United States: Obama Administration Adopts Landmark Clean Power Plan

By Robert Fleishman, Chris Carr, Joseph Palmore, William Sloan, Megan Jennings, and Lala Wu

Citing "immediate risks" to national security, public health, and the economy, the Obama Administration adopted ambitious regulations and policies to implement its Clean Power Plan, establishing the first ever national standards to limit greenhouse gas (GHG) emissions from existing power plants. The final rule, issued by the U.S. Environmental Protection Agency (EPA) on August 3, 2015, requires states to reduce carbon emissions from power plants 32 percent below 2005 levels by 2030. If fully implemented, the rule will have significant implications for how energy is generated, transmitted, and consumed in the United States.

EPA's proposed rule faced withering criticism on legal and policy grounds by the coal industry, various states, market participants, and others. Certain of EPA's modifications from the proposed to the final rule appear to be a well-orchestrated attempt to shore up the agency's legal defenses in the face of an anticipated fusillade of legal challenges. At the same time, the final rule makes certain emission reduction requirements more stringent.


The rule, adopted pursuant to Section 111(d) of the Clean Air Act, specifies interim state-level compliance targets or "glide paths" for 2022 through 2029 (the start date was moved back from 2020 in the proposed rule). Final compliance targets for 2030 are to be maintained thereafter. Individualized targets for each state are established by analyzing pounds of carbon emissions per megawatt-hour (MWh) of electricity generated based on 2012 historical data and applying a Best System of Emissions Reduction (BSER). The BSER consists of three "building blocks" for reducing emissions:

  • Building Block 1: Improve heat rates at coal-fired steam power plants.
  • Building Block 2: Increase generation from lower-emitting existing natural gas combined cycle power plants while reducing generation from higher-emitting steam power plants.
  • Building Block 3: Increase generation from new zero-emitting renewable energy generating capacity while reducing generation from fossil fuel-fired power plants.

The final rule excludes a previously proposed fourth building block, which would have employed energy efficiency to reduce the overall generation required. However, energy efficiency is still an option for compliance as the building blocks are only a guide and states may use a range of options for meeting their targets. States are also presented with opportunities to cooperate with other states in achieving their goals.

Further, states will be confronted with a federal implementation plan as a backstop in the event of noncompliance with the rule. EPA yesterday released its proposed federal plan and model rules.

Under the final rule, states must submit final implementation plans for achieving their compliance targets by 2018 and start taking action by 2022. Worth highlighting is the final rule's flexibility in allowing states to adopt individually tailored approaches. By allowing conversion of rate-based target emission goals into standards based on tons of emissions per year (mass-based standards), the rule leaves the door wide open for adoption and further elaboration of state and regional cap-and-trade programs to achieve compliance. Inspired by the relatively stable track record of California's ambitious trading program and the Regional Greenhouse Gas Initiative in the Northeast, other states may pursue similar market-based approaches so that the federal de-carbonization mandate may lead to a nationally (or at least regionally) integrated approach to GHG regulation.


Of particular note to wind and solar project developers and others, the final rule expands the Clean Energy Incentive Program to offer credits to states acting quickly to invest in renewable energy and energy efficiency. Although participation in the program will be optional, states that opt in would be able to take advantage of bankable emission rate credits or allowances to comply with performance requirements.

The final rule includes several other features not present in the proposed rule, including changes favorable to nuclear energy and incentives for utilities to construct renewable energy projects in poorer neighborhoods.

EPA also issued a concurrent rule setting standards for new coal-fired power plants. In the future, these plants will need to meet a pound-per-MWh standard that will require the use of technologies such as carbon capture and storage technology or co-firing with natural gas. EPA's final rule for new plants includes a carbon emissions limit of 1,400 pounds per MWh. That is more lenient than EPA's proposed mandate of 1,100 pounds of carbon emissions per MWh. Together, these new rules are intended to mark the beginning of a significant shift away from coal as a source of electricity.


There was much debate about the extent to which the proposed Clean Power Plan might adversely impact electric system reliability. The final rule provides a "reliability safety valve" for individual sources where there is a conflict between the requirements a state plan imposes on a specific affected generating unit and the maintenance of electric system reliability in circumstances that present substantial reliability concerns. Although the rule language uses the phrase "unforeseen emergency" to describe the standard that must be met for the safety valve to apply, the preamble describes the standard as an "unanticipated system energy" or "unanticipated catastrophic event" to be used "only in exceptional situations."

The EPA, Department of Energy (DOE), and Federal Energy Regulatory Commission (FERC) have agreed to coordinate their efforts to help ensure continued reliable electricity generation and transmission during implementation of the rule. The agencies set out a memorandum that reflects their joint understanding of how they will work together to monitor implementation, share information, and resolve any difficulties that may be encountered.

There is no question that FERC, state energy and environmental regulators, the North American Electric Reliability Corporation, and regional reliability entities will have numerous challenges under the Clean Power Plan with respect to reliability. In addition, FERC and state public service/utility commissions will have their hands full managing the transition, minimizing rate impacts to consumers, and determining how best to regulate wholesale and retail electricity markets, respectively, in an era of increased "environmental dispatch."


At the risk of over-simplifying, renewables (especially solar and wind), natural gas (though not quite to the extent proposed in the draft rule), and nuclear are the winners. The anticipated increase in renewable (including distributed) sources of electricity will require substantial transmission system upgrades and development. Increased electric transmission and natural gas infrastructure development and construction will present challenges in harmonizing de-carbonization with other impacts to natural resources, including species and water sources.

Coal is the big loser.

For this reason, while the President's announcement touts the Clean Power Plan as the "single most important step America has ever taken in the fight against global climate change," litigation challenging the final rule is certain. As the statewide emission targets have changed from the proposed to final rule, many states are beginning to grapple with the challenges of compliance. And after urging states to delay compliance or "just say no," it's been reported that Senate Majority Leader McConnell plans to have the Senate devote time this fall to trying to topple the rule through any means available, including the Congressional Review Act and riders on legislation to fund the federal government.

Nonetheless, many states and utilities have started taking steps to comply with the Clean Power Plan and are evaluating their options for meeting the compliance targets. Depending on how states choose to implement the rule, this means likely increased opportunities in the development of wind, solar, and natural gas generation, energy efficiency, and projects to build and operate new natural gas and electric transmission/distribution infrastructure.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions