### From: Frey, Nathan J. <Nathan_J._Frey@omb.eop.gov> Sent: Saturday, July 25, 2015 10:46 AM To: Culligan, Kevin; Harvey, Reid; Vasu, Amy Cc: Szabo, Aaron; Grossman, Andrea Subject: Summary of Interagency Comments Under EO 12866 and 13563 -- Clean Power Plan draft final rule preamble

Attached please find a summary of interagency comments under EO 12866 and 13563 on the EPA draft final rule preamble for the Clean Power Plan. Thanks and please let me know if you have any question or would like to discuss. Nathan << SummaryofinteragencycommentsunderEO12866_13563_EO 12866_CPP 2060 AR33 Final_2015_7_25.docx >> << SummaryofinteragencycommentsunderEO12866_13563_EO 12866_CPP 2060 AR33 Final_2015_7_25(2).docx >>

### Summary	of	Interagency	Working	Co mments	on	Draft	Language	under EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

1 **Clean Energy Incentive Program: CPP EGs text** The following text is included in preamble section VIII.B.2. Provisions to encourage early action

Many commenters supported providing incentives for states and utilities to deploy CO 2 -reducing investments, particularly zero-emitting sources such as RE and demand-side EE measures, as early as possible. In the proposal, the EPA requested comment on an approach that would recognize emission reductions that are secured prior to the initial plan performance period starting from a specified date. We also requested comment on options for that specified date and on conditions that should apply to counting those pre-compliance emission reductions toward a state goal. The EPA received many comments requesting that the agency recognize early actions for the emission reductions they provideprior to the performance period, that the EPA allow those precompliance impacts to be counted toward meeting requirements under the rule, and that certain conditions should be applied to recognition of early reductions so as to ensure the emission reductions required in the rule. We also received comments from stakeholders regarding the disproportionate burdens that some communities already bear, the concern that increases in electric bills would impact low-income ratepayers, and that all Commented [A1]: Recommend considering calling this the something that specifically refers to early action. Could simply be the Early Action Program. Potential variations include Clean Energy Early Action Program or Renewables Early Action Program.

Commented [A2]: If feasible, suggest specifically highlighting comments that specifically supported early action for RE or EE or other zero-emitting generation

Deleted: existing programs provide

### Summary	of	Interagency	Working	Co mments	on	Draft	Language	under EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

2 communities should have equal access to the benefits of clean and affordable energy. The EPA recognizes the validity and importance of these perspectives, and as a result is including in this final rule the Clean Energy Incentive Program described in this section. The Clean Energy Incentive Program is a state-federal partnership designed to reward investment in zero-emitting generation as well as demand-side EE and distributed renewables projects for low-income communities that commence construction after the effective date of this rule and that generate MWh or reduce end-use energy demand during 2020 and 2021. State participation in the program is optional; the EPA is establishing this program as an additional flexibility to facilitate even more cost-effective achievement of the CO 2 emission reductions required by this final rule. Under the Clean Energy Incentive Program, states may set aside allowances from their interim targets or generate early action emission rate credits (ERCs, as defined in section VIII.K.2), and allocate to eligible projects allowances or ERCs equivalent to each MWh generated or avoided. A state implementing a mass-based plan approach, as described in section VIII.C, may issue early action allowances, a state implementing a rate-based plan approach, also described in section VIII.C, Deleted: certain RE

Deleted: and low-income Commented [A3]: Consistent with prior discussions, recommend limiting EE to projects that target low-income andproviding extra support to both EE and distributed RE for lowincome by allowing 100% use of additive allowances for these projects. The cost of these programs is higher (and therefore closer to the cost of zero-emitting generation) and early innovation is needed to ensure that more cost-effective programs are developed to unlock reductions in this sector of the economy. Commented [A4]: Recommend expanding the scope of the Clean Energy Incentive Program to include other zero-emitting technologies such as geothermal, hydro uprates, and nuclear uprates

### Summary	of	Interagency	Working	Co mments	on	Draft	Language	under EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

