Nicholas Institute for Environmental Policy Solutions

Report

NI R 13-04

June 2013

Energy Efficiency and Greenhouse 

Gas Limits for Existing Power Plants: 

Learning from EPA Precedent

Jeremy M. Tarr**

Sara Hayes*

Jonas Monast**

NICHOLAS INSTITUTE

FOR ENVIRONMENTAL POLICY SOLUTIONS

Acknowledgements

The authors would like to thank Steven Nadel and Tim Profeta for their ongoing partnership on 

this project. We are also grateful to Megan Ceronsky, David Doniger, Sheryl Carter, David Wooley, 

Jody Foster, and Robert Brenner for providing detailed feedback during the review process.

How to cite this report

Jeremy M. Tarr, et. al. 2013. Energy Efficiency and Greenhouse Gas Limits for Existing 

Power Plants: Learning from EPA Precedent NI R 13-04. Durham, NC: Duke University. 

**Nicholas Institute for Environmental Policy Solutions, Duke University

* American Council for an Energy-Efficient Economy 
Contents

INTRODUCTION ...............................................................................................................................3

BACKGROUND .................................................................................................................................3

Section(111(d)(of(the(Clean(Air(Act...............................................................................................3

CO2 Performance)Standards)for)Existing)Fossil)FuelEFired)EGUs ..............................................4

Energy)Efficiency)under)Section)111(d) ....................................................................................4

Energy(Efficiency(Precedent(under(the(Clean(Air(Act ...................................................................5

NAAQS)Program and)EE/RE)Roadmap ......................................................................................6

Title)IV)Acid)Rain)Program ........................................................................................................6

NOx SIP)Call ...............................................................................................................................7

New)Source)Review ..................................................................................................................7

Energ Efficiency(Questions(Addressed(in(this(Paper.....................................................................7

TYING)ENERGY)SAVINGS TO)COVERED)SOURCES ............................................................................8

Tying(Reductions(to(Individual(Units............................................................................................9

Tying(Reductions(to(TTTT(Units(Generally..................................................................................10

MEASUREMENT)OF)ENERGY)SAVINGS ..........................................................................................11

Title(IV(Acid(Rain(Trading(Program ............................................................................................12

NOx SIP(Call.................................................................................................................................13

Roadmap....................................................................................................................................14

QUANTIFICATION)OF)EMISSIONS REDUCTIONS ............................................................................15

Utility(and(Challenge(of(Quantifying(Emissions Reductions(under(111(d) .................................15

Emissions Quantification(Methods(under(the(CAA.....................................................................16

Energy)Modeling.....................................................................................................................16

Historical)Generation)and)Emissions Data..............................................................................17

Capacity)Factor)Emissions Rates.............................................................................................17

System)Average)Emissions Rate..............................................................................................17

CONCLUSION.................................................................................................................................19
2
3

INTRODUCTION

In April 2012, the U.S. Environmental Protection Agency (EPA) proposed a new source 

performance standard (NSPS), limiting carbon dioxide (CO2) emissions from new fossil fuel–

fired electric generating units (EGUs). Under Section 111(d) of the Clean Air Act (CAA), the 

EPA and state governments will also have responsibility for regulating CO2 emissions from 

existing EGUs. Regulators interpreting this provision face broad statutory language and limited 

precedent from past applications, providing the opportunity to consider flexible compliance 

strategies to reduce these emissions, but also presenting a degree of legal uncertainty regarding 

how a court would view the strategies. 

Many stakeholders envision a role for flexible compliance mechanisms such as renewable power 

generation and end-use energy efficiency in existing-source regulations for CO2.

1 End-use energy 

efficiency does not require large upfront capital investments, can be expanded as needed to 

comply with regulations, and can be deployed quickly. In addition, many states already have 

energy efficiency policies and programs in place that effectively reduce CO2 emissions from the 

power sector. Recognizing state efforts to improve efficiency and crediting those measures can 

minimize administrative burdens and reduce the cost of reducing CO2 emissions from existing 

EGUs. 

There is a long history of incorporating energy efficiency under other CAA programs, and the 

EPA’s guidance on such efforts provides lessons regarding the potential inclusion of energy 

efficiency as a 111(d) compliance option. This analysis identifies key issues regarding the role of 

end-use energy efficiency under Section 111(d) and explores the CAA rules and regulations 

relevant to their evaluation by that can inform the EPA and the states as they evaluate those 

issues.

BACKGROUND

Section(111(d)(of(the(Clean(Air(Act(

The EPA has proposed an NSPS that would set an emissions limit of 1,000 pounds of CO2 per 

megawatt hour for new electric-utility steam-generating units (e.g., coal-fired facilities) and 

combined-cycle combustion turbines (e.g., natural gas–-fired combined-cycle units).2 The 

proposed rule defines this group of fossil fuel-fired EGUs as a single category of sources—

identified as the “TTTT category.”3 The proposed NSPS does not apply to modifications, units 

with preconstruction permits approved by April 13, 2012 (provided that construction begins 

 

1 See, e.g., Natural Resources Defense Council, “Closing the Power Plant Carbon Pollution Loophole: Smart Ways the 

Clean Air Act Can Clean Up America’s Biggest Climate Polluters” (March 2013), http://www.nrdc.org/air/pollutionstandards/files/pollution-standards-report.pdf; Jeremy Tarr et al., “Regulating CO2 under Section 111(d): Options, 

Limits, and Impacts, Nicholas Institute for Environmental Policy Solutions, Duke University” (January 2013). Unless 

otherwise specified, the phrase “energy efficiency” in this paper refers to end-use energy efficiency. 2 EPA Standards of Performance for Greenhouse Gas Emissions for New Stationary Sources: Electric Utility 

Generating Units, 77 Fed. Reg. 22,392. 3 This paper uses the “TTTT” source category to refer to existing power plants that meet the same criteria as the TTTT 

category that applies to new sources.
4

within 12 months of that date),4 units with a capacity of less than 25 MW, or single-cycle 

combustion turbines.5

CO2'Performance'Standards'for'Existing'Fossil'FuelCFired'EGUs

Because power plants are a major source of greenhouse gas emissions, and because those 

emissions are not regulated as hazardous or criteria air pollutants, the CAA will require the EPA 

and the states to regulate CO2 emissions from existing plants.6 Section 111(d) of the act applies to 

any existing source of an air pollutant, provided that (1) the air pollutant is neither regulated as a 

criteria pollutant under the National Ambient Air Quality Standards (NAAQS) program nor 

regulated as a hazardous air pollutant, and (2) an NSPS would apply if the existing source were a 

new source.7 CO2 emissions from existing fossil fuel-fired power plants meet both criteria, 

thereby triggering Section 111(d).

