EPA fulfilled one of President Trump’s campaign promises this week with the publication of the final Affordable Clean Energy rule—ACE—to replace the Clean Power Plan.  Like the Clean Power Plan, ACE is an “emission guideline” issued under Section 111(d) of the Clean Air Act to regulate the emission of carbon dioxide (CO2) from the electric utility sector.  However, while the Clean Power Plan could only be achieved by shifting electricity generation away from energy resources that emit CO2, ACE only regulates sources of CO2 emissions directly by requiring efficiency improvements at coal-fired power plants.

The notice published on Monday actually contains three separate actions: (1) the repeal of the Clean Power Plan, (2) the adoption of ACE, and (3) revisions to the general regulations governing all “emission guidelines” adopted under Section 111(d).  EPA asserts that each of these components constitutes a separate rulemaking action, but at least the first two are grounded in the same fundamental idea—that Section 111(d) only authorizes EPA to select as a “best system of emission reduction” something that can be “applied” to an individual regulated “stationary source” of emissions. 

By definition, the “generation shifting” contemplated by the Clean Power Plan required the involvement of multiple sources (and even non-sources, such as solar and wind power, that the Clean Air Act does not regulate).  Since the goals in the Clean Power Plan could not have been achieved by any individual regulated source of emissions, but rather required utility owners to change their mix of energy resources, EPA has now determined it to be unlawful and repealed it.  In its place, the ACE rule focuses on the only available and adequately demonstrated means of reducing CO2 emissions from coal-fired power plants—efficiency improvements that allow the same level of electricity production with less fuel and thus fewer emissions.

The final ACE rule is remarkably similar to the proposal—it focuses on the same seven projects and practices demonstrated to improve efficiency levels of coal-fired electric generating units.  Then, after selecting the most promising “heat rate improvements” and evaluating the level of emissions reduction associated with those measures, EPA leaves to the states the task of developing standards of performance for each coal-fired generating unit, as instructed by Section 111(d).  Accordingly, states will have significant discretion over how ACE affects the power plants that it covers, but that discretion is not unbounded.

EPA makes clear in ACE that states must establish numeric performance standards in pounds of CO2 per megawatt-hour, since that is the most relevant metric for determining whether a unit has achieved the level of efficiency required by the standard.  As a result, the ACE rule limits the compliance tools available to states—their plans may only include measures capable of reducing the pounds of CO2 actually emitted.  For example, co-firing with gas could be relevant to compliance, since that practice could lower the pounds of CO2 emitted per megawatt-hour, but co-firing with biomass is not, since it could actually increase the pounds of CO2 coming out of the stack (even though some of that CO2 would simply be re-released from the biomass that recently sequestered it).