NRDC SUMMARY OF EPA S CLEAN POWER PLAN

SUMMARY OF EPA S CLEAN POWER PLAN JUNE 2, 2014 FS:14-06-A NRDC SUMMARY OF EPA S CLEAN POWER PLAN Carbo Pollutio Stadards for Existig Power Plats SUMMARY OF EPA S PROPOSAL: EPA s proposal takes a sesible approach of calculatig a state s emissio target usig four basic buildig blocks ad best system of emissios reductio, icludig a wide rage of cost-effective methods to reduce emissios. EPA does ot prescribe how a state should meet its goal. Istead, EPA sets a state-specific goal ad each state develops its plas ad policy approaches to meet the target. The states asked for flexibility ad EPA has provided it. This state-by-state approach has bee used repeatedly to successfully cut pollutio uder the Clea Air Act. EPA has set modest ad achievable targets for each state based o that state s curret eergy mix. EPA started with each state s 2012 eergy mix. EPA the applied the same set of emissio reductio tools to each state. EPA s formula is based o what states aroud the coutry are already doig. EPA determied each state s target emissio reductio target by calculatig how much the emissio reductio tools could reduce a state s 2012 eergy portfolio. Because each state has a uique eergy mix, the various pollutio reductio techiques achieve sigificatly differet savigs i each state ad thus sigificatly differet targets. EPA has developed a flexible approach that allows for sigificat emissios reductios at low cost. It is a approach that draws o a wide rage of tools to reduce carbo pollutio, ad it ca pass legal muster. EPA estimates the proposal will reduce CO2 emissios o a atioal basis (rolled up estimates of the impact of state stadards) 26% below 2005 emissios by 2020 ad 30% by 2030. That is equivalet to: 18% below EPA s forecast of what would happe without the stadards (i.e., busiess-as-usual) by 2020 ad 25% by 2030 or 13% below 2012 emissios by 2020 ad 17% by 2030. These savigs are sigificat. The Clea Car Stadards set i 2010 ad 2012 are projected to reduce CO2 emissios by 4,140 millio metric tos from 2020 to 2030. This proposal would deliver 5,344 millio metric tos over the same period --almost 30% more. EPA s proposal ca ad should be stregtheed. EPA is takig commets for 120 days o the assumptios it made to develop the state stadards. NRDC believes the pollutio reductios could be greater at a reasoable cost. I particular, states could do more to icrease eergy efficiecy ad the use of reewables tha EPA assumed i settig the targets i its curret proposal. (The fial stadards will be issued by Jue 2, 2015.) PAGE 1 NRDC Summary of EPA s Clea Power Pla

The four tools used to set the state targets are: Makig existig coal plats more efficiet. Usig existig gas plats more effectively. Icreasig reewables ad uclear. Icreasig ed-use eergy efficiecy. Note that states do ot have to take the precise steps EPA used to calculate the target. They ca choose to attai the targeted level of pollutio reductios however they choose; but the target calculatio shows what level is reasoable (ad required). EPA is proposig a two-part goal structure: a iterim goal that a state must meet o average over the te-year period from 2020-2029 ad a fial goal that a state must meet at the ed of that period i 2030 ad maitai thereafter. A state could adopt either the the goal established by EPA, which is stated i terms of carbo itesity (i.e., amout of carbo per uit of power geeratio) or the state ca set a mass-based goal of a equivalet amout of pollutio (i.e., umber of tos of carbo emitted). The states must submit a state pla to EPA by Jue 30, 2016. However, EPA is allowig for coditioal approval of a pla with some additioal time to address state legislative ad rulemakig activities, as well as developmet of multi-state plas. BACKGROUND We have a obligatio to protect our childre ad future geeratios from the impacts of climate chage, ad we ca do so by settig the first-ever limits o carbo pollutio from power plats. Carbo pollutio fuels climate chage, which triggers more asthma attacks ad respiratory disease, worses air quality, ad cotributes to more frequet, destructive, costly ad deadly extreme weather evets. Power plats are resposible for 