Regulating under Section 111(d) involves a three-step process. First, the EPA releases “guideline 

documents” that identify the best system of emission reduction (BSER) for the covered pollutant 

(e.g., CO2).8 The BSER must be adequately demonstrated, considering cost, energy requirements, 

and environmental impacts.9 EPA guideline documents also include an emission guideline that 

identifies the degree of emissions limitation achievable through application of the BSER.10

Under the second step, each state creates a plan that establishes a standard of performance and 

provides for its implementation and enforcement.11 Section 111 defines this standard as “a

standard for emissions of air pollutants which reflects the degree of emission limitation 

achievable through the application of the best system of emission reduction.”12 Notably, states 

play a significant role under Section 111(d). Using EPA guidance, they establish standards of 

performance and determine how covered entities within their borders will meet those standards. 

In the third and final step, each state submits to the EPA a Section 111(d) plan, which the Agency 

approves or denies based upon whether the plan satisfies the criteria identified in the EPA’s 

guidelines. If a state fails to submit a plan or submits a plan deemed unsatisfactory, the EPA may 

develop a federal plan for the state.13

Energy'Efficiency'under'Section'111(d)

EPA action to allow end-use energy efficiency measures as a compliance option is untested in the 

111(d) context. The EPA and state regulators will interpret the statutory language to determine 

the types of compliance strategies allowable for the existing source performance standards, 

considering factors such as environmental effectiveness, legal certainty, economic viability, and 

 

4 Id. at 22,395, 22,421. 5 Id.

6 42 U.S.C. § 7411(d) (2006). The U.S. Supreme Court recognized this mandate in American Electric Power v. 

Connecticut, 131 S. Ct. 2527, 2537 (2011) (noting that section 111(d) “requires regulation of existing sources” that, 

like power plants, are major sources of carbon pollution).

7 42 U.S.C. § 7411(d)(1) (2006).

8 40 C.F.R. § 60.22(b) (2011).

9 42 U.S.C. § 7411(a)(1) (2006). 10 40 CFR § 60.22(b)(5). 11 42 U.S.C. § 7411(d)(1). 12 Id. at § 7411(a)(1). 13 Id. at § 7411(d)(2).
5

the state’s energy mix. A key question for regulators is whether each regulated source must 

achieve emissions limits at that source, as opposed to permitting the use of flexible compliance 

mechanisms that allow compliance across the regulated sources within a state, potentially by 

crediting a source with emissions reductions occurring at another electricity generator or service 

(e.g., trading, averaging, reductions in utilization of regulated sources secured through end-use 

energy efficiency or renewable energy).14 The resolution of this question will have a significant 

impact on the options for energy efficiency in the 111(d) programs.

This paper does not speculate on how regulators will resolve this issue; rather, it focuses on how 

CAA precedent can inform regulators if they determine that Section 111(d) allows end-use 

energy efficiency as a compliance option. The paper explores the role of energy efficiency in each 

of the CAA programs described below, considering the lessons that may apply to the design of 

existing source performance standards. 

Energy(Efficiency(Precedent(under(the(Clean(Air(Act(

Although recognition of energy efficiency as a compliance mechanism under section 111(d) is 

untested in court, there is a long history of incorporating energy efficiency under other CAA

programs. Regulators in many states require electric utilities to implement end-use energy 

efficiency programs. These programs target energy demand in residential or commercial 

buildings (including measures such as upgraded insulation, energy-efficient appliances and 

lighting) and optimizing performance at industrial facilities. In general, efficiency programs rely 

on upgrades and improvements to existing systems as well as replacement of old technologies to 

improve operations and reduce energy consumption. The energy savings generated by an energy 

efficiency program or project are typically measured in kilowatt- or megawatt-hours of avoided 

generation. 

Energy efficiency programs improve air quality by reducing energy consumption and, 

consequently, the burning of fossil fuels, such as coal and natural gas. Many of these programs 

can present low-cost options for achieving CO2 emissions reductions and other air quality goals. 

Furthermore, productive investments in energy efficiency hold vast potential for energy savings 

in the United States. Recent analysis by ACEEE demonstrates that productive investments in 

energy efficiency can reduce U.S. energy consumption by up to 40–60% by 2050.15

Congress and the EPA have recognized the relationship between energy efficiency and pollution 

reduction for decades. Various sections of the Clean Air Act and a number of EPA rulemakings 

and guidance documents explicitly provide for the use of energy efficiency as a compliance 

mechanism. Key examples of air quality programs that could inform the treatment of energy 

efficiency under Section 111(d) include the National Ambient Air Quality Standards program 

(NAAQS), the Title IV Acid Rain Trading Program, the NOx SIP Call, and New Source Review. 

 

14 The EPA has determined that averaging emissions across facilities and allowing emissions trading are permissible 

systems of emissions control under Section 111(d). However, this determination has not been addressed in court 

decisions. See “Standards of Performance for New and Existing Stationary Sources: Electric Utility Steam-Generating 

Units (Clean Air Mercury Rule),” 70 Fed. Reg. 28606 (July 18, 2005); Emission Guidelines for Municipal Waste 

Combustor Metals, Acid Gases, Organics, and Nitrogen Oxides, 40 C.F.R. §60.33b(d). Petitioners challenged the 

emissions trading program included in the Clean Air Mercury Rule. The D.C. Circuit Court overturned the rule on 

other grounds and did not address the question of emissions trading under Section 111(d). 15 John A. Laitner et al., “Long-Term Energy Efficiency Potential: What the Evidence Suggests,” (Research Report 

E121, American Council for an Energy-Efficient Economy, January 11, 2012). 
6

NAAQS'Program'and'EE/RE'Roadmap'

In July 2012, the EPA published the Roadmap for 

Incorporating Energy Efficiency/Renewable Energy 

Policies and Programs into State and Tribal 

Implementation Plans (EE/RE Roadmap).16 The EE/RE 

Roadmap clarifies prior EPA guidance for jurisdictions 

incorporating energy efficiency and renewable energy 

policies and programs into state and tribal plans for 

achieving NAAQS. It also identifies pathways for 

building energy efficiency and renewable energy

programs into state implementation plans for attaining 

national air quality standards and provides methods for 

estimating emissions impacts. 