3 may issue early action ERCs. For each allowance or ERC allocated to such projects, the EPA will provide the state with an equal number of matching allowances or ERCs that the state may allocate to those projects or to additional qualifying projects up to an amount that represents the equivalent of 300 million short tons of CO 2 emissions. For a state to be eligible for a matching award of allowances or ERCs from the EPA it must demonstrate that it will award allowances or ERCs only to “eligible” projects. These are projects that:

 Generate metered MWh from zero-emitting resources; or

 Result in quantified and verified avoided generation through demand-side EE or distributed renewable energy projects in low-income communities

. In addition, in order to drive investments in distributed RE and demand-side EE that directly benefit low-income ratepayers and communities, the EPA will offer an additional incentive to states that encourage these types of investments.Upon demonstration by a state that a project benefitting a lowincome community has generated quantified and verified MWh achieved in 2020 or 2021, the state will not be required to award to that project ERCs or allowances from its own interim target. Rather, the EPA will provide the entirety of the award, Deleted: appropriate Commented [A5]: Recommend a 1:1 crediting instead of a 2:1 crediting

Deleted: wind or solar

Deleted: low-income

### Summary	of	Interagency	Working	Co mments	on	Draft	Language	under EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

4 equal to one ERC per avoided MWh or one allowance per avoided ton of emissions

. The EPA will address implementation details of the Clean Energy Incentive Program in a future action. Before doing so, the EPA will engage states and stakeholders to gather additional information concerning implementation topics, including the provisions outlined below, and to solicit information about the concerns, interests and priorities of states, stakeholders and the public. In order for a state that chooses to participate in the Clean Energy Incentive Program to be eligible for an allocation of allowances or ERCs from the EPA, a state would indicate in its 2016 submittal its intent to participate in the program. In the case of a full plan submittal, the state plan would either include requirements establishing the necessary infrastructure to implement such a program and authorizing its affected EGUs to use early action allowances or ERCs as appropriate or would amend its plan to include those requirements at a later date. States submitting initial plans and extension requests would simply be required to include a non-binding statement of intent to participate in the program. Allowances or ERCs awarded by the EPA pursuant to this program may be used for compliance by an affected EGU with its Deleted: double the number or Deleted: s Deleted: s Deleted: it would have awarded to an eligible project not focused on low-income ratepayers

Deleted: Following these state submittals in 2016, the agency will create an allowance or ERC account for each participating state that reflects the pro rata share – based on the amount of the reductions from 2012 levels the state must achieve relative to that of the other participating states – of the 300 million short ton CO 2 emissions-equivalent pool that the state is eligible to receive. Thus, states with the greater reduction obligations will be eligible to secure a larger proportion of the federal allocation upon demonstration of quantified and verified MWh of RE generation or demand side-EE savings realized in 2020 and 2021. Allowances or ERCs remaining in a state’s account as of June 30, 2022 will be made available to other states that have drawn fully from their respective accounts as of that date and have additional reductions from eligible projects for which the match can be provided.

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5 emission standards and are fully transferrable prior to such

use. For purposes of establishing a state program eligible for an award of matching allowances or ERCs from the EPA, such a program must include a mechanism for awarding early action emission allowances or ERCs for actions that reduce or avoid CO 2 emissions in 2020 and 2021 that meets the requirements set out in section VIII.K of this final rule, and that is implemented in a way such that the early action allowances or ERCs or allowances allocated by the state would maintain the stringency of the state’s goal for emission performance from affected EGUs in the performance periods established in this rule. Specifically, the state must demonstrate in its plan that it has a mechanism in place that enables issuance of ERCs or allowances from the state to parties effectuating reductions in 2020 and 2021 in a manner that would have no impact on the emission performance of affected EGUs required to meet rate-based or mass-based emission standards during the compliance periods. 1 This demonstration is not required to account for matching ERCs

1 For example, under a mass-based implementation, the state plan could include a set-aside of allowances from an emissions budget that itself reflects the state goals. Allocation of those allowances to parties effectuating reductions in 2020 and 2021 would have no impact on the total emissions budget, which sets the total allowable emissions in the compliance periods.

