Obama's EPA Sets New Standards for Existing Power Plants

Various options are at play in the EPA’s planned greenhouse gas standards for new and existing power plants. In this episode, Lissa Lynch of NRDC discusses the implications.

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David Roberts

A couple of weeks ago, the policy analysts at the Rhodium Group put out a new report showing that the Biden administration's legislative achievements are not quite enough to get it to its Paris climate goals. But those goals could be reached if the legislation is supplemented with smart executive action.

Some of the most important upcoming executive actions are EPA's greenhouse gas standards for new and existing power plants. The Supreme Court famously struck down Obama's Clean Power Plan — his attempt to address existing power plants — judging it impermissibly expansive. So now EPA has to figure out what to ask of individual plants.

The agency's decisions will help shape the future of the US power sector and determine whether the Biden administration gets on track for its climate goals.

To talk through those decisions in more detail, I contacted Lissa Lynch, who runs the Federal Legal Group at the NRDC’s Climate & Clean Energy Program. We discussed the options before the EPA, the viability of carbon capture and hydrogen as systems of pollution reduction, and whether Biden will have time to complete all the regulatory work that remains.

Alright. With no further ado, Lissa Lynch from NRDC. Welcome to Volts. Thank you so much for coming.

Lissa Lynch

Thank you for having me.

David Roberts

This is a subject that I used to spend a lot of time thinking about back in the day, and it's sort of receded for a while, and now it's back. So it's very exciting for a nerd like me. So I want to just quickly walk through some history with this and then sort of hand it off to you so you can tell us where things stand now, because I don't want to assume that listeners have been obsessively following this now nearly two decade long saga. So let me just run through some history really briefly. So listeners will recall in 2007, there's a big Supreme Court case, Massachusetts vs. EPA, in which the Supreme Court ruled that CO2 is eligible to be listed as a pollutant under the Clean Air Act if EPA determines it is a threat to human health.

And then shortly thereafter, Obama's EPA officially determined that it is a threat to human health via the endangerment finding. So this is one thing I'm not sure everybody understands, and I just want to get it on the table up front. So for context, the combination of those two things, Mass vs. EPA, plus the endangerment finding, means that EPA is lawfully obliged to regulate greenhouse gases. This is not a choice. This is not something it can do or not do, depending on how it feels or who's president. They have to do it. So then that triggers the obligation, three separate obligations.

You have to regulate mobile sources, which Obama did with his new fuel economy regulations, which are still in place, as far as I know. Then you have to regulate new stationary sources of greenhouse gases, which Obama did. And as far as I know, we can come back to this in a second, but as far as I know, those new power plant regulations that Obama passed are still in effect. And then thirdly, you have to regulate existing stationary sources of greenhouse gases, which mainly means power plants. And so Obama's effort to regulate existing power plants is called the Clean Power Plan.

People may remember the fuss and ado about the Clean Power Plan as it was under development. Lawsuits were immediately launched. Of course, the Supreme Court took the extremely unusual step of putting the law on hold, basically not letting it go into implementation until it had heard this case. And then it heard the case, rejected the Clean Power Plan on the basis of the newly dreamed up, rectally, extracted Major Questions Doctrine. So that's where we stand now is we've got the mobile regs in place, although Biden is updating those too. I think we've got the new power plant regs in place, although Biden is also updating those.

But as for existing power plant regulations, there are basically none. It's been a legal mire and so Biden's got to do those too. So let's talk about what Supreme Court said about the Clean Power Plan in their ruling and how that constrains the sort of solution space that we're looking at now.

Lissa Lynch

So in West Virginia vs. EPA, that was the Supreme Court decision from last summer. The Supreme Court held that this section of the Clean Air Act that we're talking about here, section 111, does not clearly provide authority for the approach that EPA took in the Clean Power Plan. And what they did there we sort of refer to as generation shifting. In the Clean Power Plan, EPA looked at the power sector as a whole and they concluded that the best system for reducing fossil-fuel-fired power plant emissions was a combination of measures including shifting generation away from dirtier fossil power toward cleaner power.

So essentially retiring dirtier power plants and replacing them with renewables.

David Roberts

Right. So the unit of analysis here was a state's whole power fleet, not the power plant individual, but the whole power fleet.

Lissa Lynch

Right. And the reasoning for that in the Clean Power Plan context was supported by the companies themselves, the power companies themselves and the states who said, yes, this is the way that we are dealing with decarbonizing our fleets. We are looking out across our whole fleets, retiring the dirtiest sources and replacing them with cleaner generation. That's how the existing RGGI program in California cap-and-trade programs work. That's how many of the power companies that have emission reduction or clean energy targets are doing that.

