CEI Comments on EPA’s Proposed Rule to Repeal the Clean Power Plan

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Docket ID No. EPA–HQ–OAR–2017–0355

Thank you for the opportunity to comment on the Environmental Protection Agency’s (EPA) proposed rule[1] to repeal the Obama administration’s carbon dioxide (CO2) emission standards for existing fossil-fuel power plants, commonly referred to as the Clean Power Plan (CPP).[2]

We strongly support repeal of the CPP based on EPA’s reading of the Clean Air Act (CAA). This action is critical to end the previous administration’s economically destructive war on fossil fuels and deter future attempts to inflate EPA into a national climate policy legislator and energy czar.

We comment on each part of EPA’s legal argument and offer additional statutory reasons to repeal the CPP. We also comment on EPA’s revisions to the CPP Regulatory Impact Analysis (RIA) and offer additional reasons to challenge that document’s climate and health benefit estimates.

This joint comment letter is organized as follows. Part I is an executive summary. Part II describes several basic features of the CPP. Part III comments on EPA’s proposed interpretation of CAA section 111(d) and legal argument for repeal. Part IV offers additional statutory reasons to repeal the CPP. Part V comments on EPA’s “broader policy concerns” regarding the CPP. Part VI comments on the “avoided compliance costs, forgone benefits, modeling assumptions, uncertainties, and other relevant matters” discussed in the repeal proposal’s draft RIA. Part VII states our conclusions.

Executive Summary

The Clean Power Plan was President Obama’s marquee domestic climate policy and regulatory centerpiece of his Paris climate treaty emission-reduction pledge. Unable to persuade Congress to enact cap-and-trade legislation, Obama vowed to find other ways to “skin the cat,” and directed EPA to regulate CO2 emissions from the U.S. power sector. The CPP was the result. It is unlawful for all the reasons outlined in the repeal proposal plus others described herein.

Under CAA section 111, emission performance standards are to reflect the “best system of emission reduction” (BSER) that has been “adequately demonstrated” as feasible and affordable. Such “systems” are designed for and apply to “sources,” so the legal meaning of “system” depends on that of “source.” A “source” is defined as “any building, structure, facility, or installation which emits or may emit air pollutants.” Consequently, a bona fide BSER must be based on measures that can be applied at and by the source.

The Obama administration refused to accept that limitation because there is no “adequately demonstrated” best system for reducing CO2 emissions from existing power plants. The closest facsimile would be equipment upgrades that improve operational efficiency. However, increasing the efficiency of fossil-fuel power plants would not advance Obama’s goal to “finally make renewable energy the profitable kind of energy in America.”

So, EPA came up with a plan to impose unattainable emission performance standards on existing fossil fuel power plants. To comply, owners and operators must purchase power from, invest in, or cede market share to lower- and zero-emission facilities elsewhere on the grid. Such “generation shifting” is the heart of BSER under the CPP.

To make it look legal, the CPP reimagines “source” to include power plant owners and operators in their capacity as marketplace actors. More fundamentally, the CPP imagines the entire U.S. electricity system to be a single source—a vast “machine” in which individual power plants are mere cogs.

As the repeal proposal argues, generation shifting is an unlawful BSER because owners and operators are not “sources,” and, as we explain, neither are economic sectors. We debunk the CPP’s non-sequitur argument that generation shifting is a lawful BSER because the Obama EPA considers it an efficient climate policy. We show that Congress’s authorization of generation shifting in CAA Title IV actually cuts against the CPP, because section 111 contains none of Title IV’s generation-shifting terminology.

We explain how the CPP’s novel BSER produces four illogical outcomes, such as imposing tougher emission standards on existing power plants than the corresponding new source rule imposes on new sources.

We conclude, however, that the CPP would still be unlawful even if it were based on measures that can be applied at and by individual sources. As the agency’s 1975 implementing rule explains, Congress intended for CAA section 111(d) to address air pollutants with “highly localized” effects from sources that are not “numerous or diverse.” Carbon dioxide emissions have the opposite characteristics. The CO2 greenhouse effect is global, not local, and CO₂ is emitted by both numerous and diverse sources. Carbon dioxide and CAA section 111(d) are a complete mismatch.

In addition, BSER in all previous CAA section 111 rules was based on specific emission-control technologies. There is no adequately demonstrated best system for reducing CO₂ emissions from existing power plants. Absent a bona fide BSER, section 111(d) may not be used to regulate CO₂ emissions from those facilities.

The CPP is also unlawful because it lacks a valid prerequisite CAA section 111(b) new source rule. The Obama EPA determined that “partial” carbon capture and storage (CCS) is the adequately demonstrated BSER for new coal power plants. However, CCS is not adequately demonstrated because it is too costly, too subsidy-dependent, and not even plausibly economical unless paired with enhanced oil recovery operations, which are geologically-limited to specific regions.

Most importantly, CAA section 111(d) excludes from its regulatory purview “any air pollutant . . . emitted from a source category regulated under CAA section 112.” Coal power plants have been so regulated since 2012, and natural gas combustion turbines since 2004. The CPP is unlawful under the very provision that purportedly authorizes it. Any CPP replacement rule would be unlawful for the same reason.

Turning to the repeal rule’s broader policy concerns, the CPP’s regulation of intrastate electricity markets not only invades a traditional zone of state responsibility, it also undermines the interstate policy competition that safeguards economic and political liberty. By cartelizing state energy policies along the lines of the California Global Warming Solutions Act and the Regional Greenhouse Gas Initiative, the CPP restricts citizens and firms’ ability to “vote with their feet” for pro-growth energy policies.

Repealing the CPP will help restore choice and competition in energy policy, which in turn will help preserve choice and competition in American politics.

The CPP would implement a policy shift of immense economic and political magnitude without clear congressional authorization. When Congress last amended CAA section 111(d) in 1990, it also considered and rejected proposals to authorize regulatory climate policies. The 111th Congress declined to pass cap-and-trade legislation even though everyone agreed it would be more efficient, more predictable, and more sensitive to regional interests than an EPA-run regulatory program. In 2015, the House and Senate passed resolutions of disapproval to overturn the CPP. The CPP was a climate coup in which an administrative agency usurped legislative power.

Turning to the repeal proposal’s draft Regulatory Impact Analysis (RIA), we applaud EPA’s decision to use appropriate discount rates in regulatory analysis, and to compare domestic climate benefits to compliance costs when calculating CPP benefit-cost ratios. However, the draft RIA’s social cost of carbon dioxide (SC-CO₂) analysis still uses an outdated 2007 study that likely overestimates climate sensitivity (the amount of warming from a doubling of atmospheric CO₂ concentration), and still relies on two structurally- biased models that lack significant CO₂-fertilization benefits.

The final RIA should make the case that physical and economic uncertainties render quantification of CO₂-reduction benefits illusory and misleading. If courts refuse to defer to the agency’s expertise, EPA should draw the line at providing a range of SC-CO₂ values based on plausible alternative assumptions. Under some reasonable assumptions, the SC-CO₂ is negative, which implies CO₂ emissions produce net benefits.