### Summary	of	Interagency	Working	Co mments	on	Draft	Language	under EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

6 or allowances that may be issued to the state by the EPA. Byrequiring one “borrowed” ERC or allowance for every “nonborrowed” ERC or allowance that is created, the program will ensure that reductions in program stringency during the compliance period due to the crediting of “anyway” actions during the early action period is significantly reduced or eliminated. Nothing in these provisions would have the effect of requiring any particular affected EGU to achieve reductions prior to 2022, or requiring states to offer incentives for reductions achieved prior to 2022. 2 These and other details will be developed in the subsequent action. The EPA is including the Clean Energy Incentive Program in this final rule – and is including a similar program for the Federal Plan proposal being issued concurrently – for several reasons. Chief among them are those offered by commenters to the effect that the overall cost of achievement of the emission performance rates or state goals could be reduced by an approach that granted some form of beneficial recognition to emissions reduction investments that both occur and yield reductions prior

2 In addition to the Clean Energy Incentive Program, states may also offer credit for early investments in RE and demand-side EE according to the provisions of section VIII.K.1 of this final rule: a state may award ERCs to qualified providers that implement projects from 2013 onward for the quantified and verified MWh generated in 2022 and subsequent years. Commented [A7]: Suggest clarifying that these would be borrowed ERCs or allowances only (being awarded to pre-2022 reductions), or compliance ERCs or allowances for post-2022 reductions.

Deleted: that realize Deleted: results

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7 to the first date on which the program mandates reductions or imposes emissions standards. Other commenters pointed out that to the extent that states and utilities would benefit from the availability of low-cost RE and other zero-emitting generation options during the interim and final periods, the EPA should include in the final guidelines provisions that accelerate deployment of those resources, since in so doing the program would speed achievement of expected reductions in the cost of those technologies commensurate with their accelerated deployment. The specific criteria the EPA is establishing for eligible projects reflect a variety of considerations. I n contrast to other CO 2 -reducing or -avoiding technologies, many zero-emitting technologies , particularly renewables like solar and wind, and

many demand-side EE initiatives often have relatively short lead times, which would allow them to generate or avoid MWh beginning in 2020. More broadly, this early action program responds to the urgency of meeting the challenge of climate change in two key ways. First, of course, it fosters reductions before 2022. Second, in targeting investments in zero-emitting technologies and low-income EE, it focuses on the kinds of measures and technologies that are the essential foundation of longer term climate strategies, strategies that inevitably depend on the Deleted: RE

Deleted: First, solar and wind generation result in no direct emissions of either CO 2 or other air pollutants. Second, theThe EPA acknowledges that the total number of ERCs or allowances available to projects under this program is small. In our view, allocations by states even as supplemented by the matching allocations to the states from the EPA would provide little in the way of meaningful leverage for larger scale projects. At least some wind and solarzero-emitting projects (wind and solar projects for example) and demand-side EE initiatives tend to be of a scale for which relatively small incremental allocations of ERCs or allowances would provide an efficacious or higher leverage incentive. In addition, i Deleted: including other Deleted: or RE Deleted: , solar, wind, and many Deleted: require Deleted: of shorter d uration Deleted: innovative demand-side EE and wind and solar

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8 further development and widespread deployment of highly adaptable zero-emitting technologies as well as ensuring broad availability of strategies for enhancing cost-effective energy efficiency

. Finally, consistent with the technology-forcing and development purposes of section 111, the EPA believes it is appropriate to offer an additional incentive to remove current barriers to implementing distributed renewables and demand-side EE programs in low-income communities. While the EPA acknowledges that a number of states have implemented programs focused on these communities, 3 the agency also recognizes that there have been historic barriers, both economic and logistical, to implementing energy efficiency and distributed renewables projects in these communities. As a result, the costs of implementing projects in these communities are typically higher than in other communities and stand as barrier to harvesting potentially cost effective reductions, and advancing these technologies. By focusing this program on reductions in these communities, the Clean Energy Incentive Program can help incentivize projects that will deliver distributed renewables

3 Several of these programs are discussed in section IX of this preamble, including, for example, Maryland’s EmPOWER Low Income Energy Efficiency Program (LIEEP) and New York’s EmPower New York program. Deleted: and Deleted: ly Deleted: le

