EPA Announces Repeal of the Clean Power Plan

Environmental Protection Agency Administrator Scott Pruitt announced on Monday that the Trump Administration would begin the official process of rolling back the Clean Power Plan (CPP), which limits greenhouse gas emissions from power plants. Speaking at an event in eastern Kentucky, he said, “Here’s the President’s message: The war on coal is over.”

The CPP would have required states to devise plans to reduce greenhouse gas emissions by 32 percent below 2005 levels by 2030. The plan gave states specific targets for reducing carbon dioxide. Targets differed from state to state because of each state’s unique mix of electricity-generation resources, and also because of technological feasibilities, costs, and emissions reduction potentials, all of which vary across the country. 

The rule never went into effect since the U.S. Supreme Court put it on hold in February 2016, after 27 states and other opponents filed law suits.

In announcing the repeal, the Trump administration has made the argument that the Obama administration overstepped its legal authority by forcing utilities around the country to reduce carbon emissions outside their actual facilities (for instance, by replacing coal plants with wind and solar farms). Currently, the EPA has not offered an alternative plan for regulating emissions of carbon dioxide, which the U.S. Supreme Court has ruled that the agency is obligated to do since carbon dioxide qualifies as an air pollutant under the Clean Air Act. Instead, the agency has said that it plans to seek public input on how best to cut emissions from natural gas and coal-fired plants. EPA has not announced a timeline for this process.

The Trump administration’s efforts to repeal the CPP are almost certain to be met with legal challenges, with environmental groups and several states planning to challenge the repeal proposal in federal court. The attorneys general of New York and Massachusetts have already said they intend to sue the EPA once the repeal is finalized. New York’s attorney general, Eric Schneiderman, said in a statement, “Fuel-burning power plants are one of our nation’s largest sources of climate change pollution, and common-sense science — and the law — dictate that E.P.A. take action to cut these emissions.”

With months of regulatory process and subsequent litigation awaiting, it is worth asking what the CPP repeal will mean, first, for the nation’s emission levels and, second, the future of America's coal industry.

The effects of repealing the CPP could be insignificant in terms of impact on national emissions. Analysis by the research firm, Rhodium Group has shown that the United States may hit the CPP emissions target even if the regulation does not go into effect. In 2015, national emissions were already 21 percent below 2005 levels, which is two-thirds of the way toward the 2030 emission reduction target set by the CPP. 

However, if the CPP is repealed, progress on reducing emissions will likely vary state to state. The CPP focused its reduction requirements on coal-heavy states since that’s where the largest amount of emissions are located. According to the Rhodium Group analysis, as many as twenty-one states, including Georgia, Pennsylvania, Texas, West Virginia, and Wisconsin, could get away with cutting emissions far less than they would have had the CPP gone into effect.

On the other hand, a few other states like California and New York are expected to hit or exceed the targets laid out by the CPP, based on aggressive state policies and market forces.

In 2016, Illinois enacted a comprehensive new energy bill that will double the state’s energy efficiency portfolio by allowing for 4,300 megawatts of new wind and solar power, which is expected to reduce the state's carbon emissions 56 percent by 2030, far beyond that which was mandated by the CPP. Earlier this year, Virginia Governor Terry McAuliffe signed an executive order mandating the state’s Department of Environmental Quality to begin developing a regulatory framework for reducing carbon emissions from power plants.

In terms of impact on the coal industry, the proposed repeal of the CPP offers some reprieve, though it is unlikely to halt the decline of coal over the long-term. In an earlier report, it was pointed out that the transition away from coal over the course of the last decade is poised to continue, thanks to a number of market forces. U.S. coal production in 2016 stood at 743 million short tons, continuing an eight-year decline from peak production in 2008. A recent Columbia University report found that just 3.5 percent of decline in coal production between 2011 and 2016 (33 percent decline) was due to environmental regulations. The Department of Energy’s grid reliability report supports this thesis; it identified cheap natural gas as “the biggest contributor” to coal plant closures. 

Recognizing that the fundamental economics around coal-fired electricity aren’t going to change, utilities big and small are announcing a shift away from coal toward natural gas and renewables (see herehere, and here). Utility Dive’s 2017 State of the Electric Utility Survey found that utilities are most confident in the growth of utility-scale solar and wind, distributed energy resources, and natural gas generation, with few planning to deploy more coal capacity.

In short, while there is a lot of buzz around rolling back the CPP, as a practical matter, the impact on states’ power generation could be minimal. Utilities and regulators, even in heavy fossil-fueled states, make power plant investment decisions based on price, and coal is no longer a cheap choice.