Inside EPA Features EIRP Working Paper on Clean Energy Standards

Inside EPA, a leading trade publication monitoring environmental policy and the Environmental Protection Agency, published the following extensive report on EIRP CEO Samuel Thernstrom’s paper, “Clean Energy Standards: Securing the Future of the Electric Power Sector.” Inside EPA is available at https://insideepa.com/; full text reprinted with permission.

EPA Power Plant GHG Rule Critics Revive Talk Of Clean Energy Standard

May 10, 2024

Critics of EPA’s power plant greenhouse gas standards are ramping up arguments that the rule will not survive newly launched litigation and that Congress should consider passing a “market-based” clean energy standard (CES) to establish long-term climate policy certainty for the utility sector.

While there is little prospect for action on the issue in the current Congress, the pitch nonetheless provides a new marker for debate over power plant carbon emissions as fights over EPA’s GHG limits published in the Federal Register May 9 shift to the courts.

“A well-designed Clean Energy Standard that replaces the current Clean Air Act authority for power plant emissions could decarbonize the sector while ensuring affordability, reliability, security, and fuel diversity,” Energy Innovation Reform Project (EIRP) CEO Sam Thernstrom says a new white paper.

Thernstrom, who previously was a senior policy adviser at the Clean Air Task Force and communications director at the Council on Environmental Quality during the George W. Bush administration, has been a longtime proponent of a CES as an alternative to Clean Air Act rules.

The renewed argument for a CES also reflects an attempt to revive the concept of a legislative “swap” that would scrap current Clean Air Act authority for power plants in exchange for congressional action the issue, a notion that has periodically surfaced for decades on Capitol Hill but languished amid a lack of consensus on a plan ambitious enough to obtain environmentalist support.

Such a deal “would provide the industry with the regulatory (and deregulatory) certainty that it needs, enabling large-scale, long-term investments within an efficient regulatory framework,” Thernstrom’s paper says.

Such legislation “could also enable enactment of complementary policies such as permitting reforms, transmission line siting, [liquefied natural gas (LNG)] export standards, and accelerated deployment of advanced energy technologies,” he adds.

He has previously touted an proposal floated by then-Reps. David McKinley (R-WV) and Kurt Schrader (D-OR) in 2021 — prior to enactment of the Inflation Reduction Act (IRA) — that would have implemented a CES but deferred its effective date until after a period of technology development supported by the CES legislation. The plan also would have suspended Clean Air Act GHG authority for power plants but allowed EPA to enforce GHG limits as soon as five years after enactment if emissions were to rise more than a certain amount.

Environmental groups at the time said the bill was a first step to bipartisan discussion of a CES, amid several stronger CES legislative proposals from Democrats in both House and Senate.

But opposition to a CES from quarters including Sen. Joe Manchin (D-WV) ultimately resulted in the policy being omitted from the IRA, despite efforts to structure such a program as a power plant performance incentive that could be included in a budget reconciliation bill passed with a simple Senate majority.

McKinley and Schrader subsequently were defeated in their respective primaries leading up to the 2022 election.

Prior Proposals

Thernstrom’s new paper updates his pitch for a bipartisan CES to reflect the IRA’s enactment, arguing that innovation investments are now “largely secured” following that statute but that the role of a federal CES “still must be considered.” He also warns that the utility sector will remain mired in “policy ping-pong” without more regulatory certainty, threatening the IRA’s full potential.

His paper briefly alludes to several CES proposals that were circulating prior to the IRA’s enactment from lawmakers including Sen. Tina Smith (D-MN), then-House Energy and Commerce Committee Chairman Frank Pallone (D-NJ), and Rep. Diana DeGette (D-CO) — before deeming the bipartisan “framework” of the McKinley-Schrader plan as “particularly worthy of consideration in the current Congress.”

The paper, drafted before EPA finalized its GHG rules that deferred controls for existing gas plants, also paints EPA’s rules in a pessimistic substantive and legal light.

It predicts that “the most likely outcome of the [regulations] is that they will force the premature retirement of a significant amount of dispatchable generation that are vital to a reliable grid and the broader project of decarbonization.”

But he argues EPA’s standards are also “likely” to be struck down despite the agency’s efforts to tailor them to the Supreme Court’s ruling in West Virginia v. EPA that precluded any agency effort to revive the Obama-era Clean Power Plan.

The power sector, however, should not view this outcome as a success because such “uncertainty deters investment — and the agency can always come back with a new proposal if it has the president’s support,” Thernstrom says.

Talk of a CES also surfaced last month in an April 22 letter from House Climate Solutions Caucus co-chair Andrew Garbarino (R-NY) criticizing EPA’s then-proposed power plant GHG rule and pressing the agency about whether it had analyzed a “well-designed,” market-based CES as an alternative.

“If the agency has not performed such an analysis, I request that the agency do so prior to finalization of the proposed rule and make concrete regulatory and legislative recommendations to Congress based upon its obligations under applicable legal precedent and long-established administrative policy,” the letter said.

Garbarino claimed in the letter that the West Virginia decision “is a red light flashing at EPA” and that the ruling established that “new carbon emissions standards for power plants should be determined by legislation.”

The high court’s ruling in West Virginia did not deem carbon emissions standards beyond EPA’s purview but instead blocked any attempt by the agency to curb GHGs based on “generation shifting” strategies not reliant on emissions control technology installed inside the fenceline of a power plant. — Doug Obey ()