Deleted: RE

Deleted: RE and demand-side EE

Deleted: RE and demand-side EE

Deleted: RE Deleted: clean energy

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9 and demand-side EE projects to these communities. These lower costs will help new technologies penetrate in the future, thus improving the cost of implementation for the program overall. We are not requiring that projects demonstrate that they are “additional” or surplus relative to a business-as-usual or state goal-related baseline in order to be eligible. At the same time, we believe that including an incentive to develop projects that benefit low-income communities will increase the likelihood of investments being made that would not have been made otherwise. In order to be awarded matching ERCs or allowances by the EPA for projects that meet the eligibility criteria, a final state plan must have requirements establishing the appropriate infrastructure to issue early action ERCs and allowances to qualified project providers by 2020, and those requirements must be consistent with the provisions included in section VIII.K of this final rule. The state must require that the state or its agent will (1) evaluate project proposals from clean energy and low-income EE providers, including the EM&V plans that must accompany such proposals and that must adhere to the EM&V requirements included in these guidelines; (2) evaluate monitoring and verification reports submitted by providers following project implementation, which contain the quantified Deleted: RE

Deleted: demand-side

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10 and verified MWh of RE generation or energy savings achieved by the project in 2020 and 2021 assessed according to the EM&V requirements included in these guidelines; and (3) issue ERCs or allowances to qualified providers for these MWh results. A state may award early action ERCs or allowances to zeroemitting sources and low-income demand-side EE project providers that demonstrate quantified and verified MWh or emissions reduced or avoided in 2020 and 2021. These reduced or avoided emissions may result from projects procured by the state issuing the ERCs or allowances during the period that follows the effective date of these guidelines and until 2022. The Clean Energy Incentive Program will provide a number of benefits. First, the program will provide incentives designed to reduce energy bills early in the program through targeted application of energy saving technologies in low-income communities . Second, the EPA believes that stimulating or supporting early investment in zero-emitting generation technologies could accelerate the rate at which the costs of these technologies fall over the course of the interim performance period. In addition, the Clean Energy Incentive Program will provide affected EGUs and states with additional resources to help them achieve their state plan obligations. Finally, the program will improve the liquidity, in the early Deleted: RE

Deleted: implemented in or benefitting

Deleted: earlier and broader

Deleted: , and help ensure that these benefits are shared with low-income communities Deleted: RE

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11 years of the program, of the ERC and allowance markets we expect to emerge for compliance with the requirements of these guidelines. The Clean Energy Incentive Program does not modify the CO 2 emission performance rates or the final goals. The EPA is establishing this program as an option for states that wish to drive investments in clean energy and low-income EE that will result in actual, early reductions in CO 2 emissions from affected EGUs. States are also authorized to set their own glide path, or interim step performance rates or goals, during the compliance period so long as the interim and final performance rates or goals are met, and could do so in a way that takes into account the availability of the Clean Energy Incentive Program to assist affected EGUs in meeting the applicable glide path and performance rates or goals. While the EPA is not requiring states to take advantage of this program, its availability simply enhances these already-existing implementation and compliance flexibilities while at the same time delivering meaningful benefits, particularly for low-income communities. The EPA looks forward to a robust public dialogue about the implementation details of the Clean Energy Incentive Program. Deleted: RE Deleted: demand-side

### Summary	of	Interagency	Working	Co mments	on	Draft	Language	under EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

1 **Early Action Incentive Program language for FP Preamble**

Overview – in section III in FP preamble The EPA outlined and initiated the Clean Energy Incentive Program in the final emission guidelines (Clean Power Plan EGs, section VIII.B.2). The program is designed to reward investment in certain zero-emitting and low-income demand-side EE projects that commence construction after the effective date of the final emission guidelines and that generate MWh or reduce end-use energy demand during 2020 and 2021, with an additional incentive for EE and distributed renewables that target low-income communities. EPA requests comment on how to define a low-income EE or distributed renewables projects. The EPA proposes to apply the Clean Energy IncentiveProgram in all states subject to either a rate-based or massbased federal plan. The EPA’s proposed approaches to implementing the program in the rate-based and mass-based federal plans are detailed in sections IV and V of this preamble, respectively. Further details on implementation and operation of the program will be set out in a future action following publication of this proposal. Formatted: Font: Bold, Underline Commented [A1]: See comment on program title from Section VIII excerpt

