Carbon Emission Regulation

Background:

The U.S. Environmental Protection Agency (EPA) is in the process of promulgating a set of regulations under Section 111(d) of the Clean Air Act, aimed at limiting carbon dioxide (CO2) emissions from power plants. These rules represent the first time that carbon dioxide emissions from existing power plants would be directly limited or regulated in the United States. Utilities in the Midwest and Wisconsin in particular, would be most affected by these regulations.

That’s because nearly 60 percent of Wisconsin’s electric generating capacity is coal fired. Much of this generating capacity is virtually brand new, employing state of the art pollution control technology. As a result Wisconsin utilities achieved substantial CO2 reductions prior to the development of this new mandate. However, the EPA rule uses 2012 for a baseline when calculating reductions. Therefore, unless the rule is modified, Wisconsin utilities will not get credit for the reductions due to the retirement and replacement of aging coal plants that occurred just prior to 2012.

Fortunately, the laudable goal of reducing CO2 emissions from power plants can be achieved at a much lower cost and with less disruption of the economy with a few simple changes to the proposed rule.

Issues:

Wisconsin utilities will soon have over $3 billion invested in air quality control systems at existing coal plants. The EPA carbon rule should recognize and account for the reductions we have achieved due to this recent, substantial investment.

  •  2012 Baseline – The use of 2012 as a single year baseline from which reductions have to be made is not fair to Wisconsin because it fails to account for recent emission-reducing actions taken by Wisconsin utilities just prior to 2012. These actions include retirements, fuel conversions, efficiency improvements, renewables and nuclear uprates.
  • 2020 Interim Target – Under the proposed rule, substantial emission reductions must occur by 2020 – just 5 years from now. Wisconsin utility investors and ratepayers have already made investments in generation and transmission to reduce emissions. The short timeline in the proposed rule simply does not give utilities the time necessary to plan, permit and construct infrastructure and upgrades.
  • Nuclear Power – By assigning states with existing nuclear capacity more stringent emission reduction goals, the proposed rule penalizes Wisconsin for investing in zero carbon emitting nuclear power.

Under the proposed rule proactive states face a greater risk of higher electricity costs and disruptions to service reliability. This sends the wrong message – that emission reductions which already occurred and are paid for don’t matter and that states are better off waiting than leading the way on clean energy.

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