40 percet of the carbo pollutio i the Uited States, the sigle largest cotributor to dagerous climate chage, the effects of which we are already seeig. Right ow we limit mercury, arseic, lead, soot ad other dagerous pollutats from power plats, but ot the carbo pollutio drivig climate chage. O Jue 2, 2014, the U.S. Evirometal Protectio Agecy, uder Presidet Obama s Climate Actio Pla, proposed a commo-sese pla to cut carbo pollutio from power plats. The detailed iformatio from EPA o their Clea Power Pla is available at: http://www2.epa.gov/carbopollutio-stadards/clea-power-pla-proposed-rule The draft EPA stadards are a proposal. EPA is seekig public commet over the ext 120 days after the proposal is published i the Federal Register. EPA is proactively workig with states ad other stakeholders to refie ad improve its framework before fializig it i Jue 2015. The followig is a summary of EPA s proposal, mostly i the agecy s words. Quotes from EPA are i italics. NRDC s iitial reactio to the proposal is icluded at the ed of this documet. ESTIMATES OF CO 2 EMISSIONS FROM THE ELECTRIC SECTOR EPA has established state-by-state targets o a rate (or itesity ) basis (lbs/mwh, that is, how may pouds of pollutat come out of the smokestack for every uit of eergy produced). EPA has also developed estimates of atioal CO 2 emissios reductios i 2020 ad 2030. The atioal estimates for EPA s proposal are show below. The estimated level of emissios reductios from NRDC s proposal is also show i the figure below. 3,000 2,500 2,000 1,500 1,000 500 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 ELECTRIC SECTOR EMISSIONS (MILLION METRIC TONS) 2023 2024 2025 ESTIMATE OF BENEFITS FROM THE EPA PROPOSAL: The Clea Power Pla will help cut carbo pollutio from the power sector by 30 percet from 2005 levels. The proposal will also cut pollutio that leads to soot ad smog by over 25 percet i 2030. The Clea Power Pla will lead to climate ad health beefits worth a estimated $55 billio to $93 billio i 2030, icludig avoidig 2,700 to 6,600 premature deaths ad 140,000 to 150,000 asthma attacks i childre. These climate ad health beefits far outweigh the estimated aual costs of the pla, which are $7.3 billio to $8.8 billio i 2030. From the soot ad smog reductios aloe, for every dollar ivested through the Clea Power Pla, America families will see up to $7 i health beefits. EPA projects that the Clea Power Pla will cotiue to icrease eergy efficiecy ad reduce growth i demad for electricity. Natioally, this meas that, i 2030 whe the pla is fully implemeted, electricity bills would be expected to be roughly 8 percet lower tha they would [have] bee without the actios i state plas. That would save Americas about $8 o a average mothly residetial electricity bill, savigs they would t see without the states efforts uder this rule. FIGURE 1: Historic Natioal CO 2 Emissios vs. EPA Clea Power Pla Proposal & NRDC Proposal Estimates Historical Emissios EPA Proposal - Optio 1 (State Compliace) NRDC Proposal - Moderate Case (Full Efficiecy) NRDC Proposal - Ambitious Case (Full Efficiecy) EPA Base Case (Busiess as Usual) PAGE 2 NRDC Summary of EPA s Clea Power Pla

EPA S PROPOSED REGULATIONS: The proposal has two mai elemets: 1. state-specific emissio rate-based CO 2 goals ad 2. guidelies for the developmet, submissio ad implemetatio of state plas. While this proposal lays out state-specific CO 2 goals that each state is required to meet, it does ot prescribe how a state should meet its goal. CAA Sectio 111(d) creates a partership betwee the EPA ad the states uder which the EPA sets these goals ad the states take the lead o meetig them by creatig plas that are cosistet with the EPA guidelies. It also allows states to pursue policies to reduce carbo pollutio that: 1. cotiue to rely o a diverse set of eergy resources, 2. esure electric system reliability, 3. provide affordable electricity, 4. recogize ivestmets that states ad power compaies are already makig, ad 5. ca be tailored to meet the specific eergy, evirometal ad ecoomic eeds ad goals of each state. Each state ca do so aloe or ca collaborate with other states o multi-state plas that may provide additioal opportuities