Deleted: RE Commented [A2]: Recommend expanding the scope of the Clean Energy Incentive Program to include other zero-emitting technologies such as geothermal, hydro uprates and nuclear uprates

Deleted: to Deleted: these programs at

### Summary	of	Interagency	Working	Co mments	on	Draft	Language	under EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

2 Rate-based approach - in section IV in FP preamble In the rate-based federal plan, the EPA proposes to implement the Clean Energy Incentive Program by issuing early action ERCs for actions that reduce or avoid CO 2 emissions in 2020 and 2021, and that are implemented in a way that maintains the stringency of the state’s goal for emission performance in the compliance periods established in this rule. In accordance with the final emission guidelines, the EPA is also proposing to award early action ERCs to eligible projects that generate metered MWh from zero-emitting resources, and/or result in quantified and verified MWh generated or avoided through EE and distributed renewable energy projects implemented in low-income communities

. These projects will also need to meet the requirements outlined for Clean Energy Incentive Program participation outlined in section VIII.B.2 of the final guidelines. The EPA proposes the following framework for issuing early action ERCs for this program and distributing them to eligible projects. First, EPA will implement a mechanism for issuing early action ERCs for actions that reduce or avoid CO 2 emissions in 2020 and 2021 that would have no impact on the emission performance of sources required to meet rate-based emission standards during the compliance periods. The EPA requests Deleted: directly benefit low-income ratepayers or communities, Deleted: wind or solar

Deleted: generation Deleted: demand-side low-income Deleted: or

Deleted: distributed renewables projects Commented [A3]: Might these communities be defined by the criteria used to identify overburdened communities?

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3 comment on the structure of this mechanism. Key structural components include: 1) eligible project approval, 2) the ERC issuance process, 3) EM&V requirements, 4) M&V reports, 5) verification reports from an independent verifier, and 6) a method for maintaining the stringency of state goals. With regards to the last point, EPA specifically requests comment on adjusting future targets as a way take into account the borrowed ERCs. One example may be to use modeling to obtain expected emissions and generation for covered sources. New targets could then be obtained by dividing the modeled level of emission by the modeled level of generation adding in the number of borrowed ERCs. EPA also requests comment on determining the adjusted targets by assuming reference case generation and emissions over the 2022-2029 period and allocating those to fossil steam and NGCC using 2012 shares, then adding in the number of borrowed ERCs. EPA requests comments on all alternative ideas for appropriately adjusting future targets to offset borrowed ERCs.

For determining borrowed allowances in states with mass-based plans, EPA requests comment on converting the ERC MWhs into borrowed tons to reduce the mass-based target. EPA specifically requests comment on the following ways of doing this: using a

### Summary	of	Interagency	Working	Co mments	on	Draft	Language	under EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

4 nationwide conversion factor based on the 2012 fossil fuel mix, using state-specific emission rates or basing the value on modeled emission reductions.

Second, as part of the implementation of the Clean Energy Incentive Program for all states, the agency will create an early action ERC account of 300 million short ton CO 2 emissionsequivalent pool available to all states. Third, the EPA is proposing to issue early action ERCs and award matching early action ERCs from the federal pool to eligible projects in each jurisdiction as follows: each eligible project that generates metered MWh from zero-emitting resources will be awarded 1 early action ERC for each MWh. For every ERC that is drawn from the compliance period, one ERC will be awarded from the federal pool to the subsequent MWh. Each eligible project that generates metered MWh from distributed renewable generation or EE in low-income communities will be awarded one ERC from the federal pool. . ERCs awarded by the EPA pursuant to this program may be used for compliance by an affected EGU with its emission standards in any compliance period and are fully transferrable prior to such use. Deleted: that reflects a pro rata share of a federal pool of additional ERCs for all states – distributed based upon the amount of the reductions from 2012 levels the state must achieve relative to that of the other participating states – Deleted: the total Commented [A4]: As noted on other document, we are concerned that a program allocating credit opportunities to states based on their emission reduction obligation will not provide sufficient incentive for RE development by the states with small portions of that allocation, particularly since the reallocation of unused matching credits would not occur until after the fact in 2022.Would it be possible to make the pool nationally available on a firstcome, first serve basis? Deleted: Thus, states under a federal plan whose EGUs face greater reduction obligations will be eligible to secure a larger proportion of the federal allocation upon demonstrationof quantified and verified MWh of RE zeroemitting generation, or demand side-low-income EE or savings or low-income distributed renewables realized in 2020 and 2021. Deleted: once the accounts and the size of each state’s eligible pool of ERCs have been established, Deleted: wind or solar

Deleted: or quantified and verified avoided generation through demand-side EE will be issued one early action ERC and will also be awarded a matching early action ERC from the federal pool for every verified 2 MWh of generation that the project produces in 2020 and 2021 Commented [A5]: Recommend 1:1 creditin g instead of a 2:1 crediting. In other words, each MWh of verified zero-emissions generation earns 0.5 borrowed early action ERCs + 0.5 matching additive ERCs from the federal pool.

Deleted: ERCs remaining in the account for a state as of June 30, 2022 will be made available to states that have drawn fully from their respective accounts as of that date and still have additional demonstrated qualifying generation. The EPA requests comment on the approach to distribute remaining matching ERCs among states. Deleted: The EPA also requests comment on not providing matching ERCs in the rate-based trading federal plan. Deleted: The EPA also proposes that eacheligible project that directly benefits lowincome ratepayers or communities and generates metered MWh from wind or solar resources or quantified and verified avoided generation through demand-side EE will be awarded two ERCs from the federal pool for every 2 verified MWh of generation that the project produces in 2020 and 2021, and will not need to issue any ERCs for which stringency of the program must be maintained..

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5 The EPA requests comment on all aspects of implementing the Clean Energy Incentive Program under a rate-based federal plan approach, including eligible projects, the early action ERC issuance mechanism, and the process and criteria for distributing early action ERCs.

Mass-based approach – in section V in FP preamble In order to implement the Clean Energy Incentive Programunder a mass-based federal plan, the EPA proposes a third setaside of allowances from the general distribution methodology. The EPA proposes this set-aside would be capped at 300 million
CO 2 allowances across all states. Each state would be allowed to borrow allowances, up to the total allowances they are allocated for compliance.

. Pursuant to the EGs, the EPA intends to provide up to 300 million matching allowances across all states (not only statesunder a federal plan), which would be additional to the setaside allowances. Under the Clean Energy Incentive Program setaside, the EPA intends to issue to eligible projects a number of
CO 2 allowances from the set-aside equivalent to each MWh generated or avoided. For each such allowance issued, the EPA Deleted: in the amount of the pro-rata share of

Deleted: for each state, in proportion to the state’s mass goal, as listed in Table &&& below; the table shows set-asides for every state, however, the EPA would only implement this set-aside for a state under the federal plan. The EPA also requests comment on other approaches to determining the size of this set-aside in the federal plan

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6 would make available a matching allowances to be distributed to a similarly eligible project

.

. As part of the implementation of the Clean Energy Incentive Program for all states, the agency intends to apportion the 300 million short ton-equivalent matching pool of allowances or ERCs among all states participating in the Program, regardless of whether they are participating under a state plan or a federal plan The EPA intends to implement this program, including the distribution of matching allowances, consistent with the Clean Energy Incentive Program provisions in Clean Power Plan EGs (see section VIII.B.2). The agency requests comment on all aspects of implementing the Clean Energy Incentive Program under a mass based federal plan approach. The agency intends that the allowances from the Incentive Program set-aside would be awarded to generation from “eligible” projects. These are projects that are constructed or implemented after finalization of the EGs, and generate metered MWh from zero-emitting resources (including distributed renewables in low-income communities) or quantified and verified avoided generation through EE projects in low-income communities . These projects would be eligible to receive allowance awards based on Deleted: provide the eligible project with an appropriate number of Commented [A7]: Recommend a 1:1 crediting instead of a 2:1 crediting

Deleted: The EPA also requests comment on notproviding matching allowances in the massbased trading federal plan, or on only providing matching allowances in federal plan states that choose to determine their own allocation approach as discussed below. Deleted: The EPA proposes to set aside a prorata share of the 300 million allowances available nationwide from each federal-plan state’s mass goal in the first compliance period in proportion to the size of each state’s mass goal Deleted: This would result in a Clean Energy Incentive set-aside of approximately five percent of allowances for each state for each of the three years in the first compliance period (i.e., 2022 through 2024); see Table &&&. The EPA proposes to distribute any remaining set-aside allowances in a state – after distribution to all eligible projects in the state – to the affected EGUs in the state on a pro-rata basis in proportion to theinitial allocations based on the historicgeneration allocation approach detailed above. Deleted: under an approved state plan Deleted: , to reflect the amount of the reductions from 2012 levels the state must achieve relative to that of the other participating states. This approach is consistent with the method of apportioning the matching pool described in the final guidelines. Deleted: rate

Deleted: wind or solar

Deleted: low-income demand-side Deleted: or low-income distributed renewables

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7 the quantified and verified MWh of generation or avoided generation that occurs in calendar years 2020 and 2021. For each allowance awarded to an eligible project drawn from the compliance period allowances for that state, EPA proposes that it will award an allowance from the federal pool to that same state. EPA also proposes that allowances awarded to distributed generation or EE projects in low-income communities will be drawn entirely from the federal pool and not from the compliance period allowances. The EPA requests comment on the types of projects that would be eligible for the set-aside, the treatment of matching allowances, and on the timing of distribution of set-aside and matching allowances. The EPA intends to issue matching allowances to eligible projects up to the limit of 300 million matching allowances for all states. The 300 million matching-allowance limit is a total that applies collectively to all states covered by the Clean Power Plan EGs, not only to federal-plan states.

As noted in the EGs, the EPA will address implementation details of the Clean Energy Incentive Program in a future rulemaking. Before doing so, the agency will engage states and stakeholders to gather additional information concerning implementation topics and to solicit information about the Deleted: , on a one-to-one basis for each setaside allowance any such eligible project receives, Commented [A8]: Would be good to use the short ton CO2 emissions equivalent language throughout when referencing the 300 million pool

Deleted: In addition, the EPA proposes that a project benefitting a low-income community that has generated one ton of quantified and verified MWh achieved emission reductions in 2020 or 2021 will receive twocan receive an allowances from the matching-allowance pool, and will not without receive the need for a matchingan allowance from the investment pool set-aside; this approach would be consistent with the approach for such projects in the Clean Power Plan EGs. In the alternative, the EPA proposes that such a project would receiveone allowance from the investment pool setaside and one matching allowance from the matching-allowance pool. In either approach, the project would receive two allowances per MWh generated (or avoided).

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8 concerns, interests and priorities of states, stakeholders and the public. The Clean Energy Incentive Program does not modify the CO 2 emission performance rates or the final goals. The EPA has established this program in the EGs to drive investments in zero-emitting technologies and low-income EE and low-income distributed renewables that will result in actual, early reductions in CO 2 emissions from affected EGUs. As discussed in section V.E below, the EPA proposes to allow any state to replace the EPA-determined federal-plan allowance-distribution provisions with state-developed allowance-distribution provisions. This will allow a state to tailor its allowance-distribution approach to the characteristics and preferences of the state. The EPA proposes that for approval of a delegation or a partial state plan tohandle allocations, a state that chooses to replace the federalplan allocations with a state-determined approach must include a Clean Energy Incentive Program set-aside, as authorized in section VIII.B.2 in the Clean Power Plan EGs. The EPA intends that such a state would have the same flexibilities as a state implementing a full state plan with respect to implementation of the Clean Energy Incentive Program — and would not be required to implement set-asides of the same size as proposed in Table Deleted: RE Deleted: demand-side

### Summary	of	Interagency	Working	Co mments	on	Draft	Language	under EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