David Roberts

And let's just say Republicans have been saying for decades that regulations are too restrictive and they're not flexible enough and states and power companies need flexibility. And this was perfectly flexible. This is absolutely as flexible as you could make a system. It just said to the state, do whatever you want to do to lower the average emissions of your power plant fleet. And then conservatives got what they wanted and hated it for other reasons.

Lissa Lynch

One of the things that's important about what is left on the table after this decision is there is still a considerable amount of flexibility on the compliance side. So what the Supreme Court was really dealing with was the method EPA uses for setting the level of the standard, basically setting the target that industry has to meet. So the Supreme Court explicitly took that generation shifting approach off the table for purposes of setting the level of the standard itself. And so after this decision, EPA can still set standards, in John Roberts words, "Based on the application of measures that would reduce pollution by causing the regulated source to operate more cleanly."

David Roberts

Right? So the idea here is EPA, by interpreting the Clean Air Act in such a way as to apply to the power plant fleet overall, and sort of telling states how they have to shape their overall power plant fleets. EPA was assuming too much authority, basically. Like doing something major, despite too major for the words in the Clean Air Act, which I don't want to dwell on this too long, but let's just pause here to acknowledge that. No one then in the ruling, now in the subsequent ruling, since then in all scholarship knows what the hell "major" means or when it is that an agency has crossed the line from proper regulatory interpretation into "Oops, too major."

It really just kind of sounds like and seems that major means anything bigger than John Roberts is comfortable with.

Lissa Lynch

Right? I mean, this is one of the really concerning things about the Major Questions Doctrine, just generally is that it is murky and it does have this sort of paralyzing effect on ...

David Roberts

Yes, intentionally.

Lissa Lynch

Exactly. It is explicitly anti-regulatory and explicitly sort of intended to stop agencies in their tracks and make them question, oh, is this too major?

David Roberts

And there's no answer. Right. So naturally you're going to be cautious because there's no definition of major. It's just whatever irritates John Roberts when he wakes up one day. So this was the opening salvo, I think, in a longer Supreme Court effort basically to brow-beat agencies into being timid. So anyway, point being EPA can't use the overall power fleet as a sort of benchmark through which to set this standard. So what does that leave? What's the sort of range of motion that we think we still can act in here when we're talking about these new standards?

Lissa Lynch

So now that we have this Supreme Court decision in place. EPA's got some guidelines, and they can base the next round of standards on, as Justice Roberts put it, measures that make the plants operate more cleanly. So what they're looking for now is a rule that looks more like what traditional pollution regulations of the past looked like based on scrubbers, bag houses, the stuff that you can physically attach onto the plant or do at the plant itself to reduce that plant's emissions. When it comes to reducing CO2 emissions, the options are limited.

David Roberts

Well, let me pause there. Before we get into that, I just want to say one thing that I learned from your writing that I had not known, and I don't know that it's widely known. So there's been talk ever since Mass vs. EPA that bugged conservatives, and they would love to undo that, right? Because they would just love to moot this whole thing by undoing that ruling and saying that CO2 is outside the context of the Clean Air Act and have been muttering about doing that. So the Inflation Reduction Act statutorily locks into place that ruling.

Right. It says explicitly CO2 qualifies under the Clean Air Act, and it instructs EPA to develop new standards. So there's no ambiguity about that. And it says EPA needs to set standards that are going to reduce emissions relative to baseline, where the new baseline is taking the Inflation Reduction Act itself and all its subsidies into account. So it's telling EPA calculate what all these subsidies are going to do, what the new sort of business as usual trajectory of emissions would be, and then develop regulations that reduce it further. I didn't know any of that.

Lissa Lynch

Yeah, no, this is huge. And I mean, obviously the Inflation Reduction Act is enormous. It is going to accelerate the clean energy progress that we've seen in the last decade or so by many fold. It is a huge, huge deal. And one of the provisions in this quite large law essentially reaffirms EPA's not only statutory authority, but its obligation to go ahead and set CO2 emission standards for fossil-fuel-fired power plants. And so that's a clear statement from Congress last year.

David Roberts

Clear enough even for John Roberts.

Lissa Lynch

Right. So we have always thought that that authority and obligation under the statute was quite clear, but now it's crystal clear, and they need to move.

David Roberts

And I think it's also important to absorb this new baseline idea, because the IRA itself and all the historical progress since the last round of these regs, the new expected baseline for power plant emissions is much lower now than it was when Oobama's EPA was calculating these things. Which commensurately means you're going to need tighter standards if you want to reduce further than that new baseline.

Lissa Lynch

Yeah. And it is kind of wild to look back on ten years ago. So it was ten years ago, 2013, that President Obama announced in his big climate change speech that he was directing his EPA to go ahead and set carbon pollution reduction standards under Section 111 for fossil-fuel-fired power plants. The first time that was being done. So much has changed in ten years in the power sector. And I think anyone listening to this podcast knows we are smack in the midst of a clean energy transition in the power industry. Industry itself says so.