Title'IV'Acid'Rain'Trading'Program'

The Title IV Acid Rain Trading Program included

a “Conservation and Renewable Energy Reserve” (CRER) 

of 300,000 allowances that were set aside for utilities 

implementing efficiency or renewable energy measures.17

Utilities could earn CRER allowances by sponsoring 

energy efficiency programs and by measuring and 

verifying the energy savings in accordance with EPA

guidance.18

 

16 U.S. EPA, “Roadmap for Incorporating Energy Efficiency/Renewable Energy Policies and Programs into State and 

Tribal Implementation Plans” (EPA-465/D-12-001a, July 2012), 15. 17 42 USCS § 7651c(f)(2)(A) (2012). 18 See David R. Wooley, “The Clean Air Act Amendments of 1990: Opportunities for Promoting Renewable Energy”

(Technical Report NREL/SR-620-29448), prepared for the National Renewable Energy Laboratory (December 11, 

2000).

NAAQS'Program

The)Clean)Air)Act)requires)the)EPA)to)

establish)and)periodically)update)

national)ambient)air)quality)standards)

(NAAQS))for)six)pollutants—NOx,)SO2,)

ozone,)PM,)CO,)and)lead.)Each)state)

then)submits)to)the)EPA)for)approval)a)

state)implementation)plan)that)details)

the)state’s)strategy)for)attaining)

NAAQS.

Title'IV'of'the'Clean'Air'Act

In)1990, Congress)added)Title)IV)to)the)

Clean)Air)Act)to)reduce)acid)rain)

through)a)marketEbased)system.)The)

Title)IV)Acid)Rain)Trading)Program)is)an)

emissions trading)program)that)targets)

sulfur)dioxide)(SO2))emissions from)

coalEfired)power)plants.
7

NOx'SIP'Call'

The EPA’s guidance on the NOx SIP Call Model Rule 

outlines a set-aside mechanism for states to award 

allowances for emissions reductions achieved through enduse efficiency measures.19 In states that adopted this 

provision of the model rule, these set-aside credits were 

available for utilities or third parties that sponsored energy 

efficiency programs.20 The savings from those programs 

could be converted into a “tons” of NOx equivalent and 

traded or sold in the program. The EPA recommended a 

list of technologies that could potentially qualify for setaside allowances, although it was up to each state to make 

the final determination of the actions that qualified.21

New'Source'Review''

The New Source Review program limits pollution from a 

source if its potential to emit (PTE) exceeds the “major 

source threshold,” an annual limit on pollution emitted by a 

source.

22 The major source threshold for different 

pollutants is determined by the EPA and may vary by 

location of the source. Sources wishing to avoid NSR 

requirements may opt to artificially limit their PTE by 

limiting their operating hours. By reducing its PTE below 

major levels, a source can qualify as a minor source and 

avoid triggering NSR. Although this aspect of NSR does 

not directly relate to efficiency, the precedent of satisfying pollution limits through permits that 

incorporate reduced operations could apply, as discussed below.

Energy(Efficiency Questions(Addressed(in(this(Paper

Regulators considering energy efficiency in the 111(d) context face at least three key issues. 

First, any energy efficiency program will presumably require compliance entities to demonstrate 

a link between the efficiency measure and CO2 emissions at either an individual emissions source 

or a group of sources—a requirement that does not typically apply to energy efficiency programs 

 

19 Id. The EPA issued a model rule to function as a set of guidelines for states to put the rule into law. See “40 CFR 

Parts 96 Finding of Significant Contribution and Rulemaking for Certain States in the Ozone Transport Assessment 

Group Region for Purposes of Reducing Regional Transport of Ozone; Rule,” 63 Fed. Reg. 57356 (October 27, 1998). 20 U.S. EPA, “State Set-Aside Programs for Energy Efficiency and Renewable Energy Projects Under the NOx Budget 

Trading Program: A Review of Programs in Indiana, Maryland, Massachusetts, Missouri, New Jersey, New York, and 

Ohio,” (draft report, EPA 430-R-03-005, September 16, 2005),

http://www.epa.gov/statelocalclimate/documents/pdf/eere_rpt.pdf. 21 See U.S. EPA, “Guidance on Establishing an Energy Efficiency and Renewable Energy (EE/RE) Set-Aside in the 

NOx Budget Trading Program,” (March 1999), http://www.epa.gov/statelocalclimate/documents/pdf/ee-re_setasides_vol1.pdf. 22 See U.S. EPA, “Limiting Potential to Emit (PTE) in New Source Review (NSR) Permitting,”

http://www.epa.gov/reg3artd/permitting/limitPTEmmo.htm.

NOx'SIP'Call

In)2003, the)EPA)began)to)administer)

the)NOx SIP)Call,)a)marketEbased)capE

andEtrade)program)created)to)reduce)

power)plant)emissions)and)the)

regional)transport)of)nitrogen)oxides)

in)the)eastern)United)States.

New Source'Review

Created)by)Congress)in)1977,)New)

Source)Review)(NSR))is)a)permitting)

program)limiting)emissions)from)

stationary)sources)of)pollution.)

Once)finalized,)NSR)requirements)

are)incorporated)into)Title)V)

operating)permits)issued)by)the)

state)where)the)source)is)located.
8

or policies. Second, policy makers will need to determine how to accurately and reliably measure 

the energy savings that result from energy 

efficiency programs. The amount of electricity 

generation avoided by these programs can vary 

by type of program or policy, number of 

participants, and length of time the measure or 

program has been in place. Finally, once the 

energy savings are accurately measured, their

emissions impacts must be quantified. 