9&&&, but rather could choose how many of its allowances to setaside for the Clean Energy Incentive Program. The quantity of matching allowances that the EPA intends to distribute for all states – including states that implement a state plan, states that implement the allowance-distribution provisions under the proposed federal plan, and states where EPA implements the federal plan including allocations – would not exceed 300 million allowances. The EPA intends that if any matching allowances remain after the program , the agency would retire any such allowances, so they may not be used in the future. The EPA requests comment on all aspects of this program, including the size of the total set-aside, the approach for distributing the total among states, eligible project types, and the amount of allowances awarded per eligible MWh generated (or avoided if including demand-side EE) or per ton of emissions reduced . The EPA also requests comment on the proposed approach to require this program as a condition of a state choosing to determine its own allocation approach via a partial state plan or a delegation of the federal plan.

**State S**  **et -**  **Aside** Deleted: The EPA intends that, consistent with the provisions in the Clean Power Plan EGs, if any allowances from the 300 million matching allowance pool remain as of June 30, 2022, they will be made available to other states where there is unmet demand for matching allowances. The EPA requests comment on the approach to distribute remaining matching allowances among states. Deleted: this redistribution

Deleted: The set-asides shown in Table &&& are the number of allowances that the EPA would set aside, from the total allowances in a state, for the Clean Energy Incentive Program. The EPA proposes to create these allowance set-asides in any state for which we implement the mass-based federal plan and where the state chooses not to determine its own allowance-distribution approach. The EPA does not intend to create these set asides under any other circumstances.¶

Deleted: **Table &&&. Proposed Clean Energy Incentive Set-Aside in Federal Plan for**  **Projects in 2020 and 2021 (Short Tons** Deleted: **)** Commented [A10]: The column show a total of ~98k tons. Suggest clarifying that “ The EPA proposes to set aside a pro-rata share of the 300 million allowances available nationwide from each federal-plan state’s mass goal in the first compliance period in proportion to the size of each state’s mass goal. This would result in a Clean Energy Incentive set-aside of approximately five percent of allowances for each state for each of the three years in the first compliance period (i.e., 2022 through 2024)” Also, the current total would be 3*98=294k, so a slightly higher set aside percentage would be needed to reach 300k.

### Summary	of	Interagency	Working	Co mments	on	Draft	Language	under EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

10 **2 022 through**  **2024** Alabama 3 ,359,045 Arizona 1 ,786,490 Arkansas 1 ,829,305 California 2 ,716,120 Colorado 1 ,816,328 Connecticut 3 83,597 Delaware 2 71,527 Florida 6 ,060,742 Georgia 2 ,754,570 Idaho 7 7,133 Illinois 4 ,081,535 Indiana 4 ,671,187 Iowa 1 ,543,937 Kansas 1 ,358,734 Kentucky 3 ,896,801 Lands of the Fort Mojave Tribe 3 2,333 Lands of the Navajo Nation 1 ,342,777 Lands of the Uintah and Ouray Reservation 1 40,055 Louisiana 2 ,134,041 Maine 1 14,273 Maryland 8 85,763 Massachusetts 6 78,305 Michigan 2 ,886,371 Minnesota 1 ,386,122 Mississippi 1 ,469,267 Missouri 3 ,417,328 Montana 6 99,407 Nebraska 1 ,129,398 Nevada 7 65,412 New Hampshire 2 26,507 New Jersey 9 26,094 New Mexico 7 50,857 New York 1 ,801,944 North Carolina 3 ,095,617 North Dakota 1 ,292,201 Ohio 4 ,493,582 Oklahoma 2 ,415,422 Oregon 4 61,877 Pennsylvania 5 ,385,609 Rhode Island 1 93,511 South Carolina 1 ,575,101

### Summary	of	Interagency	Working	Co mments	on	Draft	Language	under EO12866/13563	Interagency	Review.		Subject	to	Further	Policy	Re view.

11 South Dakota 2 14,166 Tennessee 1 ,732,113 Texas 1 1,250,879 Utah 1 ,445,860 Virginia 1 ,588,549 Washington 6 29,307 West Virginia 3 ,175,880 Wisconsin 1 ,701,012