Powering Strong Communities
Environment
Issue Brief

Federal Efforts to Address Climate Change

PDF: Federal Efforts to Address Climate Change Issue Brief.

Summary

Public power utilities are reducing their greenhouse gas (GHG) emissions through a variety of means, including increased use of renewable energy resources, the development of new nuclear power, the addition of distributed energy resources and storage, the adoption of energy efficiency programs, and the promotion of transportation electrification.
The American Public Power Association (APPA) supports congressional efforts to address climate change through a statutory framework that provides electric utilities with regulatory certainty for the clean energy transition while keeping electricity affordable and reliable for all customers.
Congress should continue to fund federal research, development, and deployment of clean energy technologies and infrastructure that increases the resilience of the grid, reduces emissions, and helps keep electricity affordable.
The Environmental Protection Agency's (EPA) rules to consider GHG emissions from new and existing power plants must be cost-effective, practically achievable, and incorporate future market trends. 

Background

Following the U.S. Supreme Court’s landmark decision in Massachusetts v. Environmental Protection Agency in 2007, which held that EPA has the authority to regulate tailpipe emissions of GHGs under the Clean Air Act (CAA) because GHGs are pollutants that potentially “endanger” public health and welfare, Congress and EPA have sought to address climate change through legislation and regulations. In 2009, the House of Representatives passed the American Clean Energy and Security Act of 2009 by a vote of 219-212. The legislation would have established an economy-wide GHG cap-and-trade system. The Senate did not consider the House bill; nor did it consider its own comprehensive climate bill due to the lack of sufficient support among senators.

With Congress failing to enact climate change legislation in 2010, the Obama administration’s EPA issued proposed New Source Performance Standards (NSPS) for new fossil fuel-fired power plants in 2012. Just over three years later, in August 2015, EPA issued final rules to regulate carbon dioxide (CO2) emissions from new power plants and existing power plants (“Clean Power Plan” or CPP).

The CPP set final emission guidelines in the form of nationally uniform CO2 emission performance rates for coal-fired and natural gas-fired power plants. It also set CO2 emissions-reduction goals for each state and allowed for emissions reductions through energy efficiency upgrades at power plants and fuel switching from coal to natural gas or renewables.

In October 2015, the CPP was challenged in the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit). The case was subsequently dismissed in September 2019, with the court noting that challenges to the rule were moot due to the repeal of the CPP and replacement of the rule with the Trump administration’s Affordable Clean Energy (ACE) rule. The ACE rule sought to establish the “best system of emissions reduction” (BSER) for limiting CO2 emissions from affected electric generating units in the form of heat rate improvement measures that could be applied to or at an affected unit (i.e., “inside the fence-line”). In September 2019, the ACE rule was challenged in the D.C. Circuit, where the court vacated and remanded the rule back to EPA. Subsequently, the D.C. Circuit’s decision was appealed to the U.S. Supreme Court. The court ruled in West Virginia v. EPA et al. (No. 20-1530) that EPA’s conclusion in the CPP that an “outside the fence” approach, including a cap-and-trade system, that resulted in a shift of electricity production from coal plants to other sources of lower GHG emissions, exceeded EPA authority under section 111(d) of the CAA. Thus, the court reversed and remanded the case to the D.C. Circuit.

Administrative Action

In May 2024, EPA finalized rules to regulate GHG emissions from new, modified, reconstructed, and certain existing power plants under section 111 of the CAA.1 The final rules will impose stringent NSPS on power plants fueled by natural gas and impose strict limits on GHG emissions from existing coal-fired generators. Of note, the final rules no longer include hydrogen co-firing as the BSER pathway, as proposed. However, co-firing with hydrogen may still be a compliance option for some facilities. In addition, the agency did not finalize emission guidelines for certain existing natural gas plants but instead deferred regulating existing stationary combustion turbines (CTs) until a later date. EPA plans to expeditiously issue a separate proposal that addresses CO2, criteria, and hazardous air pollutant emissions from CTs and has opened a nonregulatory docket to seek input on the forthcoming rule.

The final rules establish BSER based on the use of lower-emitting fuels, highly efficient generation practices, co-firing with natural gas, and carbon capture and storage (CCS) technology. The final rules aim to significantly reduce GHGs from the electric sector by requiring certain new and existing fossil fuel generation to implement CCS by 2032 or co-fire with 40 percent natural gas by 2030, giving facilities less time to comply than originally proposed.

The final rules allow for various technology options and compliance timelines commensurate with a facility’s anticipated retirement date. The requirements vary based on whether an EGU is new or existing, coal-fired or gas-fired, and how often it is used. EPA’s reliance on CCS as BSER assumes the technology is “adequately demonstrated” and “economically achievable.” Many of the final rules’ assumptions are based upon changes in the electric sector, technology developments, the passage of the Infrastructure Investment and Jobs Act (IIJA)(P.L. 117-58) and Inflation Reduction Act (IRA)(P.L. 117-169), and state support for investment in CCS. While CCS may fit within the U.S. Supreme Court’s interpretation of “inside the fence line,” questions remain as to whether EPA’s approach will survive legal challenges.

Following publication in the Federal Register, a coalition of states, led by West Virginia, filed a petition for review in the D.C. Circuit. Subsequently, a broad coalition of states and electric sector groups called for the D.C. Circuit to stay the implementation of the final rules, explaining they would cause irreparable harm: 1) due to the length of time required to bring a plant into compliance and (2) given that EPA assumes that a facility must begin work on implementing the new requirements by June 2024. Parties also claim the final rules would force the premature retirement of coal-fired facilities and create substantial hurdles to building new gas-fired generation. The non-recoverable compliance costs also represent significant, irreparable harm to regulated facilities. States challenging the rules argue that they amount to an impermissible attack on the states’ sovereign interests in regulating emissions and crafting public policy. We expect the litigation to proceed in the D.C. Cricut this fall, regardless of how the court rules on the stay motions.

Congressional Action

Climate and energy infrastructure issues were a key legislative focus during the 117th Congress. In November 2021, President Biden signed the IIJA into law, which provided federal funding for a host of programs to promote clean energy, energy efficiency, grid resilience, and electrification of the transportation sector. Many public power utilities have been selected or are actively pursuing IIJA grants for programs that will help them reduce their GHG emissions or facilitate their ability to reduce emissions from other sectors, such as transportation. Further, the IRA, signed into law in August 2022, expanded existing energy tax credits and created new ones, including for nuclear power and carbon capture, among other technologies, with the purpose of promoting clean energy technologies to reduce emissions to address climate change. The IRA also for the first time made these credits available to public power utilities through elective pay. APPA is actively engaged in ensuring that the elective pay tax credits created by the IRA are implemented in a way that will allow public power utilities to make further investments in clean energy technologies. 1 89 Fed. Reg. at 39,798 (May 9, 2024) (Final Rules or Final GHG Rules).

The 118th Congress has primarily focused on oversight, not only of federal agencies, such as the Departments of Energy, Transportation, and Treasury, which are tasked with implementing the energy tax credits and grant programs created by the IRA and IIJA, but also of executive actions to address climate change, including EPA’s power plant regulations. Congress held several hearings on the proposed and final rules, with Republicans largely focusing on the rules’ impact on electric reliability and Democrats predominantly focusing on their impact on public health. In December 2023, Republicans on the House Energy & Commerce Committee passed the Guaranteeing Reliable Infrastructure Development (GRID) Act (H.R. 6185), which would require the Federal Energy Regulatory Commission to review and comment on federal agency actions that are likely to have a significant, negative impact on the reliability of the bulk-power system. APPA supports H.R. 6185.

In June 2024, Senator Shelley Moore Capito (R-WV) and Representative Troy Balderson (R-OH) introduced Congressional Review Act (CRA) resolutions that would nullify the final rules. The resolutions may pass in the House and Senate, but President Biden is expected to veto them, and the two-thirds majority vote needed to override a presidential veto is unlikely given the current party makeup in the House and Senate. While Congress may not be able to overturn the final rules, APPA expects the final rules and their impact on electric reliability will be a major focus for Congress for the rest of 2024.

APPA Contacts

Sarah Mathias, Senior Government Relations Director, 202-467-2959 / [email protected]

Carolyn Slaughter, Senior Director of Environmental Policy, 202-467-2943 / [email protected]