Concurrently with issuing its final Clean Power Plan to limit greenhouse gas emissions from existing power plants, the EPA issued a set of proposed federal plan requirements and model trading rules to provide states guidance as they determine their strategies to comply with the Clean Power Plan. We recently submitted comments to the agency on how these guidelines can be improved to best reduce compliance costs and promote effectiveness of the plan.
Our comments include the following suggestions:
- The EPA should select a mass-based trading system over a rate-based system as its default federal plan and should encourage states to do the same;
- The agency should encourage the development of the broadest possible trading markets to minimize costs, while consulting with market regulatory agencies to reduce the potential for market manipulation;
- The EPA should reduce leakage from mass-based trading systems by encouraging states to include new sources in the program, or in the alternative, to use set-asides;
- The agency should promote fairness and market transparency by encouraging the use of auctions to distribute mass-based allowances;
- For the benefit of states that elect to use a rate-based trading system, the EPA should allow a broad variety of low-emitting generators to qualify for emission rate credits, while avoiding incentives that could inadvertently increase emissions.
Additionally, our comments explain how the EPA’s federal plan design is well-grounded in Section 111(d) of the Clean Air Act.