The Edison Electric Institute says we are, quote, "In the middle of a profound long term transformation in how energy is generated, transmitted and used." Lazard, the investment firm, estimates that wind costs have fallen by 46%, solar has fallen by 77% over the past decade. So we're just in a totally different world now than we were ten years ago. And so we passed the Clean Power Plan's 2030 emission reduction targets in 2019 without the Clean Power Plan ever having gone into effect.

David Roberts

Which in retrospect makes all the Republican arguments about how this is an economy killing regulation and it's too strong and it's unrealistic and there's no way we can move that fast look utterly ludicrous, which we all said at the time, but we had to pretend that it was a real live argument. So they're saying it's too stringent, it's going to destroy the economy. And here we rocketed past it in 2019 without any regs.

Lissa Lynch

Right? And that is part and parcel with each time. There are new ambitious pollution standards set ...

David Roberts

Every time.

Lissa Lynch

Under the Clean Air Act, industry claims the sky is going to fall. This happened with the acid rain program back in the American Electric Power predicted that it was going to destroy the economy of the Midwest. Like the lights are going to go out, the sky is going to fall.

Every time and we never learn. We never learn from those previous examples. It's crazy, right?

And so the actual costs of complying with the acid rain program and reducing sulfur dioxide ended up being, I think, around a 10th of what industry had estimated. Sulfur scrubbers are now widely used. The program has been a great success. It is this great example of how we can set pollution standards and then innovate to meet them cost effectively and quicker than anyone expects. We do it over and over again.

David Roberts

Over and over again.

Lissa Lynch

And we can do it in this context.

David Roberts

Right? One more thing. Before we get to what's available for the new standards, we should mention I should mention that when the clean power plant got shut down, the legal obligation to pass regulations on existing power plants then passed to the Trump administration, which did that sort of passed a ... what was it called? The clean America ...

Lissa Lynch

The Affordable, Clean Energy Plan.

David Roberts

Yes, Affordable Clean Energy, the ACE Plan, which several analyses showed would on net have raised emissions in the power plant sector. So those got shut down in court, too. They were just completely a joke. Ludicrous so that's all the history. So here we are Biden's EPA has got to regulate existing power plants and new power plants. And it can't take this so called outside the fence line holistic approach that the clean power plant took. So it's got to set standards based on what you can do at the individual power plant level inside the fence line, as they say.

So what are the options? Actually, I'm talking way too much, but let me get one more thing out of the way and then I'll let you talk. But one of the things that faced the reason I just want people to understand this too, the reason Obama took this approach, the reason Obama's EPA took this outside the fence line holistic approach, is that if you're just restricting yourself to the individual power plant, you're stuck with either marginal improvements, right? You get the boiler to work more efficiently, you tighten up efficiency, and you can sort of marginally 3% to 5%, reduce emissions.

Or on the other side, there's carbon capture and sequestration, which especially ten years ago when Obama's EPA was contemplating it, was not very well tested, not very well proven, super expensive. So you either had sort of like a fly swatter or a nuke when it comes to the individual power plant, which is why they went with the holistic approach. So now the holistic approach is off the table. We're back to the fly swatter or nuke problem. So just tell us sort of like, what are the available options here?

Lissa Lynch

Yeah, so you kind of covered the two ends of the range, right? On one end, the very low ambition end, you can make minor improvements to the operating efficiency of the plant, the way the plant operates. That was the basis for the standards that the Trump administration issued. And as you noted, improving the efficiency of the plant makes it run better and it can be called upon to run more and therefore can end up increasing its overall emissions. That sort of rebound effect. That's a possibility. You can still reduce emissions through operating efficiency improvements. And I think there's more options that could achieve greater reductions than the ones that the Trump administration included in their rule.

But still, we're talking the very low-end, single percentage reductions in the middle, there's this option of cofiring with a lower carbon fuel. So if you're talking about coal plants, you can co-fire that coal plant partially with gas. In a gas plant, you could co-fire partially with hydrogen and you're going to bring the emissions rate of the plant down somewhat. In some of our analysis, we've estimated that a 40% cofiring coal with gas. So cofiring a coal plant with 40% gas gets you about a 20% emission reduction. So it's not nothing, but it also involves additional fossil infrastructure to get gas to a coal plant or additional infrastructure to get hydrogen to a gas plant.

And on top of several other issues with hydrogen that we can talk about a little later.

David Roberts

Well, a legal question, I guess all of this in some respect is arbitrary, but where is the line between forcing fuel-switching, which I think Supreme Court said was out of bounds, and too far, versus a rule that requires cofiring, which is like kind of like halfway to fuel switching? Is there a legal distinction there between those two?

