Final US power plant rules seek to make carbon trading easier

Published 01:21 on August 4, 2015  /  Last updated at 01:21 on August 4, 2015  /  Americas, US  /  No Comments

The United States on Monday released the final rules of its Clean Power Plan, allowing state regulators to pursue regional emission markets to meet their targets without first having to establish and pass bureaucratic inter-state agreements.

The United States on Monday released the final rules of its Clean Power Plan, allowing state regulators to pursue regional emission markets to meet their targets without first having to establish and pass bureaucratic inter-state agreements.

The final rule, which President Barack Obama said will cut CO2 emissions from the power sector by 870 million tonnes by 2030, aims to ease the creation of carbon markets by making individual states’ emission units “trade ready”.

The EPA regulations set target emissions rates in the form of CO2 per MWh for each state and allow local regulators flexibility in how to achieve them. Rather than requiring each power plant to meet their state’s target rate, regulators can create a market with an overall reduction goal set to collectively achieve the targets of the states involved.

The final rules aim to make this process easier by expressing state targets in the mass-based form of total tonnes of CO2 in a given year. This absolute emissions target is more conducive to a cap-and-trade programme than the emissions-per-output ratio, as it enables issuance of tradable allowances, according to the EPA.

Feedback to the draft rule released last year showed that coordinating all the regulatory bodies involved in a regional carbon market would be cumbersome and time-consuming as they would have to jointly agree on and submit a multi-state compliance plan to the EPA.

The final rules make it easier to get around this bureaucracy by setting criteria that allow individual power plants to use out-of-state reductions toward their targets without up-front interstate agreements. Such criteria include using the same carbon accounting, reporting and monitoring metrics.

The trade-ready provision “encourages the use of market mechanisms”, said Michael Tubman of the Washington DC-based Center for Climate and Energy Solutions.

States must submit plans to the EPA showing how they will meet their emission rate goals by 2030, with interim target rates in 2022-2029. But since formal agreements are not required, states initially averse to market measures could still resort to them later.

Tubman’s group thinks this is likely, and is looking at “how state plans might be written so that even if they don’t start out with tradable elements, they can remain open to the option in the future.”

CHANGES

As expected, the timeframe for state plans was changed in the final rule, with states able submit them in 2018 instead of 2017. They will only have to start complying with the targets by 2022 rather than 2020 as originally proposed.

But as previously reported, the overall requirements of the programme are now tougher, with the final rules mandating a 32% cut in carbon emissions from US power plants by 2030 on 2005 levels, up from the initial proposal of 30%.

Besides the final rules, the EPA also released a federal implementation plan that will act as a backstop for states that refuse to come up with plans to meet the required targets. Many Republicans, including US Senate majority leader Mitch McConnell, are calling on state regulators to defy the Obama administration by simply not submitting compliance plans.

But in addition to being a backstop, the federal plan constitutes a “model rule” for states to use in creating emissions trading programmes because it lays out the common denominators necessary for an interstate market.

UN TALKS

Observers said the plan would strengthen the US’ credibility at the UN climate negotiations in Paris in December, and would help the Obama administration put pressure on other nations to talk concrete steps towards cutting their carbon emissions.

The United States’ official “pledge” at those negotiations is to reduce total emissions by 17& below 2005 levels by 2020 and 26-28 per cent below 2005 levels by 2025.

Emissions from non-electricity sectors are also being addressed, with tougher standards on emissions from motor vehicles in the 2016 model year and new policies to cut greenhouses gases in agriculture expected later this year.

The Clean Power Plan was not the means by which the Obama Administration originally expected to achieve its 2020 targets – the 17% cut was originally the goal of a proposed national greenhouse gas cap-and-trade programme making its way through the US Congress in 2009. But as that bill failed to make it past the US Senate in 2010, Obama has pushed the EPA regulations instead.

By Lisa Zelljadt – news@carbon-pulse.com

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