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EXECUTIVE SUMMARY

This Regulatory Impact Analysis (RIA) discusses potential benefits, costs, and economic 

impacts of the proposed Standards of Performance for Greenhouse Gas Emissions for New 

Stationary Sources for Electric Utility Generating Units (herein referred to as EGU GHG NSPS).

ES.1 Background and Context of Proposed Rule

The proposed EGU GHG NSPS will limit greenhouse gas emissions (GHG) from new fossil 

fuel fired electric generating units (EGU) constructed in the United States in the future.1 This 

rulemaking will apply to carbon dioxide (CO2) emissions from new electric generating sources 

that exceed 25 megawatts (MW) in capacity. The United States Environmental Protection 

Agency (EPA) is proposing requirements for these sources because CO2 is a GHG and power 

plants are the country’s largest stationary source emitters of GHGs. As stated in the EPA’s 

Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of 

the Clean Air Act (74 FR 66,518; Dec. 15, 2009) and summarized in Chapter 3 of this RIA, the 

anthropogenic buildup of GHGs in the atmosphere is very likely the cause of most of the 

observed global warming over the last 50 years. This action is taken in response to a proposed 

settlement agreement entered into on December 23, 2010 to issue rules that will deal with

GHGs from certain fossil fuel-fired EGUs.

The statutory authority for this action is the Clean Air Act (CAA) section 111(b), which 

covers the regulation of new, modified, and reconstructed sources. For the purposes of this 

rule, a new source is one that commences construction after the publication of the proposed 

rule, other than those sources EPA has classified as “transitional” sources described later in this 

RIA. A reconstructed source is generally defined as an existing source that conducts extensive 

replacement of components and is treated as a new source under CAA section 111. A 

modification is any physical change in, or change in the method of operation of, a source that

increases the amount of any air pollutant emitted by the source or results in the emission of 

any air pollutant not previously emitted.

EPA is not proposing a standard of performance for a group of sources it is calling 

transitional sources as long as they commence construction2 within 12 months from the date of 

 

1

For purposes of this rule, covered EGUs do not include simple cycle combustion turbines. In addition, units 

subject to emission requirements under the CAA solid waste combustion provisions (Section 129) would not be 

subject to requirements under this proposed rule.

2

EPA’s regulations define “commenced construction” as, in general, undertaking a continuous program of 

construction or entering into a binding contract to do so (40 CFR 51.165).
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this proposal. Transitional sources are affected EGUs that have received approval for their 

complete Prevention of Significant Deterioration (PSD) preconstruction permits, but that have 

not “commenced construction” by the date of today’s proposed rulemaking. EPA is aware of 

approximately 15 transitional sources, six of which are expected to utilize carbon capture and 

sequestration (CCS) technology. 

CAA section 111(d) covers regulation of existing stationary sources that are not 

regulated under other parts of the CAA (i.e., pollutants regulated under NAAQS requirements 

or NESHAP requirements) and to which a new source performance standard (NSPS) would apply 

if such existing source were a new source. This rulemaking affects CAA section 111(b) new 

sources of GHG emissions from fossil fuel-fired EGUs but does not address GHG emissions from 

existing sources. EPA is currently examining options for developing CO2 emission guidelines that 

will be used by states to develop plans establishing standards of performance as required by 

CAA section 111(d). CAA Section 111 (b) requires that this standard be reviewed every eight 

years, thus this regulatory requirement will likely be reviewed and potentially revised after the 

2020 timeframe. Therefore, this economic analysis focuses on benefits and costs of this 

proposal for the years through 2020.

This proposed rule is consistent with the President’s goal to ensure that “by 2035 we 

will generate 80 percent of our electricity from a diverse set of clean energy sources - including 

renewable energy sources like wind, solar, biomass and hydropower, nuclear power, efficient 

natural gas, and clean coal.”3Additionally, this rule demonstrates to other countries that the 

United States is taking action to limit GHGs from its largest emissions sources, in line with our 

international commitments. The impact of GHGs is global, and U.S. action to reduce GHG 

emissions complements ongoing programs and efforts in other countries.

