With the United States Environmental Protection Agency’s (EPA) proposed Section 111(d) New Source Performance Standards (NSPS) for new plants published in January 2014—and a proposed rule for existing fossil generators expected in June 2014—many states are exploring the development of “equivalency plans” that would enable them to flexibly meet compliance requirements in the least disruptive manner and at the lowest cost. The Regional Greenhouse Gas Initiative (RGGI, pronounced “Reggie”), an electric sector CO2 emissions reduction program for fossil generators established by Northeastern states, started operation in 2009, and is the most prominent example of a cap-and-invest program. While there’s plenty of conventional wisdom about “cap-and-trade,” there’s far less understanding of cap-and-invest. This article, published in Public Utilities Fortnightly, argues that states should not confuse the two, and that as they weigh various approaches to developing equivalency plans, states might want to take a page from the RGGI playbook, and see whether cap-and-invest could serve as a 111(d) compliance model. David Farnsworth considers how EPA might develop New Source Performance Standards for existing electric fossil generators under Section 111(d), and how their approach could open the door for states to comply via their own clean energy programs. He also shares insights into the design of RGGI and what a RGGI-like approach might look like (i.e., with regard to costs, revenues, and rate impacts) in other parts of the country.
Complying With 111(d): Exploring the Cap-and-Invest Option
February 1, 2014