On Friday, EPA took a major step in implementing President Obama's Climate Action Plan by proposing carbon dioxide limits for new power plants, the first such limits on greenhouse gases to be imposed by EPA.  New coal-fired power plants will have to install costly technology to meet these limits, leading to higher prices for coal-fired electricity—which made up about 37 percent of all U.S. power generation in 2012. 

The proposed emissions limit for new coal-fired units and some small natural gas-fired units is 1,100 pounds per megawatt-hour of power produced, while the proposed limit for large new gas units is slightly lower at 1,000 pounds per megawatt-hour. This standard, which would be finalized in a year, will be particularly difficult for new coal plants to meet.  According to EPA, new coal-fired power plants emit 1,800 pounds of carbon dioxide per megawatt-hour on average, whereas new combined-cycle natural gas plants emit about 1,000 pounds per megawatt-hour.  After receiving nearly 2.5 million public comments on its April 2012 proposed standard of 1,000 pounds per megawatt-hour for all new plants, EPA made revisions to the proposal aimed at providing operational flexibility to the power sector.  In addition to increasing slightly the proposed emissions limit for coal-fired units, Friday's proposal gives new coal plants the option of averaging their emissions over a seven-year period if they agree to meet a more stringent standard (ranging from 1,000 to 1,050 pounds per megawatt-hour).

This latest development in the administration's efforts to combat climate change stems from EPA's 2009 "endangerment finding"—a formal determination that carbon dioxide emissions from the burning of fossil fuels poses a threat to human health and welfare.  To meet the proposed limits, new coal plants in particular will have to install costly technology to capture and store up to 40 percent of the carbon they produce.  Industry groups vigorously oppose EPA's proposal, arguing that the carbon capture and storage ("CCS") technology EPA is requiring is not yet commercially and economically viable.  Industry groups will almost certainly challenge the rule in court once it is finalized.

In the meantime, EPA will accept public comments on the proposed rule for 60 days following its publication in the Federal Register, and the agency also plans to hold a public hearing on the proposal.  Comments on the proposed rule should be submitted through http://rs.frostbrowntodd.com/rs/ct.aspx?ct=24F76F1BD2E00AEDC1D180AAD12A971CDFBE5588F8A52DA2349D55444994FB29FD481381CBC31B8B23003F25AA8 at Docket ID No. EPA-HQOAR-2013-0495. 

Under the Clean Air Act, finalizing the proposed carbon dioxide emissions limits on new power plants will trigger a requirement for EPA to issue similar limits for existing units.  EPA has begun reaching out to state regulators and the power sector to seek assistance in developing these limits, and expects to issue its proposed rule for existing power plants by June 1, 2014.