From: Frey, Nathan J.< Nathan_J._Frey@omb.eop.gov >

Sent: Monday, June 15, 2015 4:26 PM

To: Owens, Nicole; Elman, Barry; Culligan, Kevin; Vasu, Amy; Harvey, Reid

Subject: RE: Summary of Interagency Comments Under EO 12866 and 13563: Carbon

Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility

Generating Units

Attached please find a summary of additional interagency comments under EOs 12866 and 13563

regarding the Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility

Generating Units draft final rule.

Thanks and please let me know if you have any questions.

Nathan

<< SummaryofinteragencycommentsunderEO12866_13563_EO 12866_CPP 2060 AR33

Final_20150529(2).docx >>

## Summary	of	Interagency	Working	Com ments	on	Draft	Language	under

EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

1. Building Block 2

o Our understanding is that in Building Block 2, only existing NGCC incremental over 2012

generation is used to displace fossil steam

– is that correct? If so, that would mean that

not all the existing NGCC potential (from the remaining existing NGCC generation after

Building Block 3 to the 75% net summer capacity factor) is being used to displace fossil

steam

– can you help us understand why that is the case?

o If BSER were implemented directly, our understanding is that the level of NGCC

generation is significantly below the 75% capacity factor threshold due to the

displacement by RE. In addition, we understand that ERCs are only generated if NGCCs

generate above their 2012 generation levels. If this is the case, are there sufficient ERCs

to enable sources to achieve compliance?

2. One vs. two

‐ rates for compliance

o While a universal two

‐ rate system does solve the problem wherein the standard faced

by an individual generator depends on which side of a border it is situated on, the

problem returns when some states use a blended rate. Moreover, allowing some states

to use a two

‐ rate system creates multiple inefficiencies.

o Can we address these market inefficiencies by requiring compliance with a blended rate

in all states, or through some other approach?

3. Trading in tons

 It appears that trading in tons can be consistent with BSER. In this context, RE would be

credited at the nationwide blended emission rate. We think this may allow trading among

states with different programs (eg, rate and mass). This has many potential advantages over

trading in ERCs:

o This should mitigate the issue that, in single rate states, a given ERC will represent a

different number of tons of CO 2 depending on the state target

o The uniform nationwide value of RE means that there is no siting preference based

on state targets

o This could address ERC supply questions as all trading is done with a uniform

currency

– in particular, RE or EE in a mass

‐ based state will lower levels of

emissions, freeing up allowances that can be traded to other states for compliance

o Ton

‐ denominated credits make it easier for banked credits to retain their value if a

state switches to a mass

‐ based program or if there is a future legislative program

 Are there are any technical restrictions to a framework that trades in tons rather than in

MWh?