EPA’s Power Plant Carbon Rules Are Critical—and Complex. Here’s What to Know, and What to Watch.

April 20, 2023 | 1:39 pm
Clouds of pollution billow over two smokestacks, part of a power plant in Minnesota, against the backdrop of a pink sky and blue waterTony Webster/Wikimedia Commons (CC BY-SA 2.0)
Julie McNamara
Senior Energy Analyst

All across the country, coal- and gas-fired power plants are still running, still polluting, and still showing signs of staying relentlessly online. And more gas is slated to come. This is despite the clean energy progress the power sector has experienced to date—and despite the groundwork laid for more progress from leading states, as well as the recently passed Inflation Reduction Act (IRA).

The ongoing pollution from these power plants is an affront to public health and wildly incompatible with every climate ambition this country—and this world—has.

Because beyond the importance of cleaning up the power sector itself, we also need a clean electricity system to enable the decarbonization of so many other aspects of our economy, from vehicles to homes and businesses to industrial processes. Which means the consequences of these polluters unabashedly continuing to pollute aren’t just severe—they’re compounding. 

The IRA gave us effective tools for cleaning up the power sector through dedicated support for the rapid and widescale deployment of renewable resources and the technologies that support them. But to bring those solutions fully to bear, we also need to force a reckoning with the problem itself. Multiple lines of analysis make clear that regardless of how cheap wind and solar power get, without directly addressing pollution from coal and gas plants, the country’s clean energy transition will not happen fast enough.

One critical tool for forcing that reckoning comes from the Environmental Protection Agency (EPA).

Through the Clean Air Act, and as affirmed—and reaffirmed—through multiple legal sagas, EPA is statutorily obligated to address carbon pollution from fossil fuel-fired power plants.

The Supreme Court clipped the agency’s wings in its 2022 West Virginia v. EPA decision, but it did not ground EPA. Indeed, EPA still retains the ability to set strong standards that curtail carbon pollution at the scale, speed, and rigor required. How it goes about doing that, though, is complicated and fraught. Here are six things to know and watch for as these rules are proposed, evaluated, and set.

1. Section 111 of the Clean Air Act constrains how EPA sets standards—but gives states wide latitude in implementation.

A multi-decade legal history, including four Supreme Court decisions, has led to unimpeachable clarity on this one point: EPA has a statutory obligation to regulate carbon emissions from power plants under Section 111 of the Clean Air Act.

So what follows from that obligation?

Section 111 employs a two-phase process where, once EPA moves to regulate pollution from a new source—here, power plants—(111(b)), it is then required to regulate that pollution from existing sources, too (111(d)). There are currently carbon standards in place for new power plants, which were set back in 2015; however, there are no standards for existing plants as neither the 2015 Clean Power Plan nor the 2019 Affordable Clean Energy Rule—both of which targeted existing facilities—remain in place. As a result, EPA will be updating standards for new plants and fully developing standards for existing plants.

EPA goes about setting standards for new and existing plants in a similar way, but those standards are then implemented in very different manners with the potential to result in very different outcomes, as detailed below.

To set the performance standard (new) or emission guideline (existing), EPA develops:

“a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.”

From this, two key terms to note: 1) the “best system of emission reduction” (BSER), which is how the emission limitation is to be achieved, and 2) “adequately demonstrated,” which sets some bounds on the types of interventions EPA can consider as BSER. (For more on BSER options available to EPA, see #4 below.)

Once EPA sets a performance standard for new plants, those standards are applicable to every new facility that follows, full stop.

However, once EPA sets an emission guideline for existing plants, that is only the first step; the agency then hands the process over to states to develop implementation plans for achieving compliance with that guideline.

And here’s where it gets interesting.

While the BSER is based on interventions that directly reduce emissions from individual polluting facilities, when it comes to actually complying with those emission reduction requirements, states do not have to employ the same approach. In fact, states have wide flexibility in developing implementation plans to achieve equivalent emission reductions, with guardrails from EPA primarily focused on ensuring states don’t allow polluter loopholes.