The following sections discuss each of these 

issues and identify potential paths forward under Section 111(d) by examining the EPA’s 

previous treatment of energy efficiency as an air quality compliance mechanism and CAA 

precedent. It is important to note that these existing CAA programs address specific air quality 

concerns, and their energy efficiency options are designed to achieve compliance with the 

programs’ respective mandates. The 111(d) performance standards for CO2 emissions from power 

plants will aim to limit global concentrations of CO2 emissions rather than achieve local or 

regional air quality standards.23 Regulators may, therefore, determine that energy efficiency 

measures under Section 111(d) implementation may differ significantly from the approaches 

included in the EE/RE Roadmap, the Acid Rain Trading Program, the NOx SIP Call, and New 

Source Review.

TYING'ENERGY'SAVINGS TO'COVERED'SOURCES'

With regard to Section 111(d) regulations for CO2 emissions, regulators might decide to credit 

only energy efficiency programs whose emissions impacts can be traced to a specific identifiable 

EGU. Alternatively, they might credit only reductions that occur in the TTTT category or only 

reductions within the power sector.24 Under each of these scenarios, the challenge for regulators 

is how to determine or estimate where emission impacts occur. Because ensuring that energy 

efficiency reduces generation within the power sector is relatively straightforward, this discussion 

focuses on tying reductions to individual units and to the TTTT category.

 

23 See generally, U.S. EPA, “Climate Change Indicators in the United States,”

http://www.epa.gov/climatechange/science/indicators/ghg/ (“[Greenhouse gas emissions] become globally mixed in the 

lower atmosphere, reflecting contributions from emissions sources worldwide.”).

24 Crediting emissions reductions that occur outside the electricity sector presents a greater degree of legal uncertainty, 

as there is no direct nexus between the regulated sources and the emissions reductions. See, e.g., Jeremy M. Tarr et al., 

“Regulating Carbon Dioxide under Section 111(d) of the Clean air Act: Options, Limits, and Impacts” (NI R 13-01, 

Nicholas Institute for Environmental Policy Solutions, Duke University, January 2013), at17; Gregory E. Wannier et 

al., “Prevailing Academic View on Compliance Flexibility under §111 of the Clean Air Act” (RFF DP 11-29, 

Resources for the Future, July 2011), at 9.

Key'Issues'for'Energy'Efficiency'and'

Section'111(d)

1. How)to)tie)energy)savings)to)

regulated)sources

2. How)to)measure)energy)savings

3. How)to)quantify)emissions
9

Fig. 1. Options for Incorporating Energy Efficiency into Sec. 111(d) Performance Standards

Tying(Reductions(to(Individual(Units(

The EPA or state regulators may determine that Section 111(d) requires each covered unit to 

individually achieve the performance standard.25 Under this approach, a TTTT unit would need to 

demonstrate that reduced electricity demand due to an energy efficiency program translates into a 

specific reduction in CO2 emissions at that unit.

Tying energy efficiency initiatives to individual units is challenging, as the nature of the 

electricity grid makes it difficult to determine exactly where energy savings on the consumer side 

will “show up” among the various generation resources serving a given market. Stated generally, 

electric-generating units supply electricity to the power grid at levels necessary to satisfy energy 

demand in real time. When demand increases above base load needs, electricity from additional 

units comes onto the grid, though at a higher price. When electricity demand recedes, electricity 

from units last in the dispatch order is no longer needed, and those marginal units back off of the 

grid. It is not possible to precisely determine, however, which particular unit adjusted operations 

for a specific reason. For example, on a mild summer day, some people will turn off their air 

conditioners. At any given moment it is very difficult to tell which specific marginal units 

reduced their generation due to the weather and which reduced their operation due to energy 

savings from an individual energy efficiency program.26

The New Source Review program in the Clean Air Act may offer some precedent that could 

address this issue. Currently, sources in the electricity generation sector that wish to avoid NSR 

may instead implement artificial limitations on their potential to emit through permits that limit 

the total number of hours a facility may operate in a year. These commitments are incorporated 

into the sources’ Title V operating permits. Under Section 111(d), regulators could consider a 

similar approach whereby regulated sources accept operational limitations reflective of an amount 

of generation that is offset by the energy efficiency programs run by the facility. For example, a 

system cannot simply require a coal-fired EGU to reduce its emissions, because some other unit 

in the system would be dispatched to meet that demand. Instead, a system could allow regulated 

 

25 See, e.g., Final Opening Brief of Envtl. Petitioners, New Jersey v. Envtl. Prot. Agency, 517 F.3d 574, 583 (D.C. Cir. 

2008), 2007 WL 3193050 at *25–26. 26 Sara Hayes & Rachel Young, “Energy Efficiency: The Slip Switch to a New Track Toward Compliance with Federal 

Air Regulations,” (Research Report E122, American Council for an Energy-Efficient Economy, January 31, 2012),

at 19; U.S. EPA, Roadmap, Appendix B-7 to B-11.
10

sources to subsidize an energy efficiency program. If that program saves 1,000 MWh of 

electricity, the source would demonstrate that the reduced demand translates into emissions

reductions at that facility by agreeing to reduce its generation by 1,000 MWh relative to a 

baseline period. This strategy would ensure that the efficiency savings were realized by that 

specific facility. It would also enable regulators to accurately determine the amount of pollution 

reduced. Using this approach the reduction in generation that is created by the energy efficiency 

program would be linked directly to a specific source, allowing energy efficiency to function as a 

compliance mechanism under a conservative interpretation of the flexibility permitted by Section 

111(d). 

Tying(Reductions(to(TTTT(Units(Generally

The EPA and state regulators may determine that 

Section 111(d) does not require tying emissions

reductions to each individual source, but rather 

allows compliance credit for reductions as long as 

they occur within the TTTT sector. A challenge with 

linking EEenergy efficiency reductions to the TTTT 

sector is that energy savings may occur at sources 

that are both in and out of the regulated group. For 

example, the proposed definition of TTTT sources 

excludes single-cycle power plants (typically plants 

providing power during times of peak demand). 