for cost savigs ad flexibility. EPA is required by the Clea Air Act to establish a best system of emissios reductio (BSER) i establishig state stadards. Overall, the BSER proposed here is based o a rage of measures that fall ito four mai categories, or buildig blocks, which comprise improved operatios at EGUs, dispatchig lower-emittig EGUs ad zero-emittig eergy sources, ad ed-use eergy efficiecy. All of these measures have bee amply demostrated via their curret widespread use by utilities ad states. While the state-specific goals that the EPA is proposig i this rule are based o cosistet applicatio of a sigle goalsettig methodology across all states, the goals accout for these key differeces. The state-specific CO 2 goals derived from applicatio of the methodology vary because, i settig the goals for a state, the EPA used data specific to each state s EGUs ad certai other attributes of its electricity system (e.g., curret mix of geeratio resources). The agecy is proposig state-specific fial goals that must be achieved by o later tha the year 2030. EPA also proposes iterim goals that must be achieved, o average, durig the 2020 to 2029 period. THE FOUR TOOLS IN THE TOOLBOX ARE: 1 2 3 4 Makig existig coal plats more efficiet. Hardware ad software tweaks ca produce, o average, 6% more electricity out of a to of coal. Usig existig gas plats more effectively. Relyig o already built gas power plats i a state ad those i the pipelie achieves low-cost reductios by makig better use of capital ivestmets already made i each state. EPA forecasts that the pla will reduce our atio s gas use over time. Usig coservative assumptios about what efficiecy ad reewables ca do, gas use i the power sector would be 5% less i 2030 with the rule tha without it. Icreased reewables ad uclear. The proposal evaluates reewables i various regios ad applies the level of growth i reewables that is the average of the reewable promotio policies adopted i each regio. It also assumes uclear uits uder costructio are completed. Icreased ed-use eergy efficiecy. The proposal applies eergy efficiecy policies already adopted by may states. EPA assumes a slow ramp-up to levels i the middle of the pack, ot leadig-edge requiremets. TABLE 1: SUMMARY OF THE BSER BUILDING BLOCKS BUILDING BLOCKS DESCRIPTION ASSUMPTIONS FOR GOAL SETTING FORMULA NET COST ESTIMATE ($/METRIC TON) 1 Makig existig coal plats more efficiet Reducig the carbo itesity of geeratio at idividual affected EGUs through heat rate improvemets Average heat rate improvemet of 6% for coal steam electric geeratig uits (EGUs) $6 to $12 2 Usig Existig Gas Plats More Effectively Reducig emissios from the most carbo-itesive affected EGUs i the amout that results from substitutig geeratio at those EGUs with geeratio from less carbo-itesive affected EGUs (icludig NGCC uits uder costructio) Dispatch to existig ad uder-costructio atural gas combied cycle (NGCC) uits to up to 70% capacity factor $30 3 Icreased Reewable ad Nuclear Reducig emissios from affected EGUs i the amout that results from substitutig geeratio at those EGUs with expaded low- or zero-carbo geeratio Dispatch to ew clea geeratio, icludig ew uclear geeratio uder costructio, moderate deploymet of ew reewable geeratio, ad cotiued use of existig uclear geeratio Icrease demad-side eergy efficiecy to 1.5% aually $10 to $40 4 Icreased Ed-use Eergy Efficiecy Reducig emissios from affected EGUs i the amout that results from the use of demad-side eergy efficiecy that reduces the amout of geeratio required $16 to $24 PAGE 3 NRDC Summary of EPA s Clea Power Pla