This difference between what EPA relies upon to set the emission guideline, and how states go about achieving it, holds enormous power, and enormous opportunity. Because while after West Virginia v. EPA the agency is now largely limited to BSERs based on pollution reduction measures applied at or to a power plant, such as carbon capture and storage (CCS), states can develop implementation plans that achieve that same level of emission reduction by, for example, indirectly lowering emissions from coal and gas plants by ramping up the use of renewable resources and energy storage instead.

2. Despite the West Virginia v. EPA ruling, EPA can still establish rigorous carbon emissions standards.

In June 2022, the Supreme Court issued a 6-3 decision in West Virginia v. EPA finding that EPA had overstepped the authority granted to it by Congress in the Clean Power Plan when it set a BSER based on shifting electricity generation away from coal plants to cleaner energy resources. Critically, the Supreme Court did not reject EPA’s authority to regulate carbon emissions from power plants, only the nature by which the agency can exercise that authority.

In issuing its decision, the majority relied upon a new-to-the-Supreme-Court framework called the “major questions doctrine.” In effect, the Court argued that for decisions of “such economic and political significance”—here, shifting electricity generation from one resource to another—there must be clear congressional authorization.

The rise of the major questions doctrine threatens a chilling effect on agencies as it includes no rubric for evaluating when something might cross a threshold of so-called significance, it deeply undermines the intentionally flexible and forward-looking structure of laws like the Clean Air Act, and it ultimately puts the Supreme Court—not Congress, not agencies—in the policymaking and expert evaluation role.

Despite the concerningly broad implications of the West Virginia v. EPA decision, though, the ultimate impact for EPA in devising carbon standards is narrower and relatively straightforward to navigate. Specifically, while the Court did not ultimately rule out all possible interventions beyond direct pollution controls at individual sources, it did make clear that direct pollution controls were the clearest course, meaning that moving forward, EPA is likely to devise BSER based on things that can be applied “at or to” a polluting facility.

3. The carbon standards are being issued in parallel with multiple other EPA rulemakings focused on power plants and public health—all of which add to the headwinds facing fossil fuel plants.

Because of the nature of the Clean Air Act, EPA typically issues regulations pollutant by pollutant, even when, as is the case for power plants, a given polluter releases all types of environmental- and health-harming pollution. As a result, despite the slurry of pollutants coal and gas plants release into both air and water, the carbon standards will only directly regulate carbon emissions.

However, EPA is also undertaking a range of parallel rulemakings focused on other major power plant pollutants of concern, especially as they relate to public health. For example, EPA has rulemakings just completed, now underway, and soon to be coming on mercury and other hazardous air pollutants, ozone emissions, particulate matter emissions, coal ash, coal wastewater effluent, and more.

Each rule is moving independently, but they all impact power plant operations. The full suite of rules also gets reflected down the line when state regulators are evaluating the relative economics of a given power plant facing multiple compliance requirements compared to clean energy alternatives.

4. Will EPA use CCS or other means as the BSER?

There are three main options available to EPA when determining the BSER for coal- and gas-fired power plants: heat-rate improvements (HRI, i.e., increasing efficiency of operations), blending gas with coal-firing or blending hydrogen with gas-firing, and applying carbon capture and sequestration (CCS). These are not the only options available, but they represent the major “inside the fenceline” approaches—the approaches permitted under the West Virginia v. EPA decision—as well as the spectrum of emissions reductions potentially required, from HRI requiring ~5 percent or less, to CCS requiring all the way up to 90 percent, and fuel blending falling somewhere in the middle.

When EPA evaluates the BSER, it may consider different interventions not only for different types of power plants and fuel sources, but also for different types of power plant operations. For example, “best” systems for emission reductions may have different technical and economic implications for power plants that run very infrequently compared to power plants that run all the time.

