What next for clean power in the USA?

3 February 2018

The US administration has started the process of repealing president Obama’s Clean Coal Plan and has already withdrawn from the Paris Agreement on climate change, attracting almost universal condemnation. With resistance movements gathering pace, can Trump’s plan survive the legal battles that lie ahead?

On 9 October the administrator of the US Environmental Protection Agency, Scott Pruitt, announced that within days he would start the process of repealing former president Obama’s Clean Coal Plan to limit carbon emissions from coal-fired power plants and propose a new rule to replace it. “The war against coal,” he said, “is over”.

The Clean Power Plan was a key part of Washington’s implementation of the Paris agreement on climate change, from which US president Trump withdrew in June. It aimed to reduce the US power industry’s CO2 pollution levels by 32% below 2005 levels by 2030. But it was put on hold by the US Supreme Court in 2016 following legal challenges by industry and coal-friendly states. Even so, the plan helped drive a wave of retirements of coal-fired plants, which were being squeezed by lower costs for natural gas and renewables, and by state mandates promoting energy conservation.

Start of the backlash

The coal industry naturally celebrated the news, but environmental groups and public health advocates derided the decision as shortsighted. Michael Brune, the executive director of the Sierra Club, condemned the move as ignoring deadly health issues and discounting the jobs created by clean energy deployment.The move “is a wholesale retreat from EPA’s legal, scientific and moral obligation to address the threats of climate change,” said Gina McCarthy, Obama’s former EPA administrator.

A new embarrassment came along on 4 November when US government agency the National Oceanic and Atmospheric Administration produced a report confirming that human activity is causing global warming, and at a rate 170 times faster than by natural causes alone.

By the autumn several US groups were lining up to defy Trump. On 11 November at the UN conference on climate change in Bonn, COP23, US states, cities and businesses signed ‘America’s pledge’, a commitment to combat global warming in direct opposition to the Trump’s climate policies. To date, 20 US states and more than 50 of its largest cities, along with more than 60 of the biggest businesses in the USA, have committed to emissions reduction goals. Added together, they have a GDP power of about $10 trillion, behind only the USA as a whole ($18.6tn) and China ($11tn).

What happens next?

Sarah Ladislaw (a director of the Energy and National Security Programme at the Center for Strategic and International Studies) Kyle Danish (CSIS associate and Van Ness Feldman partner) and John Larsen (CSIS and Rhodium Group) have produced an analysis of the future direction of US clean policy from which the following are extracts.

For a while it was rumoured that the Trump administration would simply repeal the CPP and the not pursue in earnest a replacement. Some of the commercial concerns involved warned that simply repealing the CPP was not legally defensible, because at some point EPA would be forced by the courts to replace the CPP with some form of GHG emissions regulation. Moreover, if this replacement obligation fell on a future administration, it might feel compelled to impose draconian cuts to offset inaction by the Trump administration; a so-called ‘pendulum risk’.

The first implication of considering a replacement rule is that it seems to signal that the administration will not try to overturn the 2009 ‘Endangerment Finding,’ the first step in the regulatory process at EPA and the underlying justification for regulating GHGs in the first place. Overturning the endangerment finding would be the most legally challenging, resource intensive, and politically divisive route EPA could take.

A second implication is that the final outcome of the process would not be known for a number of years. Even if the Trump administration were planning only to repeal the CPP, it would need to follow a ‘notice and comment’ rule-making process prescribed by the Administrative Procedure Act. This involves proposing a rule, taking public comment, and finalising the rule. For Clean Air Act rules, this process takes anything from one to three years, followed by inevitable litigation that can last just as long. If a replacement rule was considered, the process could be extended even further.

How to repeal

The method by which the Trump administration proposes to repeal the CPP could offer insights into the administration’s current preferences for a replacement. One option is to interpret Section 111 of the Clean Air Act (invoked by the Obama administration as the source of the CPP’s authority) as actually foreclosing GHG limits on power plants, on the grounds that power plants are already regulated for their toxic emissions under Section 112. This ‘Section 112 Exclusion’ argument would foreclose any replacement options under Section 111. The fact that the Trump administration is still considering soliciting comment suggests that it is hedging its bets on the viability of the Section 112 Exclusion argument.

Another legal argument for repeal would be that the Obama EPA exceeded its statutory authority under Section 111 in crafting the emission standards in the CPP, because it considered not only reductions achievable at affected power plants, but also reductions achievable by shifting generation from higher-emitting plants to lower- or zero-emitting resources. Petitioners argued that inclusion of ‘outside-the-fence’ measures violated Section 111. Repealing the CPP on this basis could set up a replacement rule that establishes standards on the basis of what can be implemented ‘inside the fence.’

This would reduce by much less emissions from the power sector than the current CPP, perhaos by a factor of 10 smaller than the current CPP would have required by 2030. Plants that do implement upgrades to comply would also be more competitive in power markets and may be called on to run longer, leading perhaps to higher total CO2 emissions than with no standard in place.

Therefore a future administration might seek to push a more ambitious programme, and a significant issue would be the extent to which the legal reasoning behind a Trump replacement rule left a door open for a future administration to return to an outside-the-fence approach, or other means of ratcheting up the stringency of power sector regulation. Accordingly, it could be difficult for the power sector to derive long- term regulatory certainty from federal rule-making actions by this administration, and in any event, states would still be able to pursue more aggressive climate policies.

Even with more lenient standards, there still could be costs and complexity in complying with them. A Trump EPA replacement rule would likely emphasise compliance flexibility for states and power plants, including allowing states to establish cap-and-trade programmes. However, this approach could draw legal challenges.

The Trump administration’s stance on climate is far from fully formed. There is a live debate between legally defensible strategies to moderate regulations and ideologically driven ones to repeal them. Going forward this means the Trump administration’s position on climate could be far more malleable than previously thought, though still unlikely to be satisfying to the environmental advocacy community. 

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