United States: EPA's Clean Power Plan Presents Challenges, Opportunities For Manufacturers

While much of the focus on the United States Environmental Protection Agency's ("EPA") Clean Power Plan ("CPP") relates to its impact on utilities and other energy providers, manufacturers and other large electricity consumers are understandably concerned about the CPP's impact on their electricity bill. While these large consumers could see substantially higher electric rates as a result of the CPP's implementation (assuming it survives judicial review), they may also be required and/or incentivized to help offset these costs by implementing demand-side energy efficiency ("EE") measures. Although the final CPP places less emphasis on demand-side EE than the original proposed rule from 2014, the final plan still anticipates meeting its ultimate carbon emission reduction goals by using a healthy dose of demand-side EE. Whether this demand-side EE will be regulatorily required or merely incentivized depends primarily on the state in which you operate, meaning manufacturers and other energy consumers have strong incentives to get involved in the state-level CPP conversations going on across the country right now.

Demand-Side EE Under the CPP: An Overview

In 2014, EPA proposed that demand-side EE would be one of four "building blocks" utilized to establish the CPP's carbon reduction goals, along with a shift from coal to natural gas electricity generating units, increasing fossil fuel plant efficiency, and expanding zero-emission power sources, such as renewables. This "building block" status was removed in the final CPP, perhaps in an attempt to make the CPP more legally defensible (discussed more here). Instead, the final CPP relies on demand-side EE in two ways: (1) by encouraging states to adopt demand-side EE as a path to compliance with mandated state carbon emission reduction goals, which may result in mandated EE measures; and (2) by incentivizing demand-side EE in both the proposed federal plan for implementing the CPP in states that do not adopt a state plan, and in the proposed model trading program rules EPA proposed as presumptively approvable state plans. These potential requirements and incentives may be present under both mass-based programs (those that give the state an overall carbon emission "budget" that cannot be exceeded) and rate-based programs (which impose carbon emission rate limits on electricity generating units on a per-megawatt hour basis).

Potential Regulatory Requirements

EPA abandoned demand-side EE as a building block for establishing the final CPP carbon emission reduction requirements, and the agency is not imposing EE measures as a regulatory requirement for those states that are ultimately subject to a federal plan. Accordingly, the most likely scenario for mandated demand-side EE measures is a state's adoption of a plan (either mass-based or rate-based) that includes such measures as an element of meeting the state's required carbon emission reduction goals. Among other requirements, these mandates could take the form of permit limits, required participation in state-sponsored EE programs, or by including energy consumers in a state trading program (e.g., by requiring them to pay for "allowances" to cover all of their carbon emissions). If and how these measures are implemented depends on whether a given state adopts a state plan, and if so, how the state chooses to reach its mandated carbon emission reduction goals. This is where the opportunity lies for manufacturers—as a key stakeholder in the CPP debate, manufacturers need to analyze the costs and benefits of a state plan versus the federal plan and make sure their state understands those costs and benefits when choosing a compliance pathway. Manufacturers also need to get a seat at the table if and when their state designs a state plan (which is already starting in many states), because this is the likeliest source of significant, mandated demand-side EE measures on manufacturers and other industries.

Potential Regulatory Incentives

The available demand-side EE incentives will vary depending on whether a given state adopts a state plan or chooses to be subject to the federal plan. State plans are allowed to include various types of incentives for EE measures, including the issuance of emissions allowances (under a mass-based plan) or emission rate credits (under a rate-based plan). In the rate-based state plan context, these credits can be issued for EE measures that were implemented after 2012, so long as those measures are still generating electricity savings in 2022 and beyond. These emissions allowances and emission rate credits are valuable because they can be sold to electric utilities (or others) to help those utilities meet their own compliance obligations, helping to offset the cost of the EE measures used to generate them. This offset is in addition to the savings on electricity costs already generated by implementing the EE measures (discussed in more detail here).

The EPA has also proposed to create a "Clean Energy Incentive Program" ("CEIP") that includes, among other incentives, the opportunity under either a state plan (if a state opts into the CEIP) or the federal plan to obtain emission allowances or emission rate credits for demand-side EE projects implemented in low-income neighborhoods. The projects must comply with various other criteria, but if they qualify they will receive two allowances or credits for every megawatt hour the EE project saves in 2020 or 2021. This program is intended to encourage early action by states and affected sources to meet the carbon reduction goals that will be phased in beginning in 2022, which is why EPA is offering a "double benefit" for qualifying projects. EPA has indicated it intends to release additional details about the CEIP in a subsequent action, which should at minimum provide more clarity regarding how the project will be implemented.

Given the CPP's potentially heavy impact on the cost of electricity for manufacturers and other large energy consumers, these entities need to consider both the potential requirements and the potential incentives that EPA's final CPP, proposed federal plan, and model trading program rules create, and identify the best combination for their business. Manufacturers should then evaluate their role in their state's CPP implementation process and determine how active they need or want to be in that process. While many of the CPP's actual carbon emission reduction deadlines are a ways off, the methods that states will use to meet the CPP deadlines are being established now, and manufacturers should consider joining the conversation. Manufacturers may also wish to follow the judicial challenges to the CPP that are sure to come, as these will obviously impact if and when compliance will be required. Challenges to the final CPP may be filed once it is published in the Federal Register, which according to the Office of the Federal Register is expected to occur on October 23, 2015.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must 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