EPA Proposal Sets Ambitious Carbon Reduction Goals for Power Sector; Creates Challenges and Opportunities for Industry

On June 2, 2014, the Obama Administration unveiled an ambitious administrative proposal that would require states to regulate carbon dioxide (“CO2”) emissions from existing fossil fuel power plants, reducing emissions from the power sector by up to 30 percent nationwide by 2030 (“Power Sector Carbon Plan” or PSCP). Drafted under the auspices of section 111(d) of the Clean Air Act, the PSCP would set emission rate reduction goals for each state and provide state regulators with guidelines for designing and executing tailored state implementation plans.

The Environmental Protection Agency (EPA) has developed rate reduction goals based on two scenarios, described as Option 1 and Option 2. Under EPA’s preferred option, Option 1, EPA would establish state-specific emission rate restrictions at levels  necessary to reduce power sector CO2 emissions from 2005 levels by 30 percent by the year 2030, with lesser reductions required in the interim. Option 2 would establish less stringent and shorter-term state emission rate reduction requirements of 24 percent by 2025. Both options would require individual states to make significant emissions reductions over 2012 levels.