Effects of rolling back the Clean Power Plan
On Tuesday, Scott Pruitt, head of the Environmental Protection Agency (EPA), signed a regulation to repeal the Clean Power Plan, President Obama’s signature environmental policy finalized in 2015. The plan was intended to reduce greenhouse gas emissions to 32 percent in 2030 compared to 2005 levels.
The plan, which never went into effect, would have allowed states to meet those goals through a variety of means, including switching from burning coal to natural gas, which produces significantly less greenhouse gases, or increasing renewable energy sources. It would also have made it difficult to build new coal-fired power plants.
Stanford News Service spoke with economist Charles Kolstad, legal scholar Deborah Sivas and climate policy expert Michael Wara about the EPA’s move and what it might mean for efforts to reduce greenhouse gas emissions.
In brief, what does the Clean Power Plan (CPP) require and what are its objectives?
Kolstad: The goal of the CPP is to reduce carbon emissions in the United States. But it is carefully constructed to be legally consistent with the Clean Air Act, the legislation underpinning it. In particular, it gives each state a carbon reduction goal and asks states to develop plans to achieve it, by whatever method they wish from a broad set of actions.
Sivas: The Clean Power Plan, which took the EPA many years to develop and included evaluation of over 4.3 million comments during the extended public process, was intended to be a first step and the primary vehicle by which the United States would comply with its carbon emissions reduction commitments under the Paris Accord. The plan attempts to achieve this objective by setting carbon emission performance standards for fossil fuel power plants, which account for 31 percent of all U.S. carbon emissions. Consistent with the federal-state partnership established by the Clean Air Act, the Clean Power Plan sets these performance standards based on best technologies and then allows the states flexibility in how to achieve those standards. Compliance might involve renewable energy portfolio standards, residential/commercial energy efficiency programs, emissions trading programs like California’s cap-and-trade program, or some combination of these or other state responses.
Wara: The Clean Power Plan was a big deal; it was the first time the U.S. placed any limit on greenhouse gas emissions from power plants. It placed the first limits, but we assumed not the final limits. The reality is that our power sector is in the midst of a dynamic transition and we may reach the Clean Power Plan goals even without the regulation in place. We’d thought there might be a subsequent set of rules that would be more stringent in a Democratic administration. In fact, an interesting response to the repeal has been from the utilities, who say that they aren’t changing their investment plans. They planned to comply with the Clean Power Plan because that’s what market forces were encouraging anyway.
What, if anything, has changed since the Clean Power Plan went into effect?
Sivas: As adopted, the Clean Power Plan set a date of September 2018 for states to submit their proposed implementation plans for EPA review. The rule does not require compliance until much later, with interim compliance to lesser standards starting in 2022 and final compliance with the full performance standards by 2030. Some State Attorneys General, including then-Oklahoma Attorney General Scott Pruitt, challenged the Clean Power Plan in the D.C. Circuit Court of Appeals, and in February 2016, shortly before the death of Justice Antonin Scalia, the U.S. Supreme Court voted 5-4 to stay implementation of the rule pending the outcome of the challenge. The appellate court has now heard full arguments on the merits of the challenge, but at the Trump administration’s request, it has temporarily put the case in abeyance, meaning that it will not issue a ruling on the merits right now.
In the meantime, consistent with Mr. Trump’s early Executive Order on this issue, the EPA, now under the direction of Mr. Pruitt, has been working on a proposal to rescind the Clean Power Plan. That proposal was officially noticed in Tuesday’s Federal Register, with a 60-day public comment period. In order to actually rescind the Clean Power Plan, EPA has to go through this formal administrative process; it cannot just ignore the plan and fail to implement it.
Wara: The reality is that given current expectations about the power sector, especially with the cost of natural gas, the Clean Power Plan wasn’t going to move the needle much. But those expectations were based on uncertain forecasts and the Clean Power Plan set limits far into the future. Just because energy models say the market was going to do one thing doesn’t mean the Clean Power Plan wasn’t important, because it locked in the future and reduced uncertainty.
The likely scenario now is that EPA will be sued because they aren’t acting to comply with a regulation that remains in place saying that greenhouse gases endanger human health and welfare. Because of this endangerment finding, the EPA has an obligation to do something to reduce emissions. All signs point to the Trump administration running out the clock on this obligation. The question will be whether there is a second Trump administration and how that delaying tactic will play out in the courts. They make clear in the appeal that they take a limited view of the applicable law. My guess is that they’ll ask for comment given this narrow interpretation, then take their time considering the responses.
Kolstad: Nothing as yet has changed except the political atmosphere. Now Pruitt wants to roll it back. That won’t be so easy.
How quickly could a rollback of the plan happen?
Wara: No implementation of the Clean Power Plan has occurred, so nothing needs to be undone. However, in a related action proposed by Energy Secretary Rick Perry, the Department of Energy has asked the Federal Energy Regulatory Commission to begin subsidizing coal power plants. I wrote about this for the Legal planet blog. If that happens, coupled with the rollback of the Clean Power Plan, it would significantly upset the market-based, innovation-driven changes taking place within the power sector.
