On August 21, 2018, the Environmental Protection Agency (“EPA”) proposed a new rule which would replace the Obama-era Clean Power Plan (“CPP”) and establish new emissions guidelines for states to address greenhouse gas (“GHG”) emissions from electric-generating power plants. As background, the CPP was stayed by the Supreme Court in a 5-4 decision in February of 2016 before the rule ever went into effect. More recently, in October 2017, the EPA announced its intention to effectively repeal the CPP because it “exceeded” the EPA’s authority. Now, the EPA is proposing to enact the Affordable Clean Energy rule (“ACE Rule”) to reduce GHGs while giving states more flexibility to achieve that goal.

The Rule is being proposed under Section 111(d) of the Clean Air Act which applies to existing emission sources. There are several components of the ACE Rule that distinguish it from the CPP:

  • Defines “best system of emission reduction” as on-site, heat-rate efficiency improvements.

The Rule sets emissions guidelines for states to develop standards of performance based on the best system of emission reduction. While the CPP established a single federal standard that states had to adopt, the ACE Rule allows states to set their own standards as long as they meet federal guidelines.

  • Provides states with a list of “candidate technologies” that can be used to establish performance standards.

States would need to consider the candidate technologies when developing their standards of performance for individual power plants. The preferred technologies to achieve emissions reductions would be determined by each state on a case-by-case basis.

  • Incentivizes efficiency improvements at existing electric-generating power plants.

The CPP promoted investment in renewables and natural gas and disfavored any coal-related investments. By contrast, the ACE Rule promotes investments to upgrade coal-fired power plants to make them cleaner and more efficient.

  • Establishes new implementing regulations so states have sufficient time and flexibility to develop state plans.

The CPP had provided states with detailed requirements for developing and implementing state plans. The ACE Rule includes more flexible guidelines so that states have additional time to evaluate the best methods of GHG emission reduction.

While the CPP essentially sought to regulate coal-fired power plants out of existence, the Rule would effectively extend the operational lives of such facilities by promoting an increase in reliability and efficiency. The Rule is certain to generate the same level of interest and litigation as its stayed predecessor. It will be interesting to see where the Rule ends up and how states like New York and California, among others, will respond.