The Sustainability Buzz

EPA’s New Clean Power Plan: A Primer

Clean power plantAnnounced on Monday, June 2nd, the Obama administration’s new proposed plan to cut carbon emissions from power plants has already made waves.  For environmentalists, the plan was welcomed as a bold action to stem the effects of global warming.  From those in the industries most likely to be affected by the new plan (and lawmakers who are beholden to them), it drew a flood of criticism.

Yet both the proponents and detractors seem to agree on one thing: this is a turning point in U.S. environmental policy.  So what’s the Clean Power Plan about, and what does it mean for business?  We break it down for you.

What It Is:

EPA’s Clean Power Plan is essentially a set of guidelines that builds on efforts already being undertaken by states, cities and businesses to address climate change risks.  While the guidelines also address particle pollution, the most controversial proposed rule aims to cut carbon emissions from existing power plants 30% from 2005 levels by 2030.  Power plants are specifically targeted because they account for the highest percentage of carbon emissions in the U.S., at 38%.

What It Isn’t:

The proposed rule is not an executive order.  A Supreme Court ruling in 2007 led to EPA defining carbon as a pollutant, and as such, the agency is required to regulate it or be in violation of the law.  The current proposal is also not final.  EPA will now gather public comment before releasing the final rule in June 2015.

How It Works:

The plan recognizes that states and cities already have been working on climate-related issues, and building on that, it provides flexibility for states to develop their own policies and implementation plans for meeting the targets that EPA has set forth on a state-by-state basis.  However, if a state refuses to participate or fails to develop an effective implementation plan for reducing emissions, EPA can impose one.  Think of it as environmental federalism.

The Global Impact:

The U.S. certainly can’t tackle climate change alone, but it should lead by example, especially considering upcoming global negotiations with industrializing nations like China and India.  The U.S. will have far more leverage in convincing these nations to set aggressive emissions reduction targets if it can demonstrate that it’s proactively working to reduce its own contribution to climate change.

And as far as leading the emissions reduction charge is concerned, the U.S. has some ground to make up when compared to the European Union.  The EU has reduced emissions 19.2% since 1990, putting them within spitting distance of their 2020 goal of 20% reduction.  This is in stark contrast to U.S. emissions, which are on the rise after a five-year decline.  Emissions increased 2.39% from 2012 to 2013, and for the first two months of 2014, they’re up 7.45% from the same period in 2013.

Even by adopting the proposed EPA plan, U.S. economy emissions will still be above 1990 levels in 2030.  This has led to criticism from some environmental groups like Food & Water Watch and the Institute for Policy Studies that the targets aren’t aggressive enough.  However, the plan’s announcement seems to be having the desired global effect.  China, the world’s largest greenhouse gas emitter, announced a day later that its 5-year plan will include a CO2 emissions cap.

The Business Impact:

Because the proposal is still in the draft phase, it’s hard to know exactly how its adoption will affect business, but it’s very possible that it would add a little certainty to the energy market.

Opponents argue that the plan will drive up energy prices, force manufacturing overseas and stall the economy.  But the risks from climate change, including resource shortages, unstable power markets, and extreme weather patterns are just as grave for businesses.  Uncertainty kills innovation, and climate-related risks and events have already caused economic damage.  The standards set forth in EPA’s plan make it clear what each state’s goal is for reducing emissions and level the playing field by requiring everyone to be headed towards the same goal.  That, in turn, adds a measure of stability to the energy market and may, in the long term, drive down energy prices.

Additionally, as states and power companies strive to meet the targets, it could grow the energy efficiency industry, since the cost of energy efficiency is usually the cheapest strategy.  In fact, the American Council for an Energy Efficient Economy released a report in March that confirmed just that.  After examining efficiency programs in 20 states from 2009 to 2012 , it found that the average cost was 2.8 cents per kilowatt-hour.  That’s about one-half to one-third the cost of developing alternative new electricity resource options.  Since energy efficiency work can’t be outsourced abroad, that could lead to more job opportunities and more money staying in the U.S. economy.

Finally, there’s the health of our workforce to consider.  The EPA estimates that the proposed plan would reduce air pollutants by 25%, which would translate to a public health benefit of $55 billion to $93 billion by 2030.  This avoids a projected 470,000 to 490,000 missed school and work days, to say nothing of the individual benefits to people suffering from asthma, other pulmonary diseases and heart conditions.

Needless to say, we at iSpring will be very interested to see how this plan is implemented at the state level.  We are excited that the administration is taking this very important step down the path towards combating climate change.  Let’s just hope this is only the beginning.

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