***E.O. 12866 Review– Draft– Do Not Cite, Quote, Or Release During Review ***

ES - 1 11/4 draft EO12866EGUGHGNSPSRIA 2060-AQ9120111104ES.DOCX

**EXECUTIVE SUMMARY** This R egulatory Impact Analysis (RIA) discusses potential benefits, costs, and economic impacts of the proposed Standards of Performance for Greenhouse Gas Emissions for New Stationary Sources fo r Electric Utility Generating Units (herein referred to as EGU GHG NSPS or GHG EGU NSPS ). **ES -**  **1 Background and Context of Proposed Rule**  The proposed GHG EGU NSPS will limit greenho use gas emissions (GHG) from new fossil fuel fired electric genera ting units (E GU) constructed in t he United State s in the future. This rulemaking will apply to carbon dioxide (CO 2 ) emissions from new electric generating sources that exceed 25 megawatts in capacity. The United States Environmental Protection Agency ( EPA ) is proposing requirements for these sources because CO 2 is a greenhouse gas (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 discussed more fully in this document , 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 greenhouse gas emissions from certain fossil fuel - fired electric generating units . The statutory authority for this act ion is the Clean Air Act (CAA) section 111(b) that requires EPA to regulate new and modified sources. A m odification is any physical change in, or c hange 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. The CAA section 111(d) requires EPA to regulate existing sources that are not regulated under other parts of the CAA (i.e., pollutants regulated under NAAQS requirements or NES HAP r equirements) and to which an 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 and does not address GHG emission s from existing sources. In a subsequent separate action, the EPA will issue a notice of proposed rulemaking for establishing emission guidelines for States to develop plans to reduc e CO 2 emissions from existing fossil -fuel - fired EGUs The Clean Air Act Section 111 (b) requires tha t this standard be reviewed every eight years, thus this regulatory requirement will likely be reviewed and potentially revised after the 2020 tim eframe. The refore, this economic analysis focuses on benefits and costs of this proposal for the years throug h 2020.***E.O. 12866 Review– Draft– Do Not Cite, Quote, Or Release During Review ***

ES - 2 11/4 draft **ES -**  **2 Summary of Proposed Rule**  This proposal requires that all new fossil -fuel fired units of 25 megawatt or greater capacity be able to meet an emission rate standard of 1000 pounds of CO 2 per megawatt hour (lbs CO 2/ MWh ) . It also proposes an alternative standard that would allow units to meet the 1000 lbs CO 2/MWh standard using a 30 year averaging period. These standards could be met either by natural gas combined cycle generation or coal - fired generation using carbon capture and sequestrati on technology (CCS). Both the base case modeling that EPA performed for this rule (as well as base - case modeling that EPA has performed for other recent air rules) project generation that will be built out through 2020 as either combined cycle generation or coal - fired generation with CCS built with support from federal grants. An alysis performed both by EPA and the U.S. Energy Information Admini stration (EIA) , as well as , statements and actions of a number of major utilities demonstrate that generation te chnologies other than coal (including natural gas and renewable sources) are likely to be the technology of choice for new sources due to current and projected economic market conditions. This means that technologies planned for new sources currently envi sioned by owners and operators of EGSs 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 the power sector wi ll choose technologies that meet the proposed standards due to existing and anticipated economic conditions in the marketplace , even in the absence of this rule . Therefore, this analysis does not anticipate that the proposed EGU GHG NSPS will r esult in notable CO 2 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, empl oyment or labor markets, or the US economy. Nonethe less, this rule will have several important beneficial effects. This NSPS provides legal assurance that any new coal - fired plants must limit CO 2 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 CO 2 in the atmosphere. In addition, the power sector has advocated reducing regulatory uncertainty. The rule will reduce regulatory uncertainty by defining section 11 1(b) requirements for limiting GHG from new EGU sources . The availability of the NSPS also will reduce uncertainty concerning Prevention of Significant Deterioration (PSD) Best Achievable Control Technology (BACT) determinations.***E.O. 12866 Review– Draft– Do Not Cite, Quote, Or Release During Review ***

ES - 3 11/4 draft This proposed rule is co nsistent with the President’s goal to ensure that “by 2035 we will generate 80% 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 ga s and clean coal.” 1 The rule will send a clear signal about the future of CCS technology that, in conjunction with other policies such as Department of Energy financial assistance, will support development and demonstration of CCS technology from coal - fire d plants at commercial scale. The lack of GHG regulatory requirements has hampered utilities pursuing such projects and in July was cited as a key reason for cancellation of an American Electric Power CCS power plant project. 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. 2 Internationally, this rule will help demonstrate to other countries that the United States is taking action to limit gr eenhouse gases from its largest emissions sources . U.S. action supports ongoing programs and efforts in other countries to reduce greenhouse gas emissions.

1 “Blueprint for a Secure Energy Future”, March 30, 2011 **2** DOE web page, **“**Ten Basin - Oriented CO2 - EOR Assessments Examine Strategies for Increasing Domestic Oil Production,” h ttp://www.fossil.energy.gov/programs/oilgas/eor/Ten_Basin - Oriented_CO2 - EOR_Assessments.html