Bloomberg Law
July 9, 2021, 8:00 AM

Clean Power Plan Revamp or an Evolved Approach?

Ken Markowitz
Ken Markowitz
Akin Gump Strauss Hauer & Feld LLP
Chris Treanor
Chris Treanor
Akin Gump Strauss Hauer & Feld LLP
Bryan C. Williamson
Bryan C. Williamson
Akin Gump Strauss Hauer & Feld LLP
Shawn  Whites
Shawn Whites
Akin Gump Strauss Hauer & Feld LLP

The 2015 Clean Power Plan (CPP) was a cornerstone of the Obama administration’s strategy to reduce greenhouse gas emissions from power plants and set the U.S. on course to meet its Paris Agreement commitment, or nationally determined contribution (NDC). Not only did litigation derail the CPP, but President Trump subsequently withdrew the U.S. from the Paris Agreement.

In January, the legal landscape was further upended when the D.C. Circuit vacated the Trump administration’s Affordable Clean Energy rule—an ostensible replacement for the CPP. In its ruling, the court validated the basic contours of the CPP, giving the Biden-Harris administration a blank slate to regulate greenhouse gas emissions from power plants.

While Environmental Protection Agency leaders confirmed a replacement rule is coming, they remain tight-lipped on the details of this core component of the administration’s strategy for meeting the aggressive power sector decarbonization timeline outlined in the new U.S. NDC: “100 percent carbon pollution-free electricity by 2035.”

Whatever the EPA delivers next could be colored by congressional directives, necessitating a thoughtful engagement strategy for stakeholders with both the EPA and Congress.

What to Look for in a CPP ‘2.0'

In the CPP, the EPA invoked authority under Section 111 of the Clean Air Act (CAA), which directs the EPA to determine a “best system of emission reduction” and issue emission guidelines for new identified sources of air pollution. While states retain authority for setting emission standards, their regulations must comply with the EPA’s guidelines.

Against this backdrop, the EPA identified power plants as a source of air pollution and looked to three “building blocks” to inform its guidelines: (1) heat-rate improvements at plants, (2) substituting natural gas-combined cycle units for higher-emitting steam-generating plants, and (3) use of renewables. In legal challenges, opponents targeted the latter two, arguing the CAA does not allow the EPA to consider “generation shifting” or other approaches beyond a power plant’s “fence line.”

Because the D.C. Circuit blessed the “beyond-the-fence-line” approach, the EPA could pursue a similar rule with peripheral changes to match this administration’s ambitious 2035 power sector decarbonization goal. For example, the replacement may impose more stringent emission limitations, a shorter compliance window, less leniency for states failing to submit rigorous implementation plans, and fewer flexibilities for plants.

Still, the replacement rule will face a more conservative U.S. Supreme Court than its predecessor, likely prompting the EPA to update its scientific and economic underpinnings. The EPA also might expand the rule’s “building blocks” to include less-tested, but potentially more politically palatable, technologies such as carbon capture, utilization, and storage and biomass co-firing.

In short, do not expect a “copy and paste” of the original CPP. While unlikely, the EPA could consider shifting the rule’s legal basis to a different section of the CAA, such as Section 109 (establishing the National Ambient Air Quality Standards program) or 115 (establishing the international air pollution program).

Whether the EPA tests these waters remains unclear given this Supreme Court, but the acting head of EPA’s air office—the original CPP’s lead drafter—has defended the rule’s generation-shifting approach and reportedly expects the growing clean energy market to enhance its feasibility. It would be surprising if the EPA eschews renewables and other low-emitting resources from a CPP 2.0, notwithstanding legal risk.

Legislative Market Mechanisms

As the administration recognizes, achieving its 2030 NDC necessitates a “whole-of-government approach” that includes congressional action. Market-based approaches, such as a clean electricity standard (CES) or a national carbon tax, could complement a CPP replacement.

Of course, if either approach stands a chance at passing this Congress, it will not be through regular order given current political realities (i.e., no near-term chance for abolishing the filibuster and Republicans’ strong aversion to federal climate regulations). This means Democrats likely will have to “go it alone” and utilize the budget reconciliation process to pass climate legislation.

While President Biden and many congressional Democrats prefer a CES over a carbon tax, the rules governing budget reconciliation would allow for consideration of a carbon tax, whereas it is less certain whether a CES could be considered. Specifically, Senate rules limit reconciliation proposals to revenue and spending measures, which typically do not involve the creation of new regulatory programs or standards.

Proposed CES frameworks in pending legislation such as the CLEAN Future Act may be ineligible to advance through reconciliation due to the “Byrd Rule,” as they contemplate an EPA-administered program for the buying, selling, and trading of clean energy credits.

Still, a carbon tax remains a significant challenge despite Democrats’ majority. However, it could become more viable as major trade partners like the EU pursue border carbon adjustments (BCAs) on carbon-intensive imports from countries lacking comparable climate policies.

A national carbon price would signal that the U.S. is serious about its emission reduction plans, which, consequentially, could soften any BCA that U.S. exporters face at foreign borders.

Strategies for Congressional Engagement

Although the EPA will work through the details of a CPP replacement, the biggest potential for successful engagement in shaping the plan may be through congressional outreach. In particular, unified industry voices (e.g., via trade associations) likely will resonate loudest with lawmakers. Additionally, a strategy that focuses on elected officials with more moderate views who face tough re-election campaigns is most likely to gain traction.

Finally, companies throughout the energy industry will want to ensure that less visible forms of support, such as tax incentives and loan guarantee programs, remain in place despite larger-scale congressional or administrative actions.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Author Information

Ken Markowitz co-leads Akin Gump Strauss Hauer & Feld’s climate change cross practice initiative. He provides regulatory, policy, transactional and litigation counsel on environmental issues in the U.S. and internationally.

Chris Treanor is counsel in Akin Gump Strauss Hauer & Feld’s public law and policy practice and previously served on the professional staff for the U.S. House of Representatives Committee on Energy and Commerce, where he worked on passage of the Energy Independence and Security Act of 2007.

Bryan C. Williamson is an associate in Akin Gump Strauss Hauer & Feld’s Environment and Natural Resources section. He represents and advises clients on a range of civil and criminal environmental matters and helps clients navigate business and legal risks while developing robust sustainability programs.

Shawn Whites is an energy regulatory specialist in Akin Gump Strauss Hauer & Feld’s corporate practice.

Akin Gump associates Jack Lyman and Meaghan Jennison contributed to this article.

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