The Future of the Clean Power Plan and Trump Administration Climate Policy

Late last week, officials from the Trump administration’s Environmental Protection Agency (EPA) made it clear that they are working on a proposed rule that would not only repeal the Clean Power Plan (CPP) but also solicit public comment on possible replacements. The CPP is a Clean Air Act regulation promulgated by the Obama administration to limit greenhouse gas emissions (GHG) from existing fossil-fired power plants. Following quickly after this announcement, high-level White House officials caused and then tamped down a flurry of speculation about a potential route for the administration to stay in the Paris Climate Agreement rather than pull out as previously stated. Though not necessarily coordinated, these two events suggest that the Trump administration’s positions on climate policy remain a moving target; the positions could be more malleable than it first appeared. This flexibility does not appear to be motivated by a new view that regulation of GHG is necessary to effectively thwart climate change (or that it is necessary to combat climate change through reduced emissions at all), but instead by a desire to create legally durable, albeit more lenient environmental regulations. This approach to the CPP, along with other potential policy and diplomatic measures, could enable the Trump administration to take credit for environmental performance that is both in line with the climate agenda and with the administration’s energy and economic strategy. What does this mean for the future of the CPP and the Trump administration’s approach to climate?

For a long time, it was rumored that the Trump administration would simply repeal the CPP and either slow walk or not pursue a replacement in earnest. This approach drew concerns even from affected industry. Many power companies have argued that the absence of regulation creates unacceptable levels of uncertainty for their future investments. Indeed, some of these companies have told the Trump administration that simply repealing the CPP is not legally defensible; at some point, EPA would be forced by the courts to replace the CPP with some form of regulation of power plant GHG emissions. Moreover, if this replacement obligation fell on a future administration, it might feel compelled to impose draconian cuts to offset inaction by the Trump administration; this industry concern about “pendulum risk” runs across the Trump administration.

The first important implication of the apparent decision of the Trump administration to consider a replacement rule is that it seems to signal the administration won’t pursue overturning the 2009 “Endangerment Finding,” the first step in the regulatory process at EPA and the underlying justification for regulating GHGs in the first place. Overturning the endangerment finding was the most legally challenging, resource intensive, and politically divisive route EPA could have taken.

A second implication is that we will not know a final outcome of the process for a number of years. Even if the Trump administration were planning only to repeal the CPP, it would need to follow a “notice and comment” rule-making process prescribed by the Administrative Procedure Act. This process involves proposing a rule, taking public comment, and finalizing the rule. For Clean Air Act rules, this process takes anywhere from one to three years, followed by inevitable litigation that can last just as long. If the Trump administration were planning only to repeal the CPP, this timeline might fall toward the shorter end of the spectrum. However, if the Trump administration is also going to consider a replacement rule, we could see an extended process. Indeed, it seems possible that the Trump administration will undertake a separate three-step process to promulgate a replacement, starting with an “advanced” notice through which it would solicit public comment on replacement options. Subsequently, the administration would implement a notice and comment rule-making process on its chosen option. Even before litigation, this rule-making process could extend to the eve of the next presidential election.

The method by which the Trump administration proposes to repeal the CPP could offer insights into the administration’s current preferences for a replacement. One option is to interpret Section 111 of the Clean Air Act, the provision invoked by the Obama administration as the source of the authority for the CPP, as actually foreclosing GHG limits on power plants, on the grounds that power plants are already regulated for their toxic emissions under Section 112. Petitioners (including then-Oklahoma-attorney general Scott Pruitt) pressed this “Section 112 Exclusion” argument in litigation on the CPP. This interpretation would foreclose any replacement options under Section 111. The fact that the Trump administration is still considering soliciting comment on possible replacements suggests that it is hedging its bets on the viability of the Section 112 Exclusion argument.

Another legal argument for repealing the CPP would be that the Obama EPA exceeded its statutory authority under Section 111 in crafting the emission standards in the CPP. Specifically, in setting the standards, the Obama EPA considered not only reductions achievable at affected power plants, but also reductions achievable by shifting generation from higher-emitting plants to lower- or zero-emitting resources. Petitioners in the CPP litigation argued that this approach of considering “outside-the-fence” measures violated Section 111. Repealing the CPP on this latter basis could set the foundation for a replacement rule that establishes standards solely on the basis of measures that can be implemented “inside the fence.”

