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EO12866EGUGHGNSPSRIA2060-AQ9120111104Ch1.docx

SECTION 1

INTRODUCTION AND BACKGROUND

1.1 Introduction

In this action, EPA seeks to address the climate and health effects of GHGs, specifically 

CO2, emitted from fossil fuel-fired electricity generating units. This document presents the 

expected economic impacts of the proposed EGU GHG NSPS rule through 2020. This chapter 

contains background information relative to the rule and an outline of the chapters of the 

report.

1.2 Background

Section 111 of the Clean Air Act (CAA) requires performance standards for air pollutant 

emissions from categories of stationary sources that may reasonably contribute to 

endangerment of public health or welfare. In April 2007, the Supreme Court ruled that 

greenhouse gases meet the definition of an “air pollutant” under the CAA. This ruling clarified 

that the authorities and requirements of the Act apply to GHGs. As a result, EPA must make 

decisions about regulation of GHGs under certain provisions of the Act, including section 111. 

EPA issued a final determination that GHG emissions endanger public health and welfare in [

(74 FR 66,496; Dec. 15, 2009). Because fossil fuel-fired EGUs contribute significantly to the total 

domestic CO2 emissions, EPA is proposing to regulate these emissions from EGU sources under 

section 111 of the CAA.

Section 111(b) authorizes EPA to issue new source performance standards (NSPS) for 

CO2 from new sources. Section 111(d) requires that, upon finalization of the CO2 NSPS for new 

sources, States must submit to the EPA state plans that contain performance standards for 

emissions of CO2 from existing fossil fuel-fired power plants. This action responds to a consent 

decree requiring EPA to issue an NSPS for greenhouse gases from new fossil-fueled steam boiler 

generating units by September 30, 2011 and guidelines for state regulations of existing units of 

the same types by May 26, 2012. This action addresses Section 111(b) for new sources but 

does not address Section 111(d) existing sources at this time. Existing sources will be addressed 

in a separate action at a later date by the EPA.

1.3 Regulatory Analysis 

In accordance Executive Order 12866 and EPA’s Guidelines for Preparing Economic 

Analyses, EPA prepared this Regulatory Impact Analysis for this “significant regulatory action”. 
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This proposal will not have an annual effect on the economy of $100 million or more or 

adversely affect in a material way the economy, a sector of the economy, productivity, 

competition, jobs, the environment, public health or safety, or State, local, or tribal 

governments or communities and is therefore not an “economically significant rule”. However, 

under EO 12866 (58 FR 51,735, October 4, 1993), this action is a “significant regulatory action” 

because it “raises novel legal or policy issues arising out of legal mandates.

This RIA focuses on the potential costs and benefits of the new source guidelines that 

are the focus of the proposed action. The proposed rule regulates new and modified sources. 

EPA does not attribute any costs or benefits to those parts of the standards. For new sources, 

EPA (and other energy modeling groups such as EIA) do not project new coal builds (this is due 

to the lower cost of natural gas units, relatively low growth in electricity demand, and increased 

use of energy efficiency and renewable energy resources). Because the proposal does not 

change these projections, it is projected to have no, or negligible, costs or benefits associated 

with it. For modified sources, EPA believes that based upon the proposed requirements, no 

sources are likely to trigger these requirements and instead all sources would be covered under 

the existing source guidelines, therefore, for purposes of this analysis, EPA has assumed that all 

costs and benefits related to existing sources is covered by the analysis of the existing source 

emission guidelines that will be addressed in a subsequent action. 

1.4 Regulated Entities

This action will directly regulate CO2 emissions from electric generating units (EGUs) 

with capacity greater than 25 megawatts that commence construction or reconstruction after 

the issuance of this proposal. 

1.5 Baseline and Years of Analysis

The rule on which this analysis is based proposes the requirement for new or modified 

EGUs to meet reduced levels of GHG emissions. EPA considered baseline Integrated Planning 

Modeling (IPM) including State rules that have been finalized and/or approved by a state’s 

legislature or environmental agencies. Additional legally binding and enforceable commitments 

for GHG reductions considered in the baseline are discussed in Chapter 5 of this RIA.

All analysis is presented for a compliance year on or before 2020 and all estimates are 

presented in 2007$. Any estimates presented in this report represent annualized estimates of 

the benefits and costs of the proposed GHG EGU NSPS rather than the net present value of a 

stream of benefits and costs in these particular years of analysis.
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1.6 Organization of the Regulatory Impact Analysis

 This report presents EPA’s analysis of the potential benefits, costs, and other 

economic effects of the proposed Utility GHG Rule to fulfill the requirements of a 

Regulatory Impact Analysis. This RIA includes the following chapters:

 Chapter 2, Defining the Climate Change Problem and Rationale for the Rulemaking, 

describes the effects of GHG emissions on climate and offers support for EPA 

undertaking this rulemaking

 Chapter 3, Emission Control Strategies, describes the methods used to control GHG 

emissions for new sources.

 Chapter 4, Electric Power Sector Profile, describes the industry affected by the rule.

 Chapter 5, Potential Costs, Benefits, Economic and Energy Impacts describes impacts 

of the proposal.

 Chapter 6, Statutory and Executive Order Impact Analyses, describes the small 

business, unfunded mandates, paperwork reduction act, environmental justice, and 

other analyses conducted for the rule to meet statutory and Executive Order 

requirements.