Furthermore, efficiency measures may offset 

renewable and nuclear power plants—facilities not 

included in the proposed TTTT category. An 

appliance efficiency program or policy likely would 

reduce electricity demand during peak and nonpeak 

hours and consequently affect generation at TTTT 

sources and non-TTTT sources. As explained 

above,27 the nature of electricity transmission on the 

grid makes it difficult to identify with certainty 

which unit experienced emissions reductions because 

of energy efficiency measures. As a result, 

determining whether affected units are in the TTTT 

category is challenging.

The EPA’s EE/RE Roadmap and NOx SIP Call 

include strategies that might apply to the question of

tying energy savings to TTTT sources. While 

acknowledging uncertainty about where energy 

savings from efficiency will show up as reduced 

power plant emissions, the EPA does not view this 

uncertainty as insurmountable. In the EE/RE Roadmap, the agency identifies three methods for 

quantifying emissions reductions that involve estimating these reductions at individual units: the 

 

27 See supra Part II.A.

Capacity'Factor: The)capacity)factor)

approach)assumes)there)is)a)

correlation)between)the)amount)of)

time)a)power)plant)operates)and)the)

likelihood)that)its)operation)will)be)

displaced)due)to)energy)efficiency.)

The)approach)estimates)displaced)

MWhs)at)particular)units)assuming)

those)with)lower)capacity)factors)will)

be)displaced)first.)The)emissions rate)

of)a)displaced)unit)is)used)to)project)

emissions reductions)from)that)unit.)

Historical'Hourly'Data: This)method)

uses)data)about)historical)generation)

to)project)dispatch)order)and)

estimate)marginal)units.)Having)

determined)generation)impacts)at)

individual)units,)the)method)uses)

their)emissions rates)to)estimate)

emissions reductions.

Energy'Modeling: The)most)

sophisticated)of)the)methods)outlined)

in)the)EPA’s)EE/RE)Roadmap)is energy)

modeling)(dispatch)or)capacity)

modeling),)which)can)estimate)the)

location)of)avoided)emissions)while)

accounting)for)variables)such)as)

electricity)imports)and)exports,)

seasonal)demand)variability,)and)

hourly)demand)variability.)
11

capacity factor approach, historical hourly data, and energy modeling. The unit-specific emissions

impacts are then used to forecast air quality in nonattainment areas. 

These methods are not used to determine with certainty the source that reduced its emissions.

Rather, the EPA allows estimations of the sources most likely to be impacted for purposes of 

more accurately quantifying emissions impacts of efficiency measures. These emissions

quantification methods may provide some insight into how the EPA could tackle the challenge of 

linking energy efficiency impacts to the TTTT category under 111(d).28 Under this approach, the 

unit with estimated emission reductions would not necessarily receive credit for those reductions. 

Instead, the identified unit would be used only to indicate whether the emissions reductions came 

from a TTTT source. For instance, if energy modeling projected that energy efficiency programs 

reduced generation at a single-cycle peaking unit (a non-TTTT source), the associated emissions

reductions would not count toward 111(d) compliance. If emissions reductions were linked to a 

combined-cycle natural gas plant, the reductions would be credited to the regulated category. 

Similarly, the EPA’s guidance on energy efficiency projects eligible for credits under the NOx

SIP Call does not attempt to determine with certainty the power plant that reduced its emissions. 

Instead, the EPA lists criteria for eligible projects, including that a project “[r]educes/displaces 

electricity load from core source EGUs in the SIP Call region.”

29 There is no process for linking 

reductions directly to those units. Instead, this criteria is considered satisfied once regulators 

approve the project. In the same guidance document, the EPA suggests potentially eligible 

technologies and activities as well as identifies technologies that are not recommended for 

credit.30 Though the NOx SIP Call regulates a subset of the power sector, the EPA determined that 

it was not necessary to link emissions reductions due to energy efficiency programs to specific 

sources as long as those programs were decreasing electricity consumption. Although the 

language in Section 111(d) is different from that relied on for the NOx SIP Call rulemaking, this 

experience suggests that the EPA may allow the use of energy efficiency as a compliance 

mechanism in the power sector without a direct link to individual units. 

MEASUREMENT'OF'ENERGY'SAVINGS'

Measuring actual energy savings resulting from an efficiency program or policy is a critical task 

when relying on those savings to satisfy CAA requirements. This task requires (1) defining the 

energy efficiency policies and programs that “count” and (2) totaling the kilowatt- or megawatthours of energy saved by the policy or program. Measurement of energy efficiency savings occur 

at the site of the project. Accurate measurement of savings must address a number of variables 

that may affect up-front savings estimates, such as improper execution of a project and failure to

achieve critical project goals.

The approaches for measuring energy savings currently vary by state and have been developed 

over decades, largely in the context of regulatory proceedings of a state public utility 

 

28 This model could also be used to determine whether emissions reductions came from within a particular state, that is, 

to tie energy savings to a particular unit for the purpose of determining whether emissions reductions from an energy 

efficiency program will occur in state or out of state. 29 See U.S. EPA, “Creating an Energy Efficiency and Renewable Energy Set-Aside in the NOx Budget Trading 

Program: Designing the Administrative and Quantitative Elements,” (EPA-430-K-00-004, April 2000), at 9,

http://www.epa.gov/statelocalclimate/documents/pdf/ee-re_set-asides_vol2.pdf. 30 Id. at 10 and 11 (Table 4).
12

commissions.

31 However, the EPA’s recent EE/RE Roadmap guidance as well as earlier cap-andtrade regulations make a number of recommendations for measuring energy efficiency in the 

context of federal air quality regulations. The following section gives a description of the EPA’s 

guidance on the issue. The section concludes with some observations about how this guidance 

might inform energy efficiency measurement under section 111(d).