Lissa Lynch

There's absolutely precedent for requiring cleaner fuels or fuel processes. What the Supreme Court mentioned, at least in dicta, was we don't want to see standards that would force a plant to stop existing. And so essentially, if EPA were to base the standard on total conversion from coal to gas, which some coal plants have undertaken with cheap gas prices, that I think, based on our reading of the decision anyway, would probably be too far. So full conversion probably off the table along with generation shifting. But partial cofiring is actually one of the technologies that the Obama administration considered for their Clean Power Plan, as was carbon capture.

And as you noted, the approach that they took in the Clean Power Plan, they selected because it was the most cost effective. So they ruled out carbon capture and cofiring, not because they weren't adequately demonstrated or available, they were just more expensive than the approach that EPA ended up going with.

David Roberts

But now we're forced back basically to that more expensive approach.

Lissa Lynch

Right, as I mentioned before, but want to keep reiterating, this is all about setting the level of the standard, finding it's a math problem. EPA looks at the options, and so the options as we see them are efficiency improvements, getting very little cofiring, getting somewhere in the middle, or carbon capture and storage, getting the most amount of emission reductions. They look out at that and they select the best system. Then they apply it to the plant and essentially do a math problem and come out with a number, a numerical limit for the amount of CO2 emission reductions that the plants need to achieve.

Then they hand the baton off to the states for existing sources and to the companies for new sources. So this is not a requirement to install that specific technology. It's a way to derive the level of the standard and then pass that off to the states and the companies to comply with.

David Roberts

Right. EPA sets the standard and then says to states and companies, do what you want.

Lissa Lynch

Right, as long as you can meet this number. Be creative, innovate.

David Roberts

The central question is what upon what technology is the number going to be based on exactly? This low-end, this something in the middle, and this high-end, which is carbon capture and sequestration. So here I want to talk about what the sort of arguments are around this. It says in the text of the Clean Air Act that EPA should set the standard based on the best available system. That has to be adequately demonstrated so I just want to dig in a little bit on the technical legal language here. Like what exactly or what have courts interpreted that language to mean exactly?

What is required to be adequately demonstrated? A single demonstration plant somewhere? like some good charts and graphs in a lab? Or do you have to be commercial, or does price and, you know, financial viability come into that? Like, what is EPA thinking about when it thinks about what is adequately demonstrated or best?

Lissa Lynch

Yes. Okay, so I'm a Clean Air Act lawyer. This is my favorite part. I love the Clean Air Act, and I love to talk about the language of the statute because that's actually what we're really fighting over here. EPA is tasked with establishing the standard of performance, and so that definition is in the statute. They have to determine the degree of emission limitation that can be achieved through the application of the best system of emission reduction that is adequately demonstrated considering cost, energy factors and essentially other factors. And so there's this really defined set of criteria that EPA needs to go through as they're determining what's the best system of emission reduction.

So we've been talking about adequately demonstrated that it can't be a made up technology, but it also doesn't have to be widely used by everyone. Already, the Clean Air Act is technology forcing it's forward looking.

David Roberts

Right.

Lissa Lynch

It requires the regulated source to reduce its emissions commensurate with the best control systems that are available, not the ones that are already sort of out there in use, that plants are choosing to use of their own accord. So again, in a lot of ways, this is analogous to so SO2 scrubbers which were not in widely used, they were not widely produced in the 90s, and there were all these doom and gloom predictions of how much it's going to cost.

We're not going to be able to do this. So right now, there's no limit at all on CO2 emissions from power plants. There's been no reason to innovate on carbon capture for power plants, and there is not a ton of projects out there in the world, but there are plenty to serve as an adequate demonstration for purposes of the Clean Air Act. There's essentially three parts here of carbon capture. There's capture, there's transport, and there's storage. And each part of that process is well established and has been in use for decades, especially the capture part. We've been capturing carbon for decades.

And so there's plenty of demonstration in both pilot projects and at commercial scale to be applied in the power sector. It doesn't have to be something that's already widely out there.

David Roberts

So it's sort of a holistic consideration. And EPA is sort of attempting to apply something like wisdom here. There's a balance of considerations. And I assume, and tell me if I'm wrong, that the usual suspects are arguing to EPA that that would be too strict, that a standard based on CCS would be too strict. And presumably the way they're making that argument is by saying CCS is not the best or adequately demonstrated. So what is their argument? Have you read, like, their briefs, or do they have a specific argument here?

Lissa Lynch

They do, and they're familiar. It's the same set of arguments that we've seen over and over. It's too costly, we can't do it yet. We're getting there. Just let us do this at our own pace. One of the concerning things is the argument that we need gas now, and we're okay with standards that are based on something we might do in the future. So set the standards only at a level that were ready for CCS, that were ready for hydrogen sometime in the future.