EPA S ASSUMPTIONS FOR RENEWABLES, NUCLEAR AND ENERGY EFFICIENCY Icreased use of Reewable ad Nuclear Plats (Buildig Block 3): EPA s assumptios for the expasio of reewable eergy are very modest ad based o what states i each regio have already committed to do. State reewable portfolio stadard (RPS) commitmets vary sigificatly, ad as a result the scale of the reewables buildig block also varies by regio. The EPA proposal also couts existig reewables towards the target, so i may cases the emissios reductio opportuity from ew reewable resources is ot cosidered. The proposal adjusts state targets to accout for 6% of the existig uclear fleet. It does this by addig 6% of curret uclear electricity geeratio, i megawatt hours (MWh), to the deomiator of each state s target. This creates a icetive for states to retai existig uclear plats. The proposal does ot address the safety or the ecoomic status of particular uclear plats at risk of closig. Icreased use of Ed-use Eergy Efficiecy (Buildig Block 4): The eergy efficiecy buildig block assumes states expad programs at a very modest rate to achieve eergy savigs levels that 12 leadig states have already committed to reach today 1.5% aual savigs. For states that are ot already achievig this level, EPA ramps-up the expected eergy efficiecy savigs slowly, at 0.2% per year. The proposal assumes very high eergy efficiecy program costs (almost double what most experts report) ad assumes a short life-spa for eergy efficiecy measures. Eve with these very coservative assumptios, efficiecy remais a importat ad low-cost tool i EPA s aalysis. More reasoable assumptios, reflectig established market treds ad empirical state program results, would sigificatly icrease the projected emissios reductios delivered by this buildig block, thereby resultig i stroger state-by-state emissios reductio targets for 2020 ad 2030. EPA IS PROPOSING A TWO-PART GOAL STRUCTURE: a iterim goal that a state must meet o average over the te-year period from 2020-2029 ad a fial goal that a state must meet at the ed of that period i 2030 ad thereafter. A state could adopt the rate-based form of the goal established by the EPA or a equivalet mass-based form of the goal. 1 A multi-state approach icorporatig either a rate- or mass-based goal would also be approvable based upo a demostratio that the state s pla would achieve the equivalet i strigecy, icludig compliace timig, to the state-specific rate-based goal set by the EPA. PAGE 4 NRDC Summary of EPA s Clea Power Pla

STATE TARGETS The followig table shows the state itesity-based emissio stadards (lbs/mwh) EPA has set i compariso to historic emissios rates. As oted, the differece i each state s target is due to the differet amout of carbo pollutio reduced whe EPA applied the four carbo pollutio reductios tools to each state s eergy portfolio. I order to depict how the four buildig blocks cotribute to the state targets proposed by EPA, NRDC created the figure below, showig the relative cotributio of each buildig block to each state s overall emissios target i 2030. The figure shows the relative cotributio of each block e.g., eergy efficiecy to the target set for each state. 2 TABLE 2: Proposed State Targets STATE 2012 Emissio Rate (Fossil, Reew. ad 6% Nuclear) (lbs/mwh) Iterim (2020-2029 average) Iterim Percet Reductio to 2012 2030 State (2030 ad thereafter) 2030 Percet Reductio to 2012) STATE 2012 Emissio Rate (Fossil, Reew. ad 6% Nuclear) (lbs/mwh) Iterim (2020-2029 average) Iterim Percet Reductio to 2012 2030 State (2030 ad thereafter) 2030 Percet Reductio to 2012) Alabama 1,444 1,147-21% 1,059-27% Alaska 1,351 1,097-19% 1,003-26% Arizoa 1,453 735-49% 702-52% Arkasas 1,640 968-41% 910-45% Califoria 698 556-20% 537-23% Colorado 1,714 1,159-32% 1,108-35% Coecticut 765 597-22% 540-29% Delaware 1,234 913-26% 841-32% Florida 1,200 794-34% 740-38% Georgia 1,500 891-41% 834-44% Hawaii 1,540 1,378-11% 1,306-15% Idaho 339 244-28% 228-33% Illiois 1,895 1,366-28% 1,271-33% Idiaa 1,923 1,607-16% 1,531-20% Iowa 1,552 1,341-14% 1,301-16% Kasas 1,940 1,578-19% 1,499-23% Ketucky 2,158 1,844-15% 1,763-18% Louisiaa 1,466 948-35% 883-40% Maie 437 393-10% 378-14% Marylad 1,870 1,347-28% 1,187-37% Massachusetts 925 655-29% 576-38% Michiga 1,696 1,227-28% 1,161-32% Miesota 1,470 911-38% 873-41% Mississippi 1,130 732-35% 692-39% Missouri 1,963 1,621-17% 1,544-21% Motaa 2,245 1,882-16% 1,771-21% Nebraska 2,009 1,596-21% 1,479-26% Nevada 988 697-29% 647-34% New Hampshire 905 546-40% 486-46% New Jersey 932 647-31% 531-43% New Mexico 1,586 1,107-30% 1,048-34% New York 983 635-35% 549-44% North Carolia 1,646 1,077-35% 992-40% North Dakota 1,994 1,817-9% 1,783-11% Ohio 1,850 1,452-22% 1,338-28% Oklahoma 1,387 931-33% 895-35% Orego 717 407-43% 372-48% Pesylvaia 1,540 1,179-23% 1,052-32% Rhode Islad 907 822-9% 782-14% South Carolia 1,587 840-47% 772-51% South Dakota 1,135 800-29% 741-35% Teessee 1,903 1,254-34% 1,163-39% Texas 1,298 853-34% 791-39% Utah 1,813 1,378-24% 1,322-27% Virgiia 1,297 884-32% 810-38% Washigto 763 264-65% 215-72% West Virgiia 2,019 1,748-13% 1,620-20% Wiscosi 1,827 1,281-30% 1,203-34% Wyomig 2,115 1,808-15% 1,714-19% PAGE 5 NRDC Summary of EPA s Clea Power Pla

