WASHINGTON -- With less than two weeks to go, the Environmental Protection Agency is readying a climate rule for existing power plants that requires steep carbon reductions, while allowing states and companies broad flexibility in how they limit their overall greenhouse gas emissions.
While key aspects of the proposal are still under discussion, according to several individuals briefed on the matter, the measure will spur regional carbon trading regimes on the East and West coasts and is likely to spur a legal challenge from some utilities. As currently drafted, the rule would cut greenhouse gas emissions from the utility sector by 25 percent, individuals said, but the baseline for that reduction has not been finalized.
The EPA plan resembles proposals made by the Natural Resources Defense Council, which would allow states and companies to employ a variety of measures -- including new renewable-energy and energy-efficiency projects "outside the fence," or away from the power plant site itself -- to meet their carbon reduction target. The exact level of reduction will vary by state, according to those familiar with the rule, and it will consist of a two-step process that will have smaller reductions at first and larger ones by 2030.
Coal-intensive utilities, coal mining companies, the U.S. Chamber of Commerce, conservative think tanks and a dozen or so state attorneys general have lined up to challenge the basis for the EPA's impending draft regulations for limiting carbon dioxide emissions at existing coal plants. They have taken aim both at the likelihood that the EPA will set emissions targets and at any approach that isn't limited to a specific plant site.
"Any standard that is set predicated on reductions happening outside the fence line are illegal and would be overturned by the court," said Joseph Stanko, who heads government relations at the law firm Hunton and Williams and represents several utility companies. "And I think they know that."
The proposed rule, to be announced June 2, represents the centerpiece of President Barack Obama's climate action plan. Utilities account for roughly 40 percent of the nation's carbon dioxide emissions, much of it from the aging, coal-fired fleet.
The EPA declined to comment on the draft rule. Both Bloomberg News and Reuters reported some proposals over the past few days.
Kelly Speakes-Backman, both commissioner of the Maryland Public Service Commission and chairwoman of the board of directors of the Regional Greenhouse Gas Initiative, or RGGI, a nine-state emissions trading compact, said in an interview last week that a "mass-based" system allows states and utilities to cut carbon in a more efficient and cost-effective way. Under this system, which the EPA is poised to adopt, states must meet an overall greenhouse gas limit, rather than a specific rate per hour for each power plant.
"What are we ultimately trying to do? We're trying to reduce carbon in the atmosphere," she said. "What RGGI has been doing sets almost a plug-and-play model for other states to adopt."
Some, such as Washington state, are eager to follow the example of East Coast and California emission-trading schemes. The RGGI program applies only to power plants, while California's is broader; the states participating in the RGGI system cut their emissions by more than 40 percent between 2005 and 2012.
EPA administrator Gina McCarthy is traveling this week to Utah, Washington and Oregon, where she'll meet with each state's governor and hold public events. Washington's Democratic Gov. Jay Inslee has pressed the EPA to adopt a strict carbon standard and is now pushing for several policies so his state can meet its goal of reducing its overall emissions 20 percent by 2020.
Other states are more resistant. Oklahoma Attorney General E. Scott Pruitt, for example, argued Tuesday at the National Press Club in Washington that the Clean Air Act gives states the power to determine what pollution standards should be and how to achieve them. Only later, he said, can the EPA reject a state's plan and impose its own, so the EPA's task now is to design a procedure and general emissions guidelines. He said it was reducing the states "from a substantive to an administrative role."
Mr. Pruitt also said the EPA can only regulate single sites "unit by unit," rather than offer states and utilities flexibility to meet new guidelines through energy-efficiency programs or renewable investments that might not be on a regulated coal plant's site.
NRDC supports establishing a three-year baseline for power plant emissions, starting either in 2005 or 2008, and letting states and utilities take credit for anything -- new nuclear plants or energy efficiency -- that reduced carbon emissions.