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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 and 

reconstructed 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) that 

requires EPA to regulate new, modified, and reconstructed sources. For the purposes of this 

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

this proposal. Transitional sources are affected EGUs that have received approval for their 

 

1

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

subject to emission requirements under CAA 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.
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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) requires EPA to regulate 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.

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 

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 either combined cycle capacity or coalfired capacity with CCS, built with support from federal grants. Any projected combustion 

turbine capacity would not be affected by this rule. Analysis performed both by EPA and the 

U.S. Energy Information Administration (EIA), along with statements and actions of a number of 

major utilities,

3

project that generation technologies other than coal (including natural gas and 

 

3

For example: “We have no other coal-fueled generation planned at this time... When we do need new capacity, it 

is highly likely that we will look to natural gas plants instead of coal, especially if natural gas prices remain as 

low as projected.” AEP January 1, 2011, Washington Post; “If you actually look at the economics today, you 

would be burning gas, not coal,” Jack Fusco, Calpine, 12/1/2010, Marketplace; “Coal’s most ardent defenders 

are in no hurry to build new ones in this environment.” John Rowe, Exelon, 9/2011, EnergyBiz; “With low gas 

prices, gas-fired generation kind of snowplows everything else” Lew Hay, NextEra, 11/1/2010, Dow Jones.
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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.

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, the power sector will choose technologies that 

meet the proposed standards due to existing and anticipated economic conditions in the 

marketplace. Therefore, this analysis does not anticipate that the proposed EGU GHG NSPS will 

result in notable CO2 emission changes, energy impacts, monetized benefits, costs, or economic 

impacts by 2020. Accordingly, we believe this rule will not have any impacts on the price of 

electricity, employment or labor markets, or the US economy. Nonetheless, this rule will have 

several important beneficial effects.

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 provides an important safeguard 

against 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 

addition, the power sector has advocated reducing regulatory uncertainty. The rule will reduce 

regulatory uncertainty by defining section 111(b) requirements for limiting GHG from new EGU

sources. The availability of the NSPS also will reduce uncertainty concerning PSD Best 

Achievable Control Technology (BACT) determinations. 

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.”4The rule will also send a clear signal about the future of CCS 

technology that, in conjunction with other policies such as Department of Energy (DOE) 

financial assistance, will support development and demonstration of CCS technology from coalfired plants at commercial scale. The lack of GHG regulatory requirements has hampered 

utilities pursuing such projects and in July 2011 was cited as a key reason for cancellation of an 

 

4

“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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American Electric Power CCS power plant project.5 Carbon capture also can help to improve 

U.S. energy production through enhanced oil recovery, as highlighted by a series of regional 

assessments conducted for DOE.6

Internationally, this rule will help demonstrate to other countries that the United States 

is taking action to limit GHGs from its largest emissions sources. The impact of GHGs is global, 

and U.S. action to minimize GHG emissions complements ongoing programs and efforts in other

countries.

 

5

American Electric Power. “AEP Places Carbon Capture Commercialization On Hold, Citing Uncertain Status Of 

Climate Policy, Weak Economy.” July 14, 2011. Available online at: 

http://www.aep.com/environmental/news/?id=1704

6

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.