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What impact will Obama’s Clean Power Plan have? It depends.

The bright future ahead of EPA's new rule.
The bright future ahead of EPA's new rule.
(Shutterstock)

The EPA's Clean Power Plan has finally been released. It is expected to cut greenhouse gas emissions from the US electric sector by 32 percent from 2005 levels by 2030. Your first stop should be Brad Plumer's explainer, which gets into all the gory details.

There will be a great deal of talk about the CPP this week, much of it about the mechanisms and timetables in the final rule, but the questions that matter most — what effect the CPP will have on America's transition to clean energy and the larger fight against climate change — simply cannot be answered yet.

It's not a matter of modeling the numbers in the plan. Politics, law, and psychology will determine the program's fate more than economics or technology, which makes predictions an even dicier undertaking than usual. The plan's future is, in short, clouded in uncertainty.

Here are the five biggest factors that will determine whether the CPP is a historic achievement, a failed opportunity, or something in between.

1) Legal challenges

The CPP faces a number of legal challenges that, if successful, could weaken or destroy it. Two in particular are worth noting.

The first has to do with a technical issue around Clean Air Act section 111(d), the provision under which EPA is regulating power plant carbon emissions. Back in 1990, Congress passed two versions of the Clean Air Act amendment in question. One supports the CPP. The other says that EPA can't regulate a pollutant from power plants under 111(d) if it has already regulated other pollutants from those power plants (like, say, mercury).

EPA has read the supportive amendment as taking priority. Opponents say that decision exceeds the agency's authority. This is one of the arguments legal scholar Laurence "The Real Victim" Tribe has been pushing on behalf of Peabody Coal. It's not a very good argument, but it turns entirely on how much deference the Court chooses to show EPA's reading of the statute. Until recently, that deference had been well-established (see: Chevron doctrine), but in a number of recent cases, the Court has signaled that it plans to extend somewhat less deference these days, especially in regulatory matters with substantial economic impact. And since the CPP is definitely substantial, the Court may decide to weigh in on 111(d) directly.

The second has to do with EPA's authority to regulate "beyond the fenceline" of individual power plants. When setting targets for states, the draft CPP took into account four building blocks: greater efficiency at power plants, a shift in production from coal plants to natural gas plants, more renewables, and more end-use energy efficiency. The last two are outside the fenceline of the power plants EPA is purportedly regulating.

In the final proposal, EPA has dropped the fourth building block, efficiency, but kept the third, so a legal challenge on these grounds remains all but inevitable. I wrote about the issue at some length here — long story short, EPA's use of 111(d) is defensible but novel, a sweeping program born out of a little-used regulatory tool, so there's no way to predict how courts will rule.

If EPA lost the former case, the rule would be thrown out. If it lost the latter, the rule would only be weakened, as building block three is "severable." A great deal rests on whether, when courts take up these cases, they put an immediate stay on the rule or allow it to remain in effect while the case proceeds. (In the mercury case, though the final judgment was negative, the rule remained in effect while the court considered, which meant it had most of its effects regardless.)

2) State plans

Under the model of "cooperative federalism" established by the Clean Air Act, the federal government sets targets and the states determine how to comply. The CPP gives states even more flexibility and autonomy than usual, setting statewide targets (rather than targets for individual power plants) and allowing states to determine the best way to allocate reductions.

The CPP's cost and effectiveness hinge to a large extent on what states choose to do. Likely the most cost-effective option is for states to join multi-state compliance regions, in which they could implement (for instance) a cap-and-trade system. Or they could join one of the existing cap-and-trade systems, like RGGI. The larger the area over which reductions are made, the more efficient the economics.

Or states could opt for in-state trading. They could push lots of renewables and efficiency (for which the CPP offers incentives), or they could insist on restricting themselves to large polluting plants, thus raising overall costs.

Or they could, as several states now propose, "just say no," simply refusing to write a plan. In that case (barring a negative court ruling), the feds would write plans for those states.

Some have argued that federal plans would not be as stringent as state plans, because they would be prohibited from using building block three, but the EPA insists it will maintain the stringency of the targets. (Much attention will focus on the model federal plan issued alongside the CPP.) There's nothing to stop states from suing and dragging their feet and making the whole enterprise as difficult and expensive as possible, though. Rumor has it one of America's political parties benefits when government is rendered dysfunctional.

Anyway, states are always saying they want more flexibility under federal regulations. Now they have it. We'll see what they do with it. As Michael Levi writes, "No one knows what mix of renewables, natural gas, and efficiency will result from the plan."

3) The next president

States have a year to create plans (two years if they propose multistate plans and ask for an extension). If they refuse, it will take longer for the feds to write a plan for them. The official compliance period begins in 2022. And the legal challenges to the bill will take years to play out.

All these issues will be resolved during the next presidency. Hillary Clinton has said she will defend the CPP. A Rubio EPA is likely to be far less supportive. It could propose changes to weaken the rule. It could delay or weaken compliance plans or simply refuse to write them for recalcitrant states. If it did that, enviros would sue — unless the rule is thrown out, it's legally mandatory for EPA to follow through — but those lawsuits would eat up years more time. (The Supreme Court ruled that EPA could regulate CO2 in 2007; it's taken eight years to get this far.)

In short, the CPP's impact, in size and in timing, hinges on who wins the next presidential election.

4) The psychology of utility executives

There's an argument to be made — Mike Grunwald has made it — that unstoppable changes are underway in the electricity sector. Coal is getting so expensive, and renewables so cheap, that the emission reductions promised by the CPP are going to occur regardless. In other words, Grunwald says, the plan is so conservative that it will have virtually no effect on the current trajectory of the sector.

I'm not so certain. A lot of the emission reductions in the US over the past few years can be traced to the massive recession; the economy could start growing at a greater clip. Much of the decline in coal was driven by low natural gas prices; those prices won't keep falling forever, and could even start rising. Renewables are growing fast, but the policies that support that growth are under concerted attack; some of those attacks could succeed. Things could change. If nothing else, the CPP is a backstop.

But many of its supporters believe it is something more, less due to its targets than to its mere existence. The idea is that it will force utility executives — all utility executives, not just ones with liberal customers — to start thinking about the clean energy transition in earnest, rather than assuming it can be forever delayed. That's a fundamental shift in thinking. And once they make that shift, they will find that opportunities to reduce emissions are everywhere, many of which will reduce prices for their customers. They will then set themselves to the task and easily exceed CPP targets.

Or so goes the hope, which EPA administrator Gina McCarthy articulated to Brad Plumer recently. Obviously this involves some speculation and dime-store psychoanalysis, but I think there's something to it. For many utility executives, clean energy has been an annoyance, a demonstration project to appease enviros or a concern for colleagues in liberal states. The CPP, if implemented, could make it "official" for these folks that reducing emissions is US policy and they can no longer put it off. That in itself could spark transformation in parts of the country that have so far been left behind by the clean energy boom.

5) International climate talks

As Jonathan Chait argued in his response to Grunwald, one of the chief goals of the CPP is to give the US credibility in the Paris climate talks this November. Rather than pursuing the (likely futile) hope of a comprehensive, binding agreement, attention in the UNFCCC has turned to aggregating voluntary commitments. Obama has already promised that the US will cut emissions at least 26 percent below 2005 levels by 2025. As Brad explained, the CPP would only secure about a quarter of the cuts needed to get there, but it is a big, dramatic step. The hope is that a sign of seriousness from the US, especially in the context of the rest of Obama's climate agenda, will prompt other countries to fortify their ambitions.

Will the CPP have the desired effect? It's impossible to say. The truth of international negotiations is that countries are overwhelmingly focused on their own domestic politics, needs, and capabilities. That's what will mostly determine their commitments.

But at the margins, a clear signal of American commitment could bolster the arguments of those within other countries fighting for ambition.

Then again, as this post has argued, the future of the CPP is clouded in uncertainty. Perhaps other countries will wait and see how it fares in court, or whether states take it seriously, or who is elected president in 2016. Perhaps they won't truly believe the US is committed to emission reductions until one of its two major parties drops its denialism and intransigence on the issue.

Who knows? As Chinese Prime Minister Chou En Lai is (probably apocryphally) said to have responded when Richard Nixon asked him about the impact of the French Revolution on Western civilization, "it's too soon to tell."

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