David Roberts

CCS ready.

Lissa Lynch

CCS ready. Hydrogen ready.

David Roberts

I love that phrase.

Lissa Lynch

It's just kicking the can down the road.

David Roberts

Like your own David Hawkins once said, it's like saying, my driveway is Ferrari ready.

Lissa Lynch

Exactly. And I think what's at the heart of this industry estimates that CCS can achieve 90% capture and emissions data from the projects that have been built back that up. That is not to say that EPA needs to go ahead and require a 90% emission reduction from every single coal and gas plant in the country. Right. We think it makes the most sense for EPA to draw some distinctions based on the role that the plants perform on the grid. Right. So there's a big difference between ...

David Roberts

Oh, really?

Lissa Lynch

Yes, there's a big difference between plants that are used for baseload power that are running constantly all the time, and those that are used intermittently for reliability as backup power during times of high demand.

There does not need to be the exact identical standards on those two types of plants. So plants that are running full time are emitting the most, and they should be required to reduce their emissions to the greatest degree. So we think it makes sense to have a 90% capture based standard for plants that are going to serve as baseload, that are going to run all the time. And it's the most cost effective for those types of plants to install CCS, especially when you consider the tax credit. Plants that are operating intermittently as backup are already emitting less pollution simply by running less.

And those plants can face a less stringent standard, stay on the grid as backup, and serve that really important reliability function without being required to install CCS, they can meet a lesser standard.

David Roberts

Is there a distinction between those two kinds of plants that is clean enough and clear enough to set legal limits around them because there are some fuzzy edge cases? And then, number two, are we sure that EPA like that's within EPA? Sort of. That's not major for EPA to be thinking to be sort of specifying which standards applied based on function based on operations.

Lissa Lynch

Yes. So this is the kind of detailed analytical and technical decision making that is well within the expert agency's wheelhouse. This is exactly the type of thing that the experts at the agency are normally tasked by the statute to do. They're the ones who run the numbers and figure out what's most appropriate for the specific type of plant that they're regulating. And in fact, the existing standards for new sources do include these sorts of subcategorization based on the use type of the plant. So this is not something complex and mysterious. This is based on true and visible distinctions between types of plants based on the way that they're used.

And I think it really is yet another layer of the sort of flexibility that EPA can and should build into this program. Again, none of this is a particular mandate. And so the states and the companies then have that additional choice. Well, they can run a plant full steam and install controls, or they can run intermittently, keep that plant online and face a lesser limit, or they can retire it and make their own choices about what to replace it with. This is providing more and more levels of choices to the regulated industry to comply in the way that makes sense for them.

David Roberts

Yeah. And something you mentioned in passing, I want to just highlight and put a pin in here, which is that a big argument here on your side is CCS is now being showered with subsidies. Like there are huge subsidies coming down from the Inflation Reduction Act for captured hydrogen, enough to make them economic in some cases or certainly a lot closer. So these are synergistic. I'm saying like the Biden administration's legislation is bolstering the case for these tighter standards because CCS is not just on its own now. Now it's explicitly being helped and shaped and stood up by government grants.

Lissa Lynch

That's right. And at the same time, the Inflation Reduction Act also contains a ton of money for renewables. And so that level of investment across these types of technologies really changes the overall cost of the regulations. And that's one of the things that EPA has to consider, is the overall cost of compliance to the system. And so again, when these standards are in place and states and companies are looking out across their fleet and saying, oh, what should we do? All of those incentives are going to come into that consideration for them. And it makes renewables really cheap to replace your older dirtier generation with.

David Roberts

I got one more question about the standard setting before I want to get into the politics a little bit, but some energy heads out there may be familiar with a company called NET Power, which has come up with a new, I guess it's a couple of years old now. They've built one demonstration plan, a new technology that without getting into the technological details, it's really fascinating. I might do a whole pod on it, but basically it burns natural gas. Emits no particulate pollution at all and captures 100% of the CO2 emissions as a purified stream of CO2.

So you have in NET Power a natural gas power plant with zero particulate emissions and 100% carbon capture. They've built one, it's running and working. So has there been any talk about using that as a standard? Because that would be 100% carbon reduction. Has NET Power's tech come up in these discussions?

Lissa Lynch

Yeah, for sure. I mean, it's very cool, right? It was included, the EPA put out a white paper last year asking for input, sort of preregulatory input on the technologies that are available to reduce emissions, specifically from gas plants. And they took comment on the NET Power approach, which I cannot remember the name of. Allam something.

David Roberts

Allam Cycle, I think is right. I was trying to think of that.