ES.2 Summary of Proposed Rule

This proposal requires that all new fossil-fuel fired units that exceed 25 MW in capacity 

be able to meet an emission rate standard of 1,000 pounds of CO2 per megawatt hour (lbs 

CO2/MWh) calculated over a rolling 12-month period. It also proposes an alternative 

compliance option that would allow units to meet the 1,000 lbs CO2/MWh standard using a 30-

year averaging period. These standards could be met either by natural gas combined cycle 

(NGCC) generation with no additional GHG control or coal-fired generation using CCS. The base 

case modeling EPA performed for this rule (as well as modeling that EPA has performed for 

 

3

“Blueprint for a Secure Energy Future.” March 30, 2011. Available online at: 

http://www.whitehouse.gov/sites/default/files/blueprint_secure_energy_future.pdf
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other recent air rules) project that, even in the absence of this action, new fossil-fuel fired 

capacity constructed through 2020 will most likely be natural gas combined cycle capacity. 

Alternatively, with available federal funding and appropriate market conditions, coal-fired 

capacity with CCS could also be built. Any projected combustion turbine capacity would not be 

affected by this rule. Analyses performed both by EPA and the U.S. Energy Information 

Administration (EIA)4project that generation technologies other than coal (including natural gas 

and renewable sources) are likely to be the technology of choice for new generating capacity

due to current and projected economic market conditions. This means that technologies 

planned for new sources currently envisioned by owners and operators of EGUs will meet the

regulatory requirements of this NSPS or are not covered by the NSPS.

ES.3 Key Findings of Economic Analysis

As explained in detail in this document, energy market data and projections support the 

conclusion that, even in the absence of this rule, existing and anticipated economic conditions 

in the marketplace will lead electricity generators to choose technologies that meet the

proposed standards. Therefore, based on the analysis presented in Chapter 5, EPA anticipates

that the proposed EGU GHG NSPS will result in negligible CO2 emission changes, energy 

impacts, quantified benefits, costs, and economic impacts by 2020. Accordingly, EPA also does 

not anticipate this rule will have any impacts on the price of electricity, employment or labor 

markets, or the US economy. Nonetheless, this rule may have several important beneficial

effects described below.

This NSPS provides legal assurance that any new coal-fired plants must limit CO2

emissions. Rather than relying solely on changeable energy market conditions to provide low 

emissions from new power plants in the future, this rule prevents the possible construction of 

uncontrolled, high-emitting new sources that might continue to emit at high levels for decades, 

contributing to accumulation of CO2 in the atmosphere. In Chapter 5 of this RIA, we present a 

sensitivity analysis indicating that even in the unlikely event that market conditions change 

sufficiently to make the construction of new conventional coal-fired units economical from the 

perspective of private investors, the level of avoided negative health and environmental effects 

expected would imply net social benefits from this proposed rule.

The rule will reduce regulatory uncertainty by defining section 111(b) requirements for 

limiting GHG from new EGU sources. In addition, EPA intends this rule to send a clear signal 

about the future of CCS technology that, in conjunction with other policies such as Department 

 

4

 Annual Energy Outlook (AEO) 2009- 2012.
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of Energy (DOE) financial assistance, the agency estimates will support development and 

demonstration of CCS technology from coal-fired plants at commercial scale, if that financial 

assistance is made available and under the appropriate market conditions. Carbon capture 

also has the potential to help to improve U.S. energy production through enhanced oil 

recovery, as highlighted by a series of regional assessments conducted for DOE.5

 

5

U.S. Department of Energy. DOE web page, “Ten Basin-Oriented CO2-EOR Assessments Examine Strategies for 

Increasing Domestic Oil Production.,” Available online at: 

http://www.fossil.energy.gov/programs/oilgas/eor/Ten_Basin-Oriented_CO2-EOR_Assessments.html.