The Environmental Protection Agency released a highly anticipated proposed rule today to repeal the Obama-era regulation known as the Clean Power Plan. The Clean Power Plan would have regulated carbon dioxide emissions from existing power plants for the first time. The rule was working its way through the federal courts when President Trump took office and had not yet taken effect.
Today’s repeal starts the process of rescinding the Clean Power Plan. The EPA has not released a proposal for replacing the rule and many questions still remain.
1. When will the EPA replace the Clean Power Plan?
The rumor mill had anticipated that the EPA would formally solicit input on replacing the Clean Power Plan on the same day the agency proposed the repeal. However, the EPA has not yet released an advance notice of proposed rulemaking. EPA officials said today that the agency plans to do so in coming weeks. It is therefore unclear when or if the EPA will replace the regulation.
If the EPA does release an advance notice to solicit comment on what a replacement rule should look like, this will extend the already lengthy rulemaking process. The advance notice will allow interested parties to comment on how EPA should draft a proposal. The EPA will then have to process the input, release a proposed rule, take comment on the proposed rule, and then finalize the rulemaking. The Trump regulation will then certainly be challenged in court. This process will play out over many years.
In addition, it is also unclear how long the Clean Power Plan will remain in legal limbo. Once the repeal rule is finalized, groups that supported the Obama-era rule have announced plans to challenge the repeal in court. This includes the attorneys general of New York and Massachusetts.
2. What happens if no replacement rule is finalized by 2020?
If the Trump administration proposes a new rule, but does not finalize it by the time Trump leaves office, a new administration could scrap the rulemaking and start again. If the presidency changes parties in 2020, it is very likely that a new carbon regulation would be significantly more stringent than a Trump-era rulemaking.
If the Trump administration opts not to proceed with a replacement, however, power companies will face regulatory uncertainty. Companies have to make long-term investments without knowing how carbon will be regulated going forward. There is also a possibility that companies could face the return of public nuisance lawsuits, as they did in years past. These lawsuits, which argued that the owners of emitting sources should be responsible for climate change impacts, were ultimately dismissed by the courts since carbon regulation was under the purview of the Clean Air Act. However, if the Clean Air Act’s authority is not invoked, there is possibility that new public nuisance lawsuits will be filed.
3. How will this affect investments and emissions in the power sector?
The Clean Power Plan would have locked in the ongoing transition in the power sector away from coal-fired generation toward gas-fired and renewable generation. In addition, the rule required that all states, even coal-heavy states, move toward cleaner sources. Without the rulemaking, states and companies will not face federal regulatory pressure to transition to lower-carbon fuels.
As long as there is regulatory uncertainty, many companies will continue to invest in lower-emitting sources.
However, other pressures will remain. First, low natural gas prices will continue to put pressure on the coal fleet. Second, many states will continue to provide incentives and implement policies that favor lower-emitting sources. Finally, as long as there is regulatory uncertainty, many companies will continue to invest in lower-emitting sources. It is therefore likely that the repeal will not have a substantial near-term impact on the power sector. However, in the long term, additional policies will likely be needed to ensure emissions continue to decline.