Kolstad: It is not clear how quickly he can do this. It took several years to put the CPP in place. Perhaps a year, perhaps sooner? But what is certain is that there will be legal challenges, just as there were to the original CPP. Remember that the CPP has not gone into effect yet – it was stayed by the Supreme Court. In any event, many states are already expected to unilaterally do better than their CPP goals. Weakening the CPP will not change that.
Sivas: Technically, EPA could come out with a final rule rescinding the Clean Power Plan shortly after the close of the 60-day comment period. It is unlikely to happen that quickly, however. In the new notice, EPA proposes to interpret the Clean Air Act narrowly, and on that basis to rescind the Clean Power Plan as a regulation that goes beyond EPA’s legal authority. There are likely to be tens or hundreds of thousands of comments on the proposed rollback, so it will take some time to digest and address these comments. The Tuesday notice also explains that EPA has not yet decided whether or when to use the Clean Air Act to regulate greenhouse gas emissions. I’m not holding my breath on that one. My guess is that any new greenhouse emission rule is very unlikely and, in any event, almost surely will not happen as part of this rulemaking.
What are some of the outcomes you expect from a rollback?
Sivas: Once EPA issues a final rule rescinding the Clean Power Plan, there will unquestionably be lawsuits filed by interested stakeholders, which could include not only environmental organizations, but probably also those states like California that are moving forward with carbon reduction efforts and maybe even industry interests that are positioned in the market to take advantage of changing emission standards. Such litigation will likely take a number of years to resolve, perhaps beyond the current presidential term.
Kolstad: I don’t expect as dramatic a change as many predict. Much of the emission reductions in the CPP are now happening automatically with the lower price of natural gas and penetration of renewables. Most western states are predicted to actually reduce carbon more than required by the CPP. That won’t change. But still, some of the bite of the CPP will be gone.
Wara: One thing to emphasize is that this just extends the uncertainty in the power sector about what regulation will ultimately govern carbon emissions. Everyone knows that one day these will be regulated and this uncertainty makes it hard for companies to invest in big projects. It interferes in investment in ways that are unhelpful to our economy and run contrary to Trump’s other goals regarding infrastructure and putting people back to work. It’s hard to invest when there is regulatory uncertainty and this move actually increases uncertainty.
Also, a big motivation for this action is appealing to elements of the base, extending far beyond coal country. Coal miners are a potent symbol of the blue-collar industrial past that has largely disappeared in this country. Although this is great symbolic politics, the changes in the coal industry have little to do with regulations and a lot to do with the cost of natural gas and the fact that Chinese coal demand has fallen dramatically over the past several years. This symbolic action prevents a conversation in the U.S. about what is fair and just transition assistance for coal miners and coal mining communities; it takes the pressure off to do something that is actually helpful. These communities are hurting. They have spent their lives providing America with energy and we’re leaving those people in the lurch.
Will we go back to where we were before the CPP? What other factors are at play? For example, will economic realities lessen a rollback’s impact?
Kolstad: Pruitt wants to change the damage estimate from carbon to something much lower. This means that the new CPP will pass a cost-benefit test with much more modest emission rollbacks. But because the economic environment has changed so much, we will not go back to the pre-CPP emission levels. Keep in mind that the CPP has yet to go into effect, since the Supreme Court stayed it – one of Scalia’s last actions.
Wara: We will not be going back to where we were because the world has moved on. Market-based changes in the power sector have already reduced emissions in the ways foreseen by the Clean Power Plan. Also, improvements in energy efficiency are having a big impact on the demand side. Because of those improvements we don’t need as many power plants, and as a result, the more expensive coal fired plants can’t compete. Combine that with the low cost of natural gas and improvements in renewables and coal can’t win, whatever the regulations are.
Sivas: As this rulemaking and the inevitable legal challenges play out, we will go back to the regulatory world before the Clean Power Plan – that is, no federal regulation of carbon emissions – which is exactly what the current administration and its supporters want to maintain as the permanent status quo. But the absence of federal regulation does not mean that we will see no progress. Many of the more progressive states and local governments are doubling down on their own efforts, either through voluntary action or through state regulation, to reduce greenhouse gas emissions. And, in fact, the energy market will drive much of what happens.
By rolling back the Clean Power Plan, the administration is holding out illusory hope to coal-dependent communities that coal jobs will come back. The loss of coal jobs in recent years is not due to the Clean Power Plan – which would not have been implemented for many years and has been on hold almost since it was issued – but is, in fact, due to market conditions and automation. Coal is simply not economically competitive with the existing supply of inexpensive natural gas and the falling cost of renewable energy. And even if, under some currently unforeseeable scenario, market conditions change, those coal companies will continue to rapidly automate most of the jobs that sustained coal communities in the last century. So while the rescission of the Clean Power Plan is symbolic – in a positive way for supporters of the administration and in a negative way on the international landscape – it probably won’t have as great an impact as people think.
Charles Kolstad is a senior fellow at the Stanford Woods Institute for the Environment, the Stanford Institute for Economic Policy Research and the Stanford Precourt Institute for Energy, and a professor of economics.
Deborah A. Sivas is the Luke W. Cole Professor of Environmental Law, director of the Environmental and Natural Resources Law and Policy Program and director of the Environmental Law Clinic at Stanford Law School, and a senior fellow at the Woods Institute for the Environment.
Michael Wara is a senior research scholar and director of the Climate and Energy Policy Program at the Woods Institute for the Environment.