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EPA Releases Final Draft of Clean Power Plan

Last week the White House and Environmental Protection Agency (EPA) released the final version of the Clean Power Plan rule, which regulates carbon dioxide emissions, and various pollutants, by power plants in the United States. As widely expected, the final draft of the rule is stricter than the proposed regulation released last year. The compliance timeline has been extended for states in order for them to meet the stricter standards.

Specifically the final version of the rule’s national standard requires states to cut 32 percent of their carbon emissions based on levels recorded in 2005. The proposed rule required a 30 percent reduction. The rule’s renewable energy standard also increased with the EPA excepting renewable energy to rise to 28 percent of the electrical grid’s capacity by 2030. The proposed rule had expected renewable energy to comprise 22 percent of the grid’s capacity. The use of coal is also expected to drop to 27 percent of the grid’s energy creation instead of 31 percent (currently coal makes up 39 percent of energy production and creates 77 percent of CO2 emissions nationally). However, states have a longer window to begin complying with the standards. The first compliance date has been extended from 2020 to 2022. The EPA claims these standards will save approximately $45 billion a year through shrinking energy use, reducing health care costs related to asthma, lung cancer and other respiratory illnesses caused by air pollution.

Every state is required to submit a plan to the EPA of how they will meet the rule’s emission goals. State preliminary plans are due in September of 2016 but a state can request a two year extension. The EPA is encouraging interstate cap-and-trade exchanges by offering to help implement regional exchanges by tracking emissions and carbon credits. Statewide limits were set by the EPA to further facilitate the use of a cap-and-trade style system if states so choose.

Particularly relevant to Wisconsin is how the rule treats non-domestically produced hydroelectric power which Wisconsin heavily relies on as a source of renewable energy. States that adopt a rate-based target (lbs/MWh) can get credit for generation from Canadian clean energy facilities when: the resources are incremental and installed after 2012; all measurement and verification standards are met; the country generating the credits is connected to the U.S. grid; and there is a power purchase agreement or other contract for delivery of the power with an entity in the U.S.

Also relevant, Wisconsin’s interim targets are now less stringent but its 2030 goal was tightened: in the Final Rule the 2022-2029 target is 1,364 CO2 lbs/net MWh (less stringent than 2014 draft target of 1,281 CO2 lbs/net MWh) but the Final Rule 2030 Target is more stringent: 1,176 CO2 lbs/net MWh (compared to 2014 2030 target of 1,203 lbs/MWh).