Because there is no standard national protocol for measuring energy savings from energy 

efficiency measures efficiency for air quality purposes, the EPA could

• Allow states to use the evaluation, measurement, and verification (EM&V) requirements 

they have in place,

• Require states to select from EPA-approved standard protocols,

• Require states to use a particular protocol, or

• Outline protocol principles, and allow states to develop EM&V practices consistent with 

those principles.

Given the broad range of possibilities, EPA precedent on the treatment of energy efficiency 

crediting in other air regulations may help indicate a path forward. With Title IV, the NOx SIP 

Call, and the EE/RE Roadmap, the EPA has addressed measurement in a variety of ways but has 

tended to allow states to determine standards for measuring energy efficiency.

Title'IV'Acid'Rain'Trading'Program

The Title IV Acid Rain Trading Program credited energy efficiency programs that met state 

standards or an EPA protocol. Title IV set aside 300,000 allowances in the Conservation and 

Renewable Energy Reserve for utilities implementing efficiency or renewable energy measures.32 

The EPA provided a list of qualifying energy efficiency measures implemented in the residence 

or facility of a utility customer; however, efficiency measures not included in the list could 

qualify if they were cost-effective demand-side measures consistent with an applicable least-cost 

plan or least-cost planning process that increased the efficiency of the customer's electricity use.

33

The regulation allowed a state public utility commission to verify measurement of energy savings 

from energy efficiency using state protocols.34 Otherwise, applicants submitted documentation of 

savings directly to EPA using the EPA Conservation Verification Protocols.35 These verification 

options describe the types of efficiency measures that can qualify for credit, as well as the 

methods that must be used to measure the total energy savings from the qualifying efficiency 

measures. 

 

31 More than half of all U.S. states have efficiency targets, and most states are measuring savings from energy 

efficiency programs. The California Public Utilities Commission (CPUC) established energy efficiency valuation 

protocols to guide evaluations of California’s energy efficiency programs. The CPUC has developed separate protocols 

for impact evaluation, measurement and verification, market effects evaluation, codes and standards program 

evaluation, effective useful life determination, and sampling and uncertainty protocols. The Efficiency Valuation 

Organization maintains the International Performance Measurement and Verification Protocol, which includes best 

practices for verifying results of energy efficiency and renewable energy projects in commercial and industrial 

facilities. 32 42 USCS § 7651c(f)(2)(A) (2012). 33 See Sulfur Dioxide Allowance System, 40 C.F.R. § 73, Subpt. F, App. A (2012). 34 See 40 CFR Part 73.82(c). 35 U.S. EPA, “Conservation Verification Protocols,” (EPA 430/B-95-012, June 1995).
13

NOx'SIP'Call

The EPA’s guidance on the NOx SIP Call Model Rule outlines a set-aside mechanism for states to 

award allowances for emissions reductions achieved through end-use efficiency measures.36 The 

EPA recommended technologies that could potentially qualify for set-aside allowances, although 

it was up to each state to determine which actions qualified.37 The EPA’s recommended eligible 

technologies fell into three groups: (1) lighting; (2) heating, ventilation, and air conditioning 

(HVAC) and refrigeration; and (3) motors and other technologies.38 The EPA guidance 

recommended that efficiency projects receive set-aside allowances for at least three years and that 

verification of energy savings from projects occur annually.39

The guidance allowed states to choose their own measurement and verification approach and lists 

the International Performance Measurement and Verification Protocol (IPMVP) (maintained by 

the Efficiency Valuation Organization) as an available tool.40 The EPA recommended awarding 

set-aside allowances for efficiency to actors outside of the regulated sector, giving sponsors of 

end-use energy efficiency projects the opportunity to earn a return on their investments.41

Several states, including Indiana, Maryland, Massachusetts, New Jersey, New York, and Ohio, 

created “set-aside” pools of 1–5% of the allowances in their budgets that were earmarked for 

efficiency (and renewables).42 In some states, the transaction costs and administrative burdens of 

measuring and verifying energy savings were barriers.43

 

36 Id. 37 See U.S. EPA, “Guidance on Establishing an Energy Efficiency and Renewable Energy (EE/RE) Set-Aside in the 

NOx Budget Trading Program,” (March 1999), at 17, http://www.epa.gov/statelocalclimate/documents/pdf/ee-re_setasides_vol1.pdf. 38 See 63 Fed. Reg. 57356. 39 Id. 40 See also International Performance Measurement and Verification Protocol Committee, U.S. Dept. of Energy,

“International Performance Measurement and Verification Protocol: Concepts and Options for Determining 

Energy and Water Savings” (DOE/GO-102002-1554, March 2002), http://www.nrel.gov/docs/fy02osti/31505.pdf. 41 63 Fed. Reg. 57356. 42 U.S. EPA, “State Set-Aside Programs for Energy Efficiency and Renewable Energy Projects under the NOx

Budget Trading Program: A Review of Programs in Indiana, Maryland, Massachusetts, Missouri, New Jersey, 

New York, and Ohio” (draft report, EPA 430-R-03-005, 2005), at 3.

http://www.epa.gov/statelocalclimate/documents/pdf/eere_rpt.pdf; U.S. EPA, State Clean Energy-Environment 

Technical Forum Roundtable on State NOx Allowance EE/RE Set-Aside Programs, June 6, 2006 Call Summary

(2006), http://www.epatechforum.org/documents/2005-2006/2006-06-06/2006-06-06-Summary.pdf. 43 U.S. EPA, “State Set-Aside Programs for Energy Efficiency and Renewable Energy Projects under the NOx

Budget Trading Program: A Review of Programs in Indiana, Maryland, Massachusetts, Missouri, New Jersey, 

New York, and Ohio.”
14

Baseline'Emissions'Projection'

Pathway: Agencies)that)have)

already)adopted)energy)efficiency)

policies)and)programs)can)

incorporate)the)impact)of)those)

measures)in)the)air)quality)forecasts)

used)in)their)SIPs.

Control'Strategies'Pathway:''

States)can)use)this)option)to)

incorporate)new)energy)efficiency)

measures)as)one)of)the)suite)of)

control)measures)that)are)used)to)

show)they will)attain)air)quality)

standards)in)a)SIP.)

