon dioxide polluter, emitting more than 1.5 billion metric tons in 2021, nearly a third of the nation’s total. To prevent catastrophic warming, we need to bring these emissions down 80 percent from their 2005 peak by 2030, and to near zero soon after.
In response to the court decision and the new law, EPA has promised to propose new power plant carbon standards by the end of March next year. So, what are we looking for?
West Virginia ruled that the existing Clean Air Act did not provide clear enough authority for a regulation that deliberately caused power companies to shift generation from coal plants to solar and wind generators faster than market forces are already encouraging them to. As noted, however, the Court said EPA can set traditional standards that reflect the emission cuts power plants can achieve with pollution control technology. There are at least four such options:
First is improving the combustion efficiency (“heat rate”) of the plants. This is inexpensive but does not reduce emissions more than a handful of percentage points. Second, coal plants can burn a mixture of coal and natural gas. Since gas contains half the carbon of coal per unit of energy, co-firing gas with coal can reduce emissions. Some coal plants can switch entirely to gas.
The next two measures got a big boost with the passage of the IRA. Carbon capture and storage – grabbing CO2 from the plant’s smokestack and storing it deep underground – is a technological measure that can directly reduce carbon emissions at coal- and gas-fired power plants. The IRA increases the tax credit for CCS to $85 per ton of CO2.
And another measure is using hydrogen as a fuel. Hydrogen can be co-fired with other fuel or potentially used by itself. Since hydrogen contains no carbon, it can substantially cut emissions at both coal and gas plants. The IRA provides large tax credits for hydrogen production as well.
The IRA’s tax incentives dramatically reduce the cost of using CCS and hydrogen for power plant operators and their customers. That enables EPA to set stronger emission standards based on these technologies.
The IRA makes that explicit. First, the new law amends the Clean Air Act to expressly list carbon dioxide and five other greenhouse gases as “air pollutants.” The Supreme Court had already ruled them to be air pollutants in a landmark 2007 decision, Massachusetts v. EPA. Opponents of climate action have been looking for an opportunity, however, to get today’s more conservative Supreme Court to revisit Massachusetts, but the IRA blocks that effort by expressly locking greenhouse gases into the statutory text.
Second, the IRA expressly directs EPA to issue new standards. It adds a new Section 134 to the Clean Air Act entitled “Low Emission Electricity Program.” Subsection (a) provides funding to EPA for, among other things, these purposes:
(5) …to assess…the reductions in greenhouse gas emissions that result from changes in domestic electricity generation and use that are anticipated to occur on annual basis through fiscal year 2031; and
(6) …to ensure that reductions in greenhouse gas emissions are achieved through the use of the existing authorities of this Act, incorporating the assessment under paragraph (5).
The first clause directs EPA to update its assessment of the emission reductions expected to occur due to business-as-usual industry trends and the IRA’s incentives, without further standards. The second clause directs EPA to set new standards under its existing authority to make further reductions.
Both CCS and hydrogen qualify under West Virginia as pollution control measures implemented at power plants under the Supreme Court’s interpretation of Section 111 of the Clean Air Act. With tax incentives covering much of the cost, EPA will be able to set stronger standards than if the companies and their customers bore the full cost.
In this way, the IRA provides clear congressional intent to govern EPA’s future actions. Here Congress has clearly decided to incentivize these technologies and has expressly amended the Clean Air Act instructing EPA to set new standards taking those incentives into account.
It’s worth emphasizing that Section 111 standards are performance standards. They set the emission rates sources must meet, but sources are not required to use the technologies on which the standards were based. If the standards are based on CCS or hydrogen, some plant operators will likely choose to install and operate those technologies. Others may adopt alternative control technology at their plants. And reflecting current trends in the industry, still others may choose to replace those plants with alternative sources of power generation. Nothing in West Virginia constrains plant operators from adopting different compliance strategies.
Once the standards are set, power plant operators will need to choose their compliance paths, subject to state and public review. These are decisions with potentially large impacts on surrounding communities, and they must be made through transparent processes with full public participation. Both CCS and hydrogen require safeguards – for example, strong rules to prevent CO2 leakage from pipelines and underground depositories, and to favor “green” methods of making hydrogen. And as with all major industrial facilities, we must safeguard communities already overburdened by a legacy of pollution.
Unquestionably, the major questions doctrine articulated in West Virginia is a dark cloud threatening the federal government’s capacity to meet complex challenges of our modern economy and society. The IRA, however, shines a shaft of light through that cloud on the matter directly at issue in West Virginia. It provides a clear and up to date statement of congressional intent for future regulation of power plants’ climate pollution. It codifies into the Clean Air Act text that greenhouse gases are air pollutants. It amends the Clean Air Act to direct EPA to regulate power plants carbon pollution again. And it provides large tax incentives and other federal support to reduce the cost of deploying the kind of technologies that fit within the constraints West Virginia imposes.
That’s not to lessen the threat that the major questions doctrine poses beyond this specific area. The IRA was enacted through a special legislative procedure called reconciliation that allows one budgetary bill per year to pass the Senate on a simple majority vote and that, practically speaking, can be used only when the House, Senate, and presidency are in the same party’s control. Passing new legislation any other way is exceedingly difficult in this age of partisan gridlock.
But the IRA’s passage does mean that EPA has the mandate to act again on power plants’ carbon pollution. As we enter the new year, we’ll be pressing EPA to act on its announced schedule in March, and to issue strong standards that meet the dire threats of the climate crisis.