Lissa Lynch

And it is really cool and innovative and I hope that that is a direction that we're going to see any remaining fossil generation go in. And I think we may see that in the proposal. Again, all of what I'm talking about here is we have not seen a proposal from EPA. This is sort of NRDC's perspective on what is possible, justifiable achievable and legally defensible in court. And this is what we've been advocating for before the agency, and then we'll have to see what they come up with. We're expecting a proposal relatively soon, probably within a month or so.

David Roberts

What's really interesting to me about this, just from a political perspective, is it's a sort of weird inversion here of the typical roles. So you've got the power sector, which has been touting CCS for years, to sort of like defend the ongoing existence of fossil power plants. They sort of wave their hands at CCS and say, no, we can go clean too. So they've got Joe Manchin out up there saying, I want to go clean, but I want to do it with fossil. I literally think they've convinced him that they can eliminate their carbon emissions. And traditionally you've had sort of greens and climate people saying that's big and overly complicated and overly expensive and stupid and nobody's ever really going to do it and it's just going to make more sense to switch to clean generation.

And so now we've got this odd political inversion where the power companies are saying, whoa, whoa, whoa, CCS is not really ready. We didn't mean "ready ready," we meant just over the horizon is what we meant. That's where they like it. They like CCS just over the horizon. And all of a sudden this is like calling their bluff. Like, oh, you've been talking about this for decades. Well, how about you use it? And then on the green side, on the climate side, you have a similar inversion where now greens and green groups like yours are arguing like CCS.

Oh, it's great. Yeah, it's right there, it's ready to go, absolutely ready to serve. As the basis for a standard. It's just odd and funny and I just wonder if you have any comment on the politics of trying to herd the cats in the climate community around this message of like CCS is ready and viable, which I don't think comes naturally to a lot of factions, let's say, within the climate community.

Lissa Lynch

Well, that's well phrased. We're walking a fine line. I think our vision for the power sector and the power industry is one of net zero. And in order to get to net zero, that means a heck of a lot of renewables and a heck of a lot less fossil.

David Roberts

Right.

Lissa Lynch

For the purposes of setting pollution limits, we need a technological basis and by far and away CCS is the most effective of the options that we've got.

David Roberts

That the Supreme Court left us.

Lissa Lynch

Exactly. And I think it is very important to have limits on the CO2 emissions from power plants. I think that is sort of the baseline, most important thing from our point of view.

David Roberts

Right, well, lots of, I mean, reports, we should just say lots of reports have been done saying the legislative progress is great, but it's not enough to reach Biden's stated goal. And to reach Biden's stated goal, you need a whole of administration approach, including these standards.

Lissa Lynch

Exactly. And just to put some actual numbers on that, if we want to meet our international and domestic greenhouse gas emission reduction targets for 2030, we need to get our power sector emissions down by 80% from the 2005 sort of peak emissions. We're already about a third of a reduction, 33% -ish reduction since 2005. Our analysis and RDCs of the Inflation Reduction Act puts us now on track to cut our power sector emissions by about 65% by 2030. So that is massive and also not enough.

David Roberts

Right.

Lissa Lynch

And our estimate there is somewhere in the middle there's a really wide range of modeling of the Inflation Reduction Act and a lot of work is going to need to be done in order to get those emission reductions that we're sort of showing in that modeling. It's not a foregone conclusion.

David Roberts

Yeah, one of the wildest things going on right now is just the incredible range of projections about what the IRA will do. Right. Like the sort of government came up with, oh, that it's going to spend $370 on these tax credits and then Credit Suisse is like, actually it's more like a trillion. And then I think there was another one last week, it was like actually it's more like a trillion five. So the range of amounts of money that could come out of this bill are just huge. It's so opaque.

Lissa Lynch

It is. And a lot still remains to be written in all the guidance for these tax credits. But that sort of uncertainty aside, I think the Inflation Reduction Act is going to accelerate a bunch of clean energy and it's going to get us a bunch of emission reductions in the power sector. And at least based on our analysis, that's not quite enough. And we absolutely are going to need limits on the CO2 emissions in addition to investments in clean energy.

David Roberts

So maybe the way to summarize is just to say endorsing CCS as the basis of a performance standard is different than endorsing CCS, full stop.

Lissa Lynch

Yeah, well put. And I think what we see in the modeling reflects what I've been saying about the decision making that comes once EPA sets the standard. So when we model standards that are based on CCS and we've included the Inflation Reduction Act in the baseline, we overall get to around between 70% and 77% CO2 emission reduction by 2030. And what we're seeing in the actual generation results, there is some CCS deployment and also a ton of clean energy.

David Roberts

This is my next question, actually, and you're here answering it before I even ask it, but I just wanted to ask, as a matter of curiosity, has someone modeled what would happen if EPA sets the standards where you are endorsing and what does the modeling say about the decisions power companies are going to make? Like how many fossil fuel plants will shut down versus installing CCS? I don't know if there's like an easy answer to that.

