EPA’s Proposed Rules for Power Plant Emissions: 6 Key Questions, Answered
On May 11, the U.S. Environmental Protection Agency (EPA) announced proposed rules to reduce carbon dioxide emissions from coal and gas-fired power plants. If they go into effect these rules would establish the first legal limits on heat-trapping pollution from power plants and would accelerate — and make more certain — the ongoing emissions reductions from this sector. EPA’s proposal is an important step forward and can be strengthened when the final rule is issued sometime next year.
Here are the answers to six key questions about EPA’s proposal.
1. Does EPA Have Legal Authority to Set Carbon Pollution Standards?
In short, yes. The Clean Air Act requires EPA to set emissions performance standards for sources of pollution that endanger public health or welfare; the agency determined in 2009 that this applies to greenhouse gases, such as carbon dioxide (CO2).
For stationary sources, including power plants, EPA is required to set standards for both new sources and for existing sources based on the “best system of emission reductions,” or BSER.
The BSER is determined by evaluating technologies and approaches that have been adequately demonstrated, taking cost and other factors into account. In 2022, the U.S. Supreme Court constrained EPA’s authority to regulate CO2 emissions from power plants by prohibiting the agency from considering the ability of power companies to shift generation to cleaner sources of electricity as part of the BSER.
The proposed rule would set emissions standards based on what is feasible on a plant-by-plant basis rather than the broader system-wide approach taken by the Clean Power Plan proposed under the Obama administration.
2. What Would EPA's Proposal Require?
The standards would set pollution limits that power plants must comply with, based on three possible emissions-control strategies: carbon capture and sequestration (CCS), “co-firing” a coal plant with natural gas and co-firing a natural gas plant with clean hydrogen.
The most stringent pollution limits apply to coal plants that continue to operate over the long term. The most significant element of the proposal is a requirement for coal-fired power plants to reduce their emissions rate by almost 90% by 2030 unless they voluntarily commit to a legally binding retirement date no later than 2040. EPA based this performance standard on the ability of these plants to install CCS technology.
Plants that operate beyond 2031 but commit to retire by 2040 would have to reduce their emissions by an amount based on co-firing 40% natural gas with coal (as a proportion of their energy input), resulting in a 16% reduction in their emissions rate.
New natural gas power plants that operate with more than a 50% capacity factor (which measures a plant's electricity output over a year compared to how much it would produce if it operated at its maximum output level for the entire year), which EPA refers to as “baseload” plants, would be required to achieve an emissions rate based on using CCS for 90% of its emissions starting in 2035, or alternatively co-firing 30% of its gas by volume with clean hydrogen by 2032 and 96% of it with clean hydrogen by 2038. Large (>300 megawatts) existing baseload gas plants would have to meet the same standards as new baseload gas plants.
New gas plants that operate between a 20% and 50% capacity factor would be required to meet an emissions rate based on co-firing with 30% clean hydrogen by 2032 but would not have to meet the more stringent standards that apply to baseload plants in 2035 (for CCS) or 2038 (for hydrogen co-firing).
3. How Would EPA's Proposal Affect Power Plant Emissions?
While power plants are still responsible for one-quarter of total U.S. emissions, U.S. power plant emissions fell 36% between 2005 and 2022. This downward trend is expected to continue because nearly every coal plant in the U.S. is no longer economical to operate given the dramatic reductions in the cost of solar, wind and batteries over the last decade and the incentives in the U.S. Inflation Reduction Act (IRA) to deploy these and other zero-emitting generation options as well as CCS technologies. As a result, EPA projects that even without its proposed rule, power plant emissions will fall to 60% below 2005 levels by 2030 and 80% below 2005 levels by 2040. The rule would accelerate these reductions and make them more certain.
EPA’s preliminary modeling of the proposal (which doesn’t fully integrate the proposed requirements for existing gas plants) estimates that power plant emissions will drop by 63% in 2030 and as much as 83% in 2040. Cumulatively, the proposal is expected to reduce CO2 emissions by a total of roughly 800 million to 1 billion metric tons of CO2 from 2028 through 2042 over and above the reductions expected without the rule. While significant, this is less than U.S. power plants currently emit in just one year.
Along with these CO2 emissions reductions, the rule would cut emissions of particulate matter and other pollutants, resulting in direct health benefits, including preventing 1,300 premature deaths and 300,000 cases of asthma symptoms in 2030 alone, according to EPA.