Unless EPA is willing to consider setting standards based on relatively capital-intensive, on-site emission reduction technologies, such as fuel switching to natural gas and/or carbon capture and storage technology, an inside-the-fence approach to setting emission standards would reduce far fewer emissions from the power sector than the current CPP. Plant efficiency improvements considered as part of the current CPP probably represent an upper bound of what a revised rule might require and would result in coal plant emission rate reductions of 2 percent. That’s a factor of 10 smaller than what the full outside-the-fence approach of the current CPP would have required by 2030. Plants that do implement upgrades to comply would also be more competitive in power markets by virtue of their improved efficiency and may be called on to run more. The additional coal-fired generation on the system may lead to higher total carbon dioxide emissions than there would have been with no standard in place.

Because a replacement rule with inside-the-fence emission standards would likely achieve a relatively small amount of reductions, a future administration might seek to promulgate a more ambitious program. Thus, a significant issue will be the extent to which the legal reasoning behind a Trump replacement rule, and subsequent court review of that rule, leaves a door open for a future administration to return to an outside-the-fence approach or identify other means of ratcheting up the stringency of power sector regulation. Accordingly, it could be difficult for the power sector to obtain true long-term regulatory certainty from federal rule-making actions by the Trump administration. And, in any event, states will continue to have authority to pursue more aggressive climate policies.

In addition, while emission standards based on inside-the-fence measures would be more lenient, there still could be costs and complexity in complying with those standards. To be sure, a Trump EPA replacement rule likely would emphasize compliance flexibility for states and affected power plants, including allowing states to establish cap-and-trade programs. However, this approach would be likely to draw legal challenges. Environmental advocates have argued that there should be symmetry between the reduction measures assumed for purposes of setting the emission standards and the measures that can be used for compliance with those standards. Put another way, they assert that if the standard is based on what can be achieved through “inside-the-fence” measures then affected power plants should only be permitted to use “inside-the-fence” measures to comply. This would foreclose market-based flexibility. There are arguments against this “symmetry” view, but there is a risk that environmental advocates could prevail, which could make compliance with a more moderate emission standard nevertheless costly for many affected plants that lack cost-effective options for efficiency upgrades.

On international climate policy, the malleability of the Trump administration’s position was once again laid bare in a series of reportedly contradictory administration statements that were accurate statements about a complicated policy position. The Trump administration has decided that the path laid out for U.S. emissions reduction under the Obama administration is unacceptable and that the only legally defensible way to avoid obligations to implement the Obama-established target is to withdraw from the Paris Climate Agreement, although the Trump administration has also stated a willingness to renegotiate its participation in the agreement. Since, under the terms of the agreement, the United States cannot formally withdraw until the end of the current administration, and there are no penalties for not meeting the existing targets, the entire topic is fraught with confusion. Adding to the confusion is the fact that (1) climate change is not a big priority for the administration and (2) officials within the administration with jurisdiction over this issue have vastly different views.

And yet in several different official communiqués it is clear that the United States is not completely opposed to talking about or even voicing support for elements of the international climate agenda. The Arctic Council statement early in the administration’s tenure and the G20 communiqué are two examples. This certainly does not mean the Trump administration is poised to take a leadership role on the international climate stage or to take domestic actions that live up to international expectations. It does suggest, however, that the Trump administration does not yet have a set climate policy and that there may be opportunities for it to choose policies or support agreements that are positive for the climate. One example of this is the Kigali Amendment to the Montreal Protocol, which calls for a further phase down of hydrofluorocarbons. Affected companies in the chemical industry by and large support this amendment and have already taken steps to comply. It would be one area where the Trump administration could stay on board with the international climate realm with a policy that makes sense for U.S. industry. Other oft-cited but as yet inconclusive examples are efforts to support energy research and development, nuclear power expansion, carbon capture and sequestration, energy efficiency, and renewables.

Though the Trump administration’s stance on climate is nothing like what the United States or the world had become used to under the Obama administration, it is far from fully formed. There is a live debate between legally defensible strategies to moderate regulations and ideologically driven ones to repeal them. Going forward this means the Trump administration’s position on climate could be far more malleable than previously thought, though still unlikely to be satisfying to the environmental advocacy community.

Sarah Ladislaw is a senior fellow and director of the Energy and National Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Kyle Danish is a senior associate with the CSIS Energy and National Security Program and a partner at Van Ness Feldman LLP. John Larsen is a senior associate with the CSIS Energy and National Security Program and a director at the Rhodium Group LLC.

Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). In addition, this publication does not necessarily represent the views or positions of Van Ness Feldman LLP, Rhodium Group LLC, or their respective clients.

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