Lissa Lynch

Well, so we have done lots of modeling and we've been doing it for quite a while because even before this Supreme Court decision last summer, we were anticipating that EPA was going to be constrained and in this sort of inside the fence line way. And so we've really been looking for ways to get the most ambition and the most emission reductions out of these sort of source specific basis for the standards. That range that I gave you is based on CCS and partial CCS runs. So 70% to 77% overall emission reductions depending how much you crank the dial on the ambition.

But still with some of those sort of flexibilities that I talked about in terms of the type of use of the plant and what we see in those runs is renewables and energy storage capacity tripling from now to 2030 and quadrupling by 2035. And I think that is in large part based on these new Inflation Reduction Act tax credits being just so much more cost effective. And we still do see some retrofits with carbon capture and storage and some new builds of gas with carbon capture, but not a massive amount. And so there is some uptake of the technology and there's also some reinvestment in clean energy and that kind of tracks with what you would expect, right?

And that kind of goes back to that was essentially what EPA was counting on and basing their standards off of in the Clean Power Plan and that's why they did it that way. I think we can do it this way. And that carbon capture and storage based best system of emission reduction can be shown to be available to the plants that could use it. And not all plants are going to make that choice. It's going to be up to the states and the companies to look at their options and choose whether they want to keep that plant online, and that should work.

David Roberts

So NRDC is recommending a CCS based standard for both existing-source regs and new-source regs. Is there any difference between those two that's worth sort of pulling out here?

Lissa Lynch

Yeah, so I think industry estimates that CCS can achieve 90% capture. And so given that that technology exists, we think it should be used to set the standard for at least the plants that are operating at full bore, both new and existing. When you're building a new plant, you have much greater options in terms of where you're sighting it, how you're building it. You should be required to use the latest and greatest technology on a brand new plant. So that's pretty straightforward for existing plants because they're all over the place. We rely on them already for power.

There needs to be more flexibility, there needs to be more of a phase-in sort of glide path to compliance and some flexibility for how you're going to comply and some exemptions for those plants that are going to commit to retire. You don't want to make them retrofit right before they're expected to retire, you want to just let them plan to retire at the natural end-of-life of the plant. And so giving that flexibility on the existing source side is going to be really important and has long been part of the way that the section 111 standard setting has worked to differentiate between new and existing plants.

David Roberts

So, CCS based standard in both cases, but maybe more flexibility and implementation for the existing plants.

Lissa Lynch

Exactly.

David Roberts

If EPA does use CCS or hydrogen, something like that, as the basis for its performance standard, does it have any say at all in the details of sort of how CCS or hydrogen are used or measured? Because Volts listeners just got an hour and a half earful of discussion of the clean Hydrogen Tax Credits last week, and the details are many, and they make a big gifference in how clean hydrogen is used, how it's measured sort of how its carbon intensity is assessed, how much end users are allowed to claim reductions from using it, et cetera, et cetera. Does EPA get into any of that? Or is this purely just, we're using this tech as a way to set the numerical standard, but the details of how a power plant might implement this is somebody else's problem.

Lissa Lynch

So they absolutely have some authority over how it gets used to comply with this standard. So for purposes of standard setting, they're looking kind of broadly at what the technology is capable of achieving, how it's been used in the past, how it could apply to power plants that exist now in terms of compliance, though, they've got the authority over CO2 essentially in this rulemaking. And so if a plant is going to demonstrate compliance using carbon capture and storage or hydrogen, they can absolutely include the types of rigorous monitoring and verification requirements they would need to see in order for a plant to be demonstrating compliance using one of these technologies.

David Roberts

Right? So they can get into saying, here's what does and doesn't qualify as full CCS like measured every so often, or this kind of geographical storage. They can't get into that?

Lissa Lynch

I absolutely think so. I think they have authority to say you need to have rigorous monitoring and verification from the point of capture to the point of sequestration. And that needs to be part of your demonstration of compliance for using carbon capture. For hydrogen ... It's a little trickier.

David Roberts

I'm very aware at the moment.

Lissa Lynch

To the extent that there is going to be a pathway for hydrogen to be used for compliance, it's got to take into account where that hydrogen comes from, how it's made in order to avoid net emissions increases. And I think they absolutely have that authority. Given that the purpose of this is for the best system of emission reduction, they've got to ensure that it is truly reducing emissions.

David Roberts

Maybe they can just borrow whatever treasury comes up with for the hydrogen.

Lissa Lynch

Assuming it's good.