FIGURE 2: Cotributio of Each Buildig Block to the State CHANGE IN STATE GOAL: 2012 BASELINE TO 2030 (LBS/MWH) - 1,000-800 - 600-400 - 200 0 200 Alabama Alaska Arizoa Arkasas Califoria Colorado Coecticut Delaware Florida Georgia Hawaii Idaho Illiois Idiaa Iowa Kasas Ketucky Louisiaa Maie Marylad Massachusetts Michiga Miesota Mississippi Missouri Motaa Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolia North Dakota Ohio Oklahoma Orego Pesylvaia Rhode Islad South Carolia South Dakota Teessee Texas Utah Virgiia Washigto West Virgiia Wiscosi Wyomig Block 1 (Heat Rate) Block 2 (NG Dispatch) Block 3 (Reewables & Nuclear) Block 4 (Eergy Efficiecy) PAGE 6 NRDC Summary of EPA s Clea Power Pla

THE PROPOSAL OFFERS STATES SIGNIFICANT FLEXIBILITY IN CRAFTING STATE PLANS: While this proposal lays out state-specific CO 2 goals that each state is required to meet, it does ot prescribe how a state should meet its goal. CAA Sectio 111(d) creates a partership betwee the EPA ad the states uder which the EPA sets these goals ad the states take the lead o meetig them by creatig plas that are cosistet with the EPA guidelies. Each state ca do so aloe or ca collaborate with other states o multi-state plas that may provide additioal opportuities for cost savigs ad flexibility. Addressig a cocer raised by both utilities ad states, the EPA is proposig that states could choose approaches i their compliace plas uder which full resposibility for actios achievig reductios is ot placed etirely upo emittig electric geeratig uits (EGUs); istead, state plas could iclude measures ad policies (e.g., demad-side eergy efficiecy programs ad reewable portfolio stadards) for which the state itself is resposible. The EPA is proposig to evaluate ad approve state plas based o four geeral criteria: 1. eforceable measures that reduce EGU CO 2 emissios; 2. projected achievemet of emissio performace equivalet to the goals established by the EPA, o a timelie equivalet to that i the emissio guidelies; 3. quatifiable ad verifiable emissio reductios; ad 4. a process for bieial reportig o pla implemetatio, progress toward achievig CO 2 goals, ad implemetatio of corrective actios, if ecessary. The Presidetial Memoradum also calls for a deadlie of Jue 30, 2016, for states to submit their state plas. The EPA is proposig that each state must submit a pla to the EPA by Jue 30, 2016. However, the EPA recogizes that some states may eed more tha oe year to complete all of the actios eeded for their fial state plas, icludig techical work, state legislative ad rulemakig activities, coordiatio with third parties, ad coordiatio amog states ivolved i multi-state plas. Therefore, the EPA is proposig a optioal two-phased submittal process for state plas. Each state would be required to submit a pla by Jue 30, 2016, that cotais certai required compoets. If a state eeds additioal time to submit a complete pla, the the state must submit a iitial pla by Jue 30, 2016 that documets the reasos the state eeds more time ad icludes commitmets to cocrete steps that will esure that the state will submit a complete pla by Jue 30, 2017 or 2018, as appropriate. If the state develops a pla that icludes a multi-state approach, it would have util Jue 30, 2018 to submit a complete pla. Further, the EPA is proposig that states participatig i a multi-state pla may submit a sigle joit pla o behalf of all of the participatig states. Edotes 1 The mass-based goal developmet appears to require the states to complete a modelig exercise to develop the toage targets. See TSD: Projectig EGU CO 2 Emissio Performace i State Plas, sectio III, page13. 2 Note: the icreases i itesity for Block 3 i a few states appear to be due to a calculatio or trascriptio error i EPA s tables. PAGE 7 NRDC Summary of EPA s Clea Power Pla