On August 3, 2015, the U.S. Environmental Protection Agency (“EPA”) issued its final Clean Power Plan, which announces new standards and emission guidelines to reduce carbon pollution from power plants. The plan takes into account input received through EPA outreach to the power industry and its regulators, as well as from the over four million comments submitted to the agency. Ultimately, the Clean Power Plan is anticipated to strengthen a fast-growing trend toward lower-emitting energy.

The Clean Power Plan sets standards to reduce carbon dioxide (“CO₂”) emissions by 32 percent from 2005 levels by 2030. These cuts represent a further 9 percent reduction to those announced in the proposed rule issued last year. The plan proposes interim and final target rates of CO₂ emissions for each state, and includes guidelines for the states’ development, submittal, and implementation of plans to reduce emissions. Each target assumes how much a state could reduce emissions using three carbon-reducing measures, or building blocks, which the EPA has identified as the “best system of emission reduction” under Section 111(d) of the Clean Air Act. Each state is required to develop and implement a plan to ensure that the power plants in that state – either individually, collectively, and possibly in combination with other measures – achieve both the interim CO₂ emissions performance rates over the period of 2022 to 2029, and final CO₂ emission performance rates, rate-based goals or mass-based goals by 2030.

In addition to having more stringent CO₂ emissions targets, the Clean Power Plan includes a number of other changes with respect to the proposed rule issued a year ago, of which we will highlight a few. First, the plan includes a new focus on the reliability of the electric supply, and includes a new “reliability safety valve” exception to state plans in case of grid emergencies. Second, the plan includes more flexible timelines for state compliance. Under the Clean Power Plan, state implementation plans are due very quickly – in September 2016 – but states may request extensions of up to two years. The compliance period begins in 2022, with emissions reductions phased in over the 2022‐2029 interim period on a “glide path” to 2030, which is now divided into three separate periods, each with their own interim targets. Third, the plan provides a head start to wind and solar deployment through the Clean Energy Incentive Program. The program will enable states to “bank” credits in 2020 and 2021 for complying with the Clean Power Plan during its interim (2022-2029) and final (2030 and onward) performance periods. These incentives are meant to spur investment in zero-emissions approaches and may also kick-start broader carbon-trading efforts.

Norton Rose Fulbright US LLP has issued an alert on the Clean Power Plan that contains more information on the final rule.