David Roberts

Yes, true. If EPA doesn't go with CCS, doesn't go with the high end here, what do you think it will do? Will it fall back to something medium, something in the fuel blending sort of range? And just more broadly, do we have any sense at all of what EPA is thinking or which direction it's going or what to expect?

Lissa Lynch

I think in terms of publicly facing tea leaves, what we've got to look at really is that white paper from last year where they had laid out the options and said, hey, give us some comments on what you think of these options for reducing CO2 emissions from combustion turbines. From everything that we have seen from this administration, we are hoping that they're going to be ambitious. They know that this is a critical moment. They know that this is an important wedge of emissions, that the power sector is still a really significant percentage of our emissions, roughly a quarter, and that we need standards on those CO2 emissions and they need to be strong.

And it's not going to be worth all this work, honestly, if they don't make them strong. And so that has been our message to the administration, is, look, if you're going to go through the trouble of doing this all over again, let's make it worth it.

David Roberts

Is Manchin he's like the monster under my bed at this point. Is there some way Manchin could burst out of the closet and screw this up somehow? Or is he ...

Lissa Lynch

I hesitate to even speculate.

David Roberts

Can I just not think about him in this respect, or does he have some way that he could theoretically muck this up, or is this something that's finally just sort of beyond his reach?

Lissa Lynch

I think for now, the ball is in EPA's court to come out with a proposal and to take public comments and to consider them. And so for right now, this is an EPA project. Once it's finalized, it will presumably be subject to a Congressional Review Act resolution, and it will depend on who is in charge as to what happens there. And so that's when Congress gets to have its veto opportunity over regulations, which is unfortunate, but it is the world we're living in.

David Roberts

And does that just require a majority or a supermajority?

Lissa Lynch

I believe it's just a majority, but it can be blocked by the President.

David Roberts

Right. And by the time there's a new president, it'll be too late. We're coming in under the deadline that the Congressional Review Act, if it's going to happen at all, would happen under Biden and thus would be vetoed. So that's not really ...

Lissa Lynch

And so that takes place at the final rule. So we're only at the proposal stage. We've got a long way to go.

David Roberts

Is it going to get done under the Congressional Review Act just to just explain to listeners? Congressional Review Act says basically Congress can undo or veto a regulation basically within a certain window of it being finalized which is 60 ...

Lissa Lynch

60 working days, which does not equal the calendar days.

David Roberts

Right. So what you want to do is get your regulations on the books more than 60 working days prior to the next presidential election.

Lissa Lynch

Exactly.

David Roberts

Just so you're sure your guys in charge, if it happens.

Lissa Lynch

The date that we are looking at is next April, roughly a year from now, for all of these regulations. Right. Like it's not just ...

David Roberts

There's a lot these are not the only ones. There's a lot of there's a big backlog.

Lissa Lynch

It is. And we are seeing the use of the Congressional Review Act right now as we speak in this Congress with attempts to invalidate the rules that the administration has recently finalized. It is a terrible tool. It is not a good thing.

David Roberts

It's a Newt Gingrich special, isn't it? Am I right about the history? Of course, like so many malignant things in our government treat.

Lissa Lynch

But it is the world we're living in, and I think the administration is aware of the timeline that's facing them next year.

David Roberts

Interesting. So you think a proposed rule is going to show up in the next month or two?

Lissa Lynch

Yeah, we're expecting a proposed rule maybe by the end of April. And then when ... you know what happens, that gets published in the Federal Register. There's an opportunity for public comment. There's public hearings. And so there will be sort of a flurry of activity as everybody gets their comments in, and then the agency has to review those comments and address them in the final rule. That's part of the sort of Administrative Law 101. And then they have to issue the final rule and demonstrate yeah, we heard all your comments, and this is why we made the decisions that we made.

David Roberts

And that's when the lawsuits kick off.

Lissa Lynch

And that's when the lawsuits start. Exactly. We do it all over again. It's the circle of life.

David Roberts

Yes. And what do you think of the chances that this Supreme Court ends up hearing a case on this again? Do you think the conservatives can mount a legal case plausible enough to get it back into the Supreme Court?

Lissa Lynch

I would never speculate about what this Supreme Court will do, because who knows, right? Our job is to make this thing as airtight as possible. And Chief Justice Roberts gave us some guidelines and a roadmap in the West Virginia decision. He told us what he's looking for, and it's this sort of traditional looking approach to pollution control. And so that's what we're operating under. And we are urging EPA to follow those guidelines and do the most that they can within those constraints, and we'll be there to defend it with them if it comes down to that.

David Roberts

All right, awesome. Lissa Lynch of NRDC, thank you for coming and forecasting and explaining all this with us. Maybe we'll talk again in that distant future day when these things are actually on the books and the lawsuits have started. We'll talk again.

Lissa Lynch

Thank you so much for having me.

David Roberts

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