As detailed above, when EPA sets the BSER it must consider whether something has been “adequately demonstrated,” as well as technical and economic feasibility, alongside other factors. This can result in different BSERs for new sources versus existing sources, as some interventions can be easier to incorporate from the start. Incentives within the IRA, including the 45Q carbon capture and sequestration tax credit as well as the 45V hydrogen production tax credit, may make certain interventions pencil out now that would not have before.

It’s clear that the option available to EPA with the potential to require the greatest carbon emission reductions from fossil fuel-fired power plants—by an overwhelming margin—is CCS with a very high rate of capture. For new power plants, that would mean no new gas plants coming online without meeting strict capture requirements (partial CCS is already required for new coal plants). For existing coal and gas plants, that would mean EPA requiring states to devise plans to reduce power plant carbon emissions by the equivalent of what would result from a BSER based on a high rate of capture, such as 90 percent—but however they best see fit, including through the use of renewables and energy storage, not CCS.

In the proposed rulemaking, EPA must document how and why it arrived at its BSER determinations, all of which will then be open to expert evaluation and public comment.

5. How will EPA manage possible loopholes?

The significant flexibility inherent to Section 111 creates valuable opportunities for forward-looking state implementation plans; however, that flexibility can also cut the other way, running the risk of enabling polluter loopholes. Some of the most prominent of these include letting coal and gas plants slated for far-future retirement continue to pollute in the interim; allowing lengthy timelines for development and subsequent execution of implementation plans; slow phase-in of compliance targets; lack of rigor of emissions accounting for co-fired resources like natural gas, hydrogen, biomethane, and biomass; and permitting weak allowances for emissions exceedances in the case of grid reliability concerns.

A number of these issues are currently being addressed in a parallel rulemaking, which applies across Section 111 rulemakings, not just the carbon standards. In that rulemaking, EPA is tightening timelines and raising the bar for states to excuse a given polluting source from compliance. Other aspects, however, will need to be addressed directly within the power plant carbon rulemaking, and could meaningfully shape the scale, scope, and pace of actual carbon emission reductions resulting from the rules.

6. How will EPA ensure durable community representation, engagement, and protections?

Coal- and gas-fired power plants harm people all across the country; however, those harms are disproportionately borne by the communities living in the areas immediately surrounding power plants and the fossil fuel infrastructure that supports them. EPA has a responsibility to address this environmental injustice in the carbon standards—and it has multiple means of doing so.

From the outset, and at a minimum, EPA must ensure that all proposed BSERs are subject to rigorous and transparent distributional impact analyses; that public hearings are widely accessible in geographic scope and timing; that community engagement is a required compliance component for states; that if a BSER is based on CCS, it includes rigorous guardrails to ensure safety and performance of capture equipment and supporting infrastructure both within the rule and in parallel administration efforts; and that compliance requirements include protections against the creation of pollution hot spots. And throughout, the agency must be setting robust, truly protective public health standards across the array of health-harming pollution generated by coal- and gas-fired power plants. Further, EPA should also facilitate connections between fossil fuel workers and energy communities and broader administration efforts to advance just transition priorities.

What comes next

Section 111 of the Clean Air Act is an imperfect tool—but it is still a powerful tool, and coal- and gas-fired power plant carbon pollution needs to be addressed.

What’s more, if EPA gets it right, the carbon standards could translate to:

1) no new gas plants coming online without clearing a very high bar for carbon pollution controls, meaning clean energy alternatives are likely to overwhelmingly win the day in head-to-head match-ups;

2) no continued use of existing coal and gas plants without accounting for all the carbon pollution these power plants cause—and when states turn that accountability into action, it will be clean energy solutions, not power plant tinkering, that will be the clearest forward course; and

3) as a result, the delivery of outsized benefits to consumers’ pocketbooks and the health and wellbeing of people and communities all across the country.

But it will take a lot to get these standards right, and there are a lot of ways they could go sideways. Furthermore, a lot of vested fossil fuel interests will be attempting to undermine them. EPA holds enormous responsibility on behalf of people and the environment as it navigates this path. Public and expert engagement will be critically important to ensure the agency stays the course.