Emerging/Voluntary'Measures'

Pathway: This)path)allows)

additional)flexibility)so)that)

measures)that)are)difficult)to)

enforce, quantify,)or)both)can)

receive)a)limited)amount)of)SIP)

credit.)

Weight'of'Evidence'Pathway:

States)that)are close)to)meeting)

their)air)quality)goals)can)use)this)

path)to)show)that)efficiency)

measures)that)are)difficult)to)

measure)and)verify)will)have)an)

impact)on)a)nonattainment)area.)

EE/RE'Roadmap

The EE/RE Roadmap is the EPA’s most recent guidance 

affirming the value of energy efficiency as an air quality 

compliance mechanism. This guidance details how states 

might incorporate energy efficiency as an air quality 

compliance mechanism in state implementation plans

(SIPs) developed to comply with National Ambient Air 

Quality Standards (NAAQS). The requirements and goals 

of NAAQS differ in many ways from the goals and 

requirements of 111(d), but because the EE/RE Roadmap 

is the EPA’s most recent and comprehensive guidance on 

how energy efficiency can be considered in the air quality 

context, it may be indicative of EPA’s current views on 

EM&V issues. 

The options for measurement in the EE/RE Roadmap 

vary in required degree of specificity and level of 

documentation and process. States may use estimates of 

the energy savings of statewide policies (as opposed to 

individual programs or measures) in the “baseline” 

pathway; the “control strategy” pathway requires 

submission of more detailed documentation to 

demonstrate compliance with requirements outlined in the 

guidance. The “emerging/voluntary measures” pathway 

and “weight of evidence” pathway both lean toward 

allowing states to estimate the energy savings from 

efficiency programs and policies with less oversight. All 

but the control strategies pathway allow states autonomy 

in determining which types of energy efficiency programs 

will count and broad flexibility in determining how to 

measure the energy savings from those policies and 

programs. The control strategies pathway has some added requirements (quantifiable, surplus, 

permanent and enforceable)44 that may limit the types of efficiency measures that can qualify, 

though states retain quite a bit of flexibility to design programs within these parameters. 

It is unclear which, if any, of the measurement approaches included in the EE/RE Roadmap might 

be permissible in the context of 111(d), but in its guidance on the most rigorous of the options 

(the “control strategy”), the EPA defers to state efforts.

If an air agency wants to incorporate EE policies as a control measure, the agency should 

conduct evaluation, measurement, and verification (EM&V) of the EE impacts over time, 

as savings accrue. In jurisdictions with significant levels of EE investment in place, a 

robust EM&V framework likely already exists and is overseen by the PUC. 

 

44 For more detailed discussion of these four elements see U.S. EPA, EE/RE Roadmap, Appendix F F-6,

http://www.epa.gov/airquality/eere/pdfs/appendixF.pdf. These criteria must also be met as part of the 

emerging/voluntary measures pathway, though there is added flexibility for meeting the quantifiable and enforceable 

criterion.
15

Communications with these officials can reveal the frequency, rigor, and scope of the 

EM&V effort needed, as well as the timing for impacts reporting.

Air officials can then use these data to document and validate the effectiveness of the EE 

policy for SIP purposes.45

The EPA has long exhibited (and recently reaffirmed) a willingness to allow states to take the 

lead in determining the appropriate protocols for measuring energy savings. Furthermore, Section 

111(d) appears to permit flexibility in allowing states to determine many of the aspects of a 

compliance approach. These factors suggest that in the context of 111(d), the EPA could defer, at 

least to some extent, to states to define the appropriate methods for measuring energy savings. 

The limited use of energy efficiency under the NOx SIP Call and Acid Rain Trading Program 

suggest that there is a potential tension between encouraging the use of energy efficiency to 

maximize CO2 reductions and using the most stringent protocols for measuring and verifying the 

impacts of those efficiency measures. In its development of 111(d) guidance, the EPA may have 

to consider a balance between achieving the right level of stringency in terms of measurement 

and verification and adopting a simple and straightforward compliance path that encourages the 

use of energy efficiency as a compliance tool. 

QUANTIFICATION'OF'EMISSIONS REDUCTIONS'

Utility(and(Challenge(of(Quantifying(Emissions Reductions(under(111(d)

After measuring energy savings from a qualifying efficiency policy or program, the savings 

would need to be converted into an amount of avoided CO2 emissions, or “quantified.” The 

quantification process comes into play for states wishing to encourage energy efficiency for 

Section 111(d) compliance when demonstrating that a plan (a “SIP”) complies with EPA 

guidance or that a state’s approach is otherwise adequate to quantify emission reductions (under 

an equivalency plan46). The EPA’s approval of a state’s implementation plan may depend, in part, 

upon the state’s proposed methods for quantifying emission savings.47

The EPA recognizes that quantifying the emission impacts of energy efficiency policies and 

programs can be challenging.48 Nevertheless, multiple methods for quantifying emissions 

reductions from energy savings are currently in use.49 The following section discusses several 

such methods outlined by the EPA that may be useful in the context of a 111(d) rulemaking.

 

45 Id. at F-7, http://www.epa.gov/airquality/eere/pdfs/appendixF.pdf. 46 For more on state equivalency determinations, see Jonas Monast et al., “Greenhouse Gas Emissions from Existing 

Sources: Section 111(d) and State Equivalency,” 42 Env. Law Reporter 10,206 (2012). 47 Other considerations may include the characteristics of particular energy efficiency programs (e.g., educational 

programs) and the method used for measuring energy savings. 48 See U.S. EPA, Roadmap for Incorporating Energy Efficiency/Renewable Energy Policies and Programs into State 

and Tribal Implementation Plans, 15. 49 Chris Ann Dickerson and Mike McCormick, “Securing the Link Between Energy Efficiency Savings and 

Greenhouse Gas Reductions: How Will Energy Efficiency Evaluation Protocols Measure Up,” (International Energy 

Program Evaluation Conference, New York, 2005), http://iepec.org/abstracts/abstracts2005/papers/071.pdf.
16

Emissions Quantification(Methods(under(the(CAA

According to EPA guidance, the process of converting energy savings to emissions reductions 

can consist of two steps: (1) “estimate which facilities will likely reduce their energy output as a 

result of the measure” and (2) “determine the emission rate in pounds per kilowatt-hour of those 

facilities.”50 Emissions reductions are then calculated by multiplying the reduction of a facility’s 

generation by that facility’s emissions rate. Although the degree of emissions reduction depends 

on the emissions rate of the displaced unit, it may not be possible to determine exactly the 

generation impacts at an individual unit.51 As a result, “surrogate approaches,” such as dispatch 

models or methods based on historical or projected information, may be necessary to estimate the 

electric generation units (EGUs) most likely to experience generation impacts.52 Because the EPA 

recognizes that states may not have the resources to conduct sophisticated dispatch modeling, it

sometimes considers other approaches that rely on simplified assumptions, including use of

capacity factor and historical generation data, to be adequate.

