Abby L. Harvey
GHG Monitor
6/20/2014
The Environmental Protection Agency’s “outside the fence” approach in recently released proposed carbon emissions guidelines for existing power plants got a lot of attention during a Bipartisan Policy Center event this week, with Jeffery Holmstead, former Assistant Administrator for Air and Radiation with the EPA and Susan Tierney, former Assistant Secretary for Policy with the Department of Energy, debating at length the legality of such a regulatory framework. The regulations proposed early this month set emission reduction targets for each state and require states to develop their own plans to meet their targets by 2030. However, Holmstead questioned the legality of such an approach, and said it will make it difficult for the regulations to withstand a challenge in court. “As someone who actually believes in the rule of law … I think this clearly goes well beyond what EPA is allowed to do under the Clean Air Act,” he said. “EPA is very clever and very creative, and I know they have a legal theory by which they can do this, but the idea that they can essentially regulate the electricity system in every state I think is pretty far-fetched under the Clean Air Act,” Holmstead said.
The new EPA regulations propose four “building blocks,” or categories of emissions reductions, which apply both “inside the fence” like increasing the efficiency of power plants, and “outside the fence” like fuel switching to natural gas, increasing use of renewable and nuclear energy and promoting demand-side energy efficiency. While these “outside the fence” measures are controversial, Tierney said she would like to see this system preserved in the final rule. “I also hope that they keep this combination of the state being in the driver’s seat to figure out where they’re going. They can tailor it with any of those building blocks that they want, not including some and emphasizing others,” she said. “Only a portion of that will then apply directly to regulated units but there could be a lot of things that the state has in its toolkit that are just indirectly affecting the markets in which the affected generating units operate, so I hope they keep all of that.”
Holmstead said, however, that the EPA lacks the power to even set an emissions standard under the Clean Air Act statute with which these regulations have been developed. “The way the statute reads is EPA sets a standard of performance for a new plant and then the states set a standard of performance for any existing plant within its borders,” he said. “What that has always meant is that the states set a standard for an existing plant and so this idea that EPA sets the standard that applies to the state as a whole, it’s hard to see how that possibly fits within the statute, so I think that’s the biggest legal issue.”
What if States Don’t Develop Plans?
Should the EPA regulations stand up to legal challenge and avoid legislative blocks, the EPA could still be facing difficulty from the states. “There’s going to be enormous questions about whether this is legal, enormous questions about how this can possibly be implemented in states and questions about what will happen if states are unwilling or unable to come up with state plans and what does EPA do. I don’t think EPA really has a good answer to that yet. So, I think there are some pretty fundamental flaws with this approach,” Holmstead said, later saying that “in virtually all states you will need additional legislation in the state legislature to implement this. There are going to be some states where the politics are going to be such where you’re not going to get that legislation even if the governor may want to. In other places you’ll have governors who will say, ‘We think EPA has gone well beyond its authority, we can’t submit a plan.’ … Making the assumption, which is unlikely in my view, that this stands up, if it does stand up, if you have an administration that’s trying to implement it, you are going to have a significant number of states that either can’t or won’t submit a plan that meets EPA’s standards.”
The EPA has stated on various occasions that should a state fail to submit a plan, it would come up with one for them. Kentucky has already signed into law a bill which would limit its Environmental Quality Commission to developing a plan with only “inside-the-fence” mitigation efforts. “It seems to me a state would be penny-wise and pound-foolish to stand on a platform that says the only thing we’re going to do is take action at the regulated unit. I think that will leave on the table a lot of very cost effective ways to get carbon reductions,” Tierney said. “If the state actually decides we actually want to have certainty, we want to stand just on things that are directly pointed at the effected generating units; I think they’re going to come up with very costly emissions reductions.” The EPA’s proposed regulations were published in the Federal Register this week, kicking off a 120-day comment period that is set to close Oct. 16.
