Four Important Points About EPA’s Affordable Clean Energy Rule

By Dena Adler, Jessica Wentz, and Romany Webb

On Wednesday, June 19, the U.S. Environmental Protection Agency (EPA) finalized its so-called Affordable Clean Energy (ACE) rule. The ACE rule repeals and replaces the 2015 Clean Power Plan (CPP) which aimed to reduce carbon dioxide emissions from existing power plants by 30% below 2005 levels by 2030. To that end, the CPP established state-specific targets for reducing emissions from the electric power sector, and required states to develop plans for achieving those targets. The ACE Rule takes a different approach, directing states to set standards of performance for individual power plants, and thus effectively allowing them to decide how much to cut emissions. Here are 4 important things to know about the ACE Rule:

1. The ACE Rule Directs States to Establish Performance Standards for Power Plants Based Solely on Heat Rate Improvements: Section 111(d) of the Clean Air Act (CAA) provides for the establishment of “standards of performance” for certain existing sources of air pollution. Under the Act, the standards must reflect the emissions reductions that can be achieved through application of the “best system of emission reduction” (BSER) for the pollutant and source.

In the CPP, the EPA defined the BSER for carbon dioxide emissions from existing power plants based on three “building blocks,” reflecting (1) heat-rate improvements at coal-fired power plants, (2) increased utilization of natural gas combined cycle units, and (3) increased use of renewable energy. However, EPA has now concluded that BSER should not include so-called “outside the fence line” measures, such as those in building blocks 2 and 3. To justify that conclusion, EPA points to section 111(a) of the Clean Air Act, which requires standards of performance to reflect the emissions reductions achievable through “application” of the BSER. Thus, according to EPA, the BSER must comprise systems that can be “applied” or “put into operation” at the emissions source (i.e., in the case of the ACE Rule, the power plant). Contrary to its previous view, EPA asserts that the BSER “cannot be premised on a system . . . that is implementable only through the combined activities” of multiple sources, such as generation switching (see point 2 below for more on this).

The ACE Rule redefines the BSER to only include on-site, heat-rate efficiency improvements at coal-fired power plants. The Rule includes a list of “candidate technologies” for improving heat-rate efficiency that states can use to establish standards of performance for individual power plants. (This is consistent with the approach in the proposed rule published by EPA in August 2018 and discussed in our previous blog post here). The standards will, therefore, be significantly less stringent than those established under the CPP and result in fewer emissions reductions. According to EPA, the ACE Rule will reduce carbon dioxide emissions by just 11 million short tons in 2030, whereas the CPP would have delivered emissions reductions of 415 million tons (both relative to a no action baseline).

2. EPA Maintains That It Must Repeal the CPP Because It Exceeds EPA’s Statutory Authority Under the Clean Air Act: At the heart of EPA’s argument to repeal the CPP is the very question contested in the litigation challenging the CPP (currently held in abeyance by the D.C. Circuit): does Section 111(d) of the CAA grant EPA authority to issue quantitative emission guidelines based on a BSER that includes so-called “outside the fence line” measures such as fuel switching? In the just finalized rule, EPA asserts the CAA does not grant this authority on the basis of the plain meaning, structure, and legislative history of the CAA. The agency maintains that it has the discretion to change its interpretation of its legal authority so long as it provides a reasoned explanation for the change.

However, it is unclear that the courts will defer to the agency on this question. Under the Chevron doctrine, agencies receive deference from the courts in their reasonable interpretations of statutes that they administer when the statute is silent or ambiguous on a matter. But courts may answer the question of whether EPA has the authority, or jurisdiction, to define BSER as it did in the CPP at the first step of the Chevron analysis, looking to the language of the statute and Congressional intent. If the courts determine the statute unambiguously grants EPA authority to determine the BSER as it did in the CPP, then EPA’s current argument—that it must repeal the CPP because it exceeds their authority—falls apart. Alternatively, if the courts find the statute is ambiguous, the courts may still disagree with EPA’s new interpretation of the scope of the statute’s delegation, and find that the CPP reflects a reasonable interpretation of an ambiguous provision in the CAA.

Notably, EPA has tried this very move before—and lost before the Supreme Court. In Massachusetts v. EPA (2007), EPA argued that congress did not intend for the EPA to regulate GHGs, and therefore they lacked legal authority to do so. The Supreme Court disagreed with the EPA’s interpretation, finding that though the CAA did not expressly mention GHGs, it unambiguously granted EPA jurisdiction to regulate “any air pollutant.” The Supreme Court held that the absence of explicit reference to GHGs in the CAA did not establish the sort of ambiguity that would warrant Chevron deference to the EPA’s interpretation of its jurisdiction, stating that “[t]here is no reason, much less a compelling reason, to accept the EPA’s invitation to read ambiguity into a clear statute.”

