EPA Releases Proposed Rules on Clean Energy Incentive Program, Despite High Court Stay of Clean Power Plan

The Environmental Protection Agency (EPA) has issued proposed rules for the Clean Power Plan’s (CPP) Clean Energy Incentive Program

 (CEIP), despite the Supreme Court’s stay of the CPP itself. As an EPA statement explains, “Many states and tribes have indicated that they plan to move forward voluntarily in cutting carbon pollution from power plants and have asked the agency to continue providing support and developing tools that may support those efforts, including the CEIP.”

Given this, EPA is responding to these requests by providing information that will help states “make timely decisions regarding options for plan development when the stay is lifted.

EPA is accepting public comment on the proposed rules for 60 days following their June 16 publication in the Federal Register and is holding a public hearing in Chicago on August 3. EPA has also issued a detailed fact sheet about the proposed rules.

EPA says the proposed rules will give stakeholders the opportunity to comment on:

  • Clarifications about project eligibility, including expanding eligibility to solar energy projects – in addition to demand-side energy efficiency projects – in low-income communities and to zero-emitting renewable energy projects, including geothermal and hydropower, in all communities.
  • Providing states with the flexibility to choose one or more existing definitions of low-income community.
  • How CEIP incentives should be made available to eligible renewable energy and energy efficiency project providers.  

Definition of Low-Income Community
EPA received comments about the value of “building on successful existing local, state and federal programs that serve low‐income communities, as well as the importance of affording states and tribes that choose to participate in CEIP the flexibility to address their specific economic and demographic conditions, rather than EPA establishing a single definition of ‘low‐income community.’”

As a result, EPA has proposed enabling states and tribes “to use one or more existing definitions, including local, state or federal definitions from programs that provide benefits to low‐income households and populations.” One caveat is that any definition must have been established before October 23, 2015, when the final CPP rule was published.

EPA adds, “Selected definition(s) may be based on a geographic area that includes low‐income households, and/or may be based on a household‐level income determination.” The agency says this approach will allow states and tribes “to consistently apply their selected definition(s) to determine eligibility of energy efficiency and solar projects that are implemented to serve low‐income communities.”

EPA has also proposed that CEIP eligibility begin for low‐income community projects on or after September 6, 2018, and for renewable energy projects on January 1, 2020.

Mass-Based Vs. Rate-Based Plans
Another area clarified in the proposal is how the matching pool of 300 million tons of CO2 emissions would be expressed in terms of allowances (for mass‐based plans) and Emission Rate Credits, or ERCs, (for rate‐based plans). EPA explains that the numbers differ because allowances are measured in tons and ERCs in megawatt-hours (MWh).

The Natural Resources Defense Council provides definitions for these terms:

A state adopting a mass-based plan creates a permit – or allowance – for each ton of carbon pollution that power plants will be allowed to emit in the coming year. At the end of the year, power plant owners must submit to the state the number of allowances equal to their CO2 emissions. If, for example, a power plant emitted 500 tons of CO2 that year, its owner must give the state 500 allowances.

In rate-based plans, the state establishes for its power plants an allowed emission rate – pounds of CO2 emitted per MWh of electricity generated. At the end of the year, power plant owners must show that their emission rate was equal to or less than the rate-based limit. States that apply rate-based limits must create ERCs to account for positive actions such as shifting electricity production to cleaner sources or reducing electricity consumption, with one ERC equaling one emissions-free megawatt-hour of electricity. The operator of a coal or natural gas plant can add the emissions-free MWh of acquired ERCs to the MWh that the plant actually produced. Then, for compliance purposes, the plant operator divides that combined number of MWh into the amount of CO2 emitted by the plant to determine the plant's effective emission rate.

EPA is proposing to divide the matching pool this way:

  • 300 million allowances for mass‐based programs, which allow a state or group of states to cap their tonnage of CO2 emissions and set up a trading program.
  • 375 million ERCs for rate‐based programs.

EPA would divide the matching pools evenly between two reserves, one for low‐income community projects and one for renewable energy projects – in other words, 150 million allowances or 187.5 million ERCs would be put in a reserve for energy efficiency and solar projects serving low‐income communities, and the same number of allowances or ERCs would be put in a reserve for renewable energy projects. 

EPA has created a table with each state’s and tribe’s share of the matching pool.


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