Choosing a Policy Pathway for State 111(d) Plans to Meet State Objectives

Franz T. Litz, co-author of the report, is a program consultant for the Great Plains Institute and principal of Litz Energy Strategies LLC.

In mid-summer 2015, EPA is expected to issue its final “Clean Power Plan” regulations, which aim to reduce carbon dioxide emissions from existing fossil fuel-fired power plants under section 111(d) of the Clean Air Act. The final rule will require states to develop and submit state plans as early as mid-summer 2016, to achieve the federally prescribed state emissions goals. Because EPA is expected to grant states broad flexibility in choosing a compliance pathway to achieve required emissions performance at existing power plants, states will need to evaluate the potential policy pathways and select an approach that best meets state objectives. This paper aims to assist states in choosing a policy pathway for their state 111(d) plans, guiding states through the key considerations and walking through potential policy pathways.

Coming Requirements for States

EPA’s final regulations are expected to establish emissions goals for each state as well as the requirements that apply when states develop plans to achieve those emissions goals. The state goals are the minimum stringency that the state plan must achieve. The regulations will also provide states with guidance for designing and implementing required and some optional elements of state plans.

In its June 2014 proposal and related documents released for public comment, EPA signaled it will grant states broad flexibility to choose a policy pathway, provided that plan obligations are federally enforceable and that the state can demonstrate the plan will achieve the state goal within the prescribed timetable. EPA also provided initial guidance on what measures could be counted toward achievement of a state goal, and how those measures might be counted.

A state goal can be applied in a rate-based form, meaning that the plan must not exceed a certain level of emissions per unit of power generated by covered power plants. EPA is expected to issue state goals in the form of rates. Alternatively, a state plan can be designed to achieve the mass-based equivalent of the rate EPA prescribes, meaning that covered power plants do not exceed a certain aggregate emissions level in tons. States must decide whether to pursue a rate-based or mass-based approach as a threshold matter.

A state plan must meet the requirements of the final EPA guidelines to gain EPA’s approval. If a plan submission does not meet the requirements and EPA does not approve the plan, the Clean Air Act provides that EPA must impose a federal plan for that state. To date, EPA has not indicated what a federal plan might entail, though the agency has indicated it will propose such a federal backstop for public comment.

Although states will not know the specifics of the final regulations until EPA releases them in mid-summer 2015, states can nevertheless begin understanding their policy options for 111(d) plans. To evaluate these options, it helps to first consider what are the state’s objectives in designing and implementing a 111(d) plan, and then consider the available policy pathways in light of those objectives.

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This report was prepared to further understanding and stimulate discussion of the issues covered. The conclusions reached in this document do not necessarily reflect the views of the Great Plains Institute or the Bipartisan Policy Center, their founders, or boards of directors.