4. Would EPA's Proposal Result in Massive Deployment of Carbon Capture and Sequestration and Hydrogen?
CCS involves three steps: capturing CO2 at a source before it enters the atmosphere, compressing and transporting it and injecting it in a deep geologic formation for permanent storage. EPA based its proposed emissions performance standards for some subcategories on the emissions reductions that can be achieved by employing CCS, but it will be up to each power plant operator to decide whether to implement CCS or achieve the required emissions reductions in other ways, including replacing obsolete power plants with new cleaner technology.
Also, the 45Q tax credits for CCS included in IRA already provide a strong incentive to install the technology where it makes sense. As a result, EPA does not expect the proposed rule to result in greater deployment of CCS than would otherwise occur. Under the rule, EPA projects that 16 gigawatts (GW) of fossil fuel generating capacity with CCS will be online by 2030, the same amount it projects in its baseline scenario (which includes the IRA). By 2035 this is expected to increase to 20 GW. For comparison, there was nearly 200 GW of unabated coal online in 2022, which EPA expects to drop to 60 GW by 2030 without the proposed rule and to 46 GW with it.
The IRA and the proposed rule also have the potential to spur further innovative CCS designs such as the Allam Cycle, which can deliver close to 100% capture rates, near zero conventional air pollutants and significant water savings compared to conventional designs. The IRA also includes strong incentives for scaling up clean hydrogen production and several power companies already have plans to deploy combustion turbines that can accommodate hydrogen co-firing. EPA projects that the proposed rule would result in 11 GW of capacity employing hydrogen co-firing by 2035.
5. How Can EPA's Proposal Be Improved?
The power plant emissions standards proposed by EPA will move the U.S. closer to its climate goals, but they still leave a significant gap. President Joe Biden has called for a 100% clean electricity system by 2035. The National Renewable Energy Laboratory (NREL) has analyzed multiple pathways to achieve that target, and all of them involve building more than twice as much zero-emissions generating capacity than projected in EPA’s scenarios. In NREL’s least-cost scenario, unabated fossil fuel use only provides 4% of total electricity generation in 2035, compared to 30% in EPA’s scenarios. (The NREL scenario achieves net-zero emissions through 193 million metric tons of carbon removal to compensate for the remaining emissions from fossil fuel generators.)
It’s essential that EPA strengthen its standards before issuing its final rule, and the NREL study points to an important way it can do so: Require much lower capacity factors for gas plants to be exempt from emissions controls. The proposal would only apply strong emissions standards to baseload plants that operate with a capacity factor over 50%. The concept of baseload power, however, is rapidly becoming outmoded as more and more variable renewables are added to the system.
Fossil fuel generating capacity can play a valuable role by ensuring reliability in a clean electricity system that relies primarily on solar and wind, but it need not run more than a few hundred hours per year to serve that function, as the NREL study demonstrates. Allowing unabated gas plants to run at maximum capacity for as much as half the year provides far more leeway than necessary, resulting in excessive emissions inconsistent with achieving U.S. climate goals.
It will also be important for the final rule to include performance standards for a much larger share of existing natural gas plants (provided that they operate more than a few hundred hours per year). The proposal only covers existing gas plants larger than 300 megawatts (MW), which constitute less than a quarter of existing capacity; plants between 25 MW and 250 MW make up 70%. Although the requirements could vary with size, EPA should include over 95% of the existing gas capacity in the final rule by covering all plants larger than 25 MW. Doing so will help ensure that pollution isn’t shifted to smaller plants that are often located in communities of color that have been overburdened by pollution for far too long.
Finally, EPA should look for every opportunity to set tighter deadlines given the urgency of the climate crisis. For example, coal plants could be required to retire by 2035 rather than 2040 if they want to be exempt from emissions limits in the interim.
6. What Else Is Needed to Close the Emissions Gap?
Achieving faster and deeper reductions from coal- and gas-fired power plants is the most important thing the United States can do to build on IRA and achieve its target of reducing emissions 50% to 52% below 2005 levels by 2030. That means building zero-emissions generation, energy storage, and transmission capacity far faster than current rates. The Biden administration recently released an action plan for quicker, smarter permitting of this essential infrastructure. Congress and state and local governments must also step up to promote more effective community engagement while eliminating duplicative processes that add time without improving decision-making. (For further recommendations on how to build on IRA, see America Is All In’s Beyond 50 report.)
EPA's proposed rule sends an unequivocal signal to American power plant operators: The era of unlimited carbon pollution is over. As the agency considers public comments and finalizes the rule, it should take the opportunity to strengthen its proposal, in recognition of the urgency of the climate crisis before us.