May 15, 2023

EPA Issues New Power Plant Rules That Could Raise Energy Costs

The U.S. Environmental Protection Agency has issued a long-awaited draft regulation that aims to reduce carbon dioxide emissions from coal and new natural gas-fired power plants. (After transportation, electricity production is the United States’ second-largest source of carbon dioxide emissions.)

If implemented, the new rule essentially would require all U.S. coal plants and the largest gas-fired facilities to contain nearly all of their carbon dioxide emissions by using control technologies that can be applied directly to power plants.

Specifically, coal facilities would need to capture 90 percent of their emissions by 2030 or shut down the plants by 2032. Large natural gas facilities that run consistently would be required to capture 90 percent of their emissions by 2035 or burn low-carbon hydrogen by 2038.

According to the The Hill, the rule would result in some coal plants shutting down instead of trying to comply with the new regulation. Additionally, if implemented, the rule is expected to raise power prices by two percent in 2030, 0.24 percent in 2035, and 0.08 percent in 2040.

The proposal requires that states, in developing plans for existing power sources, undertake meaningful engagement with affected stakeholders, including communities disproportionately burdened by pollution and climate change impacts, as well the energy companies and their workers.

The EPA will take comment from the public on this proposal for 60 days and will hold a virtual public hearing. Read more about the rule here.

The new proposal is controversial and already faces opposition. MSCI members may recall that the U.S. Supreme Court struck down EPA power plant emissions rules written by the Obama administration. As AXIOS noted, this time the EPA crafted its rule differently, focusing on emissions standards for specific power plant categories instead of seeking a more system-wide push toward renewables like the Obama administration did. Additionally, the new approach would allow individual utilities to decide how to meet the strict new emissions standards.

Still, business organizations, including the U.S. Chamber of Commerce and the National Association of Manufacturers have argued the proposed rules go too far and that the EPA should adopt a more rational approach that balances electric reliability and affordability with attempts to reduce carbon emissions and address climate change. Republican attorneys general also already have promised to sue the EPA over the rule, arguing the agency’s objective is to undermine coal and the grid reliability that comes with steady fossil fuel power.

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