The particular issue of how Chevron may or may not apply in this instance is a complex knot, which Professor William Buzbee seeks to disentangle in this recent article. Undoubtedly, it will be litigated, joining a slew of other climate change litigation summarized in a recent Sabin Center report. As discussed in the report, the courts have not tolerated attempts by the Trump Administration to flout administrative law or statutory obligations.

3. EPA Has Attempted to Split up the CPP Repeal and Final ACE Rule as Separate Final Agency Actions: Though EPA has bundled the CPP repeal and ACE rule within the same notice, EPA argues that the CPP is a “distinct final agency action” that is “not contingent upon the promulgation of ACE or the new implementing regulations.” What is the intended result of this bifurcation? EPA’s position is that should the ACE rule or its associated implementing regulations be struck down by a reviewing court, the CPP repeal should be found severable and still stand because it rests on a separate legal basis. However, this proposal raises at least several other potentially messy questions. First, should the CPP repeal be struck down, will that doom the ACE rule? To elaborate, if the CPP is upheld and its repeal is struck down, then the very existence of the CPP will prove that the ACE rule is not the best system of emission reductions, because it is far less effective than the CPP.

Second, in the scenario this proposed bifurcation most likely targets, that the CPP repeal is allowed to stand despite the courts striking down the ACE rule, what sort of rule will EPA issue next? EPA will not be absolved from regulating greenhouse gas emissions—Massachusetts v. EPA (2007) and the resulting Endangerment Finding place nondiscretionary obligations on the agency to regulate GHGs as an air pollutant that endangers the public health and welfare. EPA will be sent back to the drawing board to issue new regulations. Meanwhile, businesses will suffer from a lack of regulatory certainty, citizens will bear the health burden of increased air pollution, and emissions will further exacerbate climate-change related harms. In this event, EPA will have made a complicated legal situation an even bigger mess and imposed significant costs on society in its attempt to kick the regulatory can down the road.

4. EPA Revised Its Methodology to Downplay the Public Health Impacts and Costs of Replacing the CPP with the ACE Rule: In the regulatory impact analysis (RIA) that accompanied the ACE rule proposal, EPA estimated that replacing the CPP with this proposal would result in an additional 470-1,400 premature deaths, 48,000 cases of exacerbated asthma, 42,000 lost work days, and 21,000 missed school days as compared to a baseline where the CPP was implemented. Now, EPA claims that this action will actually avoid 50 to 122 premature deaths in 2030 as well as 14,000 asthma attacks, 4,600 lost work days, and 8,200 missed school days. EPA’s cost and benefit estimates have also changed. Whereas it previously estimated that replacing the CPP with the ACE rule would result in billions of dollars of net “foregone benefits” under every scenario analyzed, it now claims that replacing the CPP with the ACE rule will result in annual net benefits between $120 million and $730 million.

The projections are dramatically different because EPA changed the baseline it used to estimate impacts. For the proposal, EPA compared implementation of the ACE rule to a baseline in which the CPP would have been implemented – a reasonable assumption, given that this rule was intended to replace the CPP. For the final rule, EPA now relies on a baseline in which there are no federal standards for CO2 emissions from power plants under Section 111 of the Clean Air Act. EPA claims this is reasonable because, as discussed above, it is treating the repeal of the CPP and the ACE rule as two separate actions and the ACE rule would be promulgated immediately after the repeal of the CPP. Of course, if the repeal fails as a matter of law then the entire regulatory impact analysis is flat out wrong, and the ACE rule cannot stand.

Some commentators had also raised concerns that EPA would downplay the effects of particulate matter pollution by assuming that there would be little or no health benefit to reducing emissions of particulate matter (PM) pollution beyond what is required by the CAA. There would appear to be no rational basis for this assumption, as peer-reviewed research has shown that such reductions would in fact reduce the number of deaths and cases of respiratory illness associated with PM pollution. Perhaps recognizing that it could not defend this position – and that such a methodology change would not help build a case for the rule in light of the revised baseline against which impacts are measured – EPA did not predicate its entire analysis on this assumption. Instead, it estimated public health impacts under a scenario in which reductions in PM concentrations beneath CAA thresholds did result in additional health benefits, compared those to a scenario in which reductions in PM concentrations beneath CAA thresholds did not result in additional health benefits, and noted that it was less confident in projected health impacts of PM concentrations at lower levels (see, e.g., FN 34 of the RIA).

The repeal and replacement of the Clean Power Plan is just one of the numerous deregulatory actions that the administration has initiated to repeal and revise federal climate protections. Earlier this week, the Sabin Center released a report which takes a critical look at the scope of these efforts and what the administration has actually accomplished with its rollbacks. We also track the latest regulatory developments on our Climate Deregulation Tracker, and we track efforts to suppress, distort or ignore science in our Silencing Science Tracker.


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