EPA issues new power plant rules

As part of the Biden Administration’s pledge to achieve a net zero electricity sector by 2035, the Environmental Protection Agency (EPA) finalized new regulations to address emissions from existing coal power plants and new gas plants. All said, the performance standards are projected to slash CO2 emissions from the power sector by 75% below 2005 levels by 2035, and 83% by 2040.

The rules have been challenged by 27 Republican Attorneys General, plunging the power sector back into a familiar state: rules are proposed, rules are challenged, and the future remains uncertain.

Existing Facilities

The EPA's regulations for existing facilities predominantly focus on coal. Two rules require plants to mitigate wastewater pollution and to safely manage toxic coal ash. Another rule spells out a 67% enhancement in mercury emissions standards, which will also affect oil-fired electric utilities.

The most prominent and contentious rule requires that coal plants reduce emissions through best-available pollution control technologies. If a facility will operate beyond 2039, it must cut or capture 90% of their carbon dioxide pollution by 2032. “Medium-term” units slated to retire before 2039 must reduce emissions by 40% based on natural gas co-firing by 2030; units slated to close before 2032 are not subject to emissions reductions.

The combination of these rules means that, in the next couple of years, the coal industry will be required to make major investments in pollution-reduction technologies, like carbon capture and storage (CCS), to continue operating existing facilities.  Analysis suggests these regulations could eliminate coal plants in the next decade. 

New Facilities

The EPA also issued New Source Performance Standards for new, modified, or reconstructed gas-fired plants. These plants are categorized into three groups depending on their capacity factor, which measures the amount of electricity generated relative to its maximum potential. Like coal plants, gas facilities slated to operate at a capacity factor exceeding 40% will have to reduce or capture 90% of their carbon emissions by 2032.

The rules are technology-neutral. Operators can adopt CCS technologies; transition power plants to operate on hydrogen, ammonia, or other carbon-neutral fuels; or adopt another approach that sufficiently lowers emissions.

What Comes Next

Politicians, electric utilities, and the coal industry were quick to criticize the rules, citing them as a threat to employment and energy reliability.

Senator Shelley Moore Capito (R-WV) announced plans to file a Congressional Review Act resolution to formally disapprove the regulations. Republican nominee Donald Trump has also promised to overturn the rules, should he be elected president in November.

The rule is also drawing legal challenges. On May 9th, 27 Republican attorneys general and several industry trade groups sued the agency. The plantiffs are invoking the precedent set by the 2022 Supreme Court decision in West Virginia vs. EPA, which narrowed the EPA’s regulatory scope regarding power plants. The decision, which annulled President Obama’s Clean Power Plan, clarified that while the EPA can impose requirements at the power plant level—or “inside the fenceline”—it cannot mandate a complete shift to new power sources.

The challengers argue that the rules contravene administrative law, citing the court’s “major questions doctrine,” which applies to rulemakings of “vast economic and political significance.” Because there is no “clear congressional authorization” for the EPA to reshape the nation’s energy grid, they argue, the rules constitute an “abuse of discretion.”

The plantiffs further allege that the rules are unlawful, as carbon capture—likely the only means by which coal plants could continue to operate past 2039—is not yet “adequately demonstrated.” They also contend that these technologies would require building pipelines and emissions storage facilities that are “beyond the fence line,” contrary to the Supreme Court's recommendation to the EPA for establishing greenhouse gas emission standards.

A More Predictable Approach to Decarbonization

Regulations like the new EPA actions which face delays in enactment, legal challenges, and potential reversal by future administrations, may not be the most effective strategy to reduce greenhouse gas emissions.

A more predictable, cost effective pathway is available: act of congress that places a border adjusted, revenue-neutral price on carbon. Recent research has shown that a carbon price, like the Baker-Shultz Carbon Dividends plan, would help the U.S. cut emissions 57% below 2005 levels by 2035. And that’s not just in the power sector, but across the entire economy.

As the arguments ensue over exactly how to greenhouse gas emissions, our climate targets continue to slip out of reach. The optimal path forward lies not in regulation, but in legislation.