Energy'Modeling

In the EE/RE Roadmap and the NOx SIP Call guidance, the EPA discusses energy modeling as 

the most accurate of its suggested methods for estimating emissions impacts. Energy models, 

such as dispatch and capacity expansion models, can “capture the complex interactions within the 

electricity market and simulate what might happen given a set of assumptions.”53 Models, for 

instance, can optimize dispatch from EGUs across different regions and appreciate variables such 

as “transmission constraints, forced outages, environmental regulations, plant retirements, new 

generation, and limitations on specific power plants.”54 A dispatch model estimates the marginal 

units on an hourly basis and the amount of energy displacement at those units. A capacity 

expansion model is used for large-scale programs that may dramatically change electrical system 

operations.55

The EE/RE Roadmap identifies energy modeling as the most sophisticated emissions

quantification approach because of its ability to take into accounts for electricity imports, exports, 

fuel prices, and unit availability.56 The EPA explains that energy modeling can provide “detailed, 

geographically specific hourly emission data at the EGU level.”57 In the NOx SIP Call guidance, 

the agency recognized the capacity of dispatch models to “capture a high level of detail on the 

specific electric generation units (EGU) displaced by EE/RE projects or programs.”58 The 

guidance also explains that when energy efficiency programs reduce electricity demand, “the 

model calculates how this would affect dispatch and then calculates resulting emission and 

 

50 U.S. EPA, Guidance on State Implementation Plan (SIP) Credits for Emission Reductions from Electric-Sector 

Energy Efficiency and Renewable Energy Measures (2004), 14. [hereinafter “2004 EE/SIP Guidance”] 51 U.S. EPA, 2004 EE/SIP Guidance,14–15. 52 Id. at 4. 53 U.S. EPA, EE/RE Roadmap, Appendix I, I–28.. 54 Id. 55 Id. at I–29.. 56 Id. at I–18. 57 U.S. EPA, EE/RE Roadmap, Appendix I, I–29, I–30 . 58 U.S. EPA, “Creating and Energy Efficiency and Renewable Energy Set-Aside in the NOx Budget Trading Program: 

Evaluation, Measurement, and Verification of Electricity Savings for Determining Emission Reductions from Energy 

Efficiency and Renewable Energy Actions,” (2007),at 8.4.2 (2007) [hereinafter “EPA NOx Budget Trading Program 

vol. 3”].
17

prices.”59 Despite these advantages, modeling can be expensive and data intensive. Moreover, it

requires modeling expertise, and the quality of results depends on assumptions.

Historical'Generation'and'Emissions Data

The EE/RE Roadmap and the NOx SIP Call guidance also provide for a less resource-intensive 

approach to calculating emissions reductions. In the EE/RE Roadmap’s historical hourly 

emissions rate approach, data about historical generation are used to estimate dispatch order and 

corresponding marginal emissions rates.60 Comparing these data to estimated hourly impacts of 

an energy efficiency policy can reveal “which EGUs within the dispatch order will be affected by 

the policies” for each hour, day, and month of the time period being analyzed.61 The NOx SIP 

Call guidance outlines a similar approach, whereby an estimated hourly dispatch order is 

compared to a load curve that accounts for energy efficiency measures in order to estimate 

marginal units on an hourly basis. Characteristic emissions rates for the marginal units can be 

used to quantify emissions savings.62

Capacity'Factor'Emissions Rates

This approach, put forward in the EE/RE Roadmap, operates on the assumption that a unit’s 

capacity factor63 can indicate the amount of its generation that an energy efficiency program will 

displace.64 Marginal units cycle up and down according to demand and tend to have a low 

capacity factor. Base load units, by contrast, run continuously and have a capacity factor close to 

1. By assuming that energy efficiency programs are more likely to displace marginal rather than 

base load units, this method uses capacity factor data to determine the “relative dispatch order” of 

EGUs in a region, and to identify “which power plants are on the margin,” allowing for the use of 

the “emission rates of those plants”65 to quantify emissions.

System'Average'Emissions Rate

A simple method used in CAA programs is to multiply energy savings by an average emissions

rate of units in a specified geographic region. In the NOx SIP Call guidance, for example, the 

EPA explains that the average rate is the total emissions output of a group of units divided by the 

total energy output of those units.66 The group of units could be a single region or a power 

system,67 and the agency notes a variety of sources for average emissions rates calculated by 

 

59 Id. at 8.4.2. 60 U.S. EPA, EE/RE Roadmap, Appendix I, I–25. 61 Id. at I–26. 62 U.S. EPA, NOx Budget Trading Program vol. 3, at 8.4.3. 63 “Capacity factor” refers to the ratio of the electricity produced by an EGU to the electricity the unit could have 

produced if operating at continuous full power. See U.S. EPA, EE/RE Roadmap, Appendix I, I–22. 64 Id. 65 Id. at I–23. 66 U.S. EPA, NOx Budget Trading Program vol. 3, supra note 62, at 8.4.1. 67 Id.
18

utility, state, and region.68 The EPA’s guidance also suggests a similar but more accurate method 

whereby states use the average emissions rates of marginal EGUs. This method uses “regional or 

state average rates that exclude the base load EGUs not ‘backed off’ by EE/RE projects” in order 

to better estimate “the impact on the marginal EGUs that are most likely to be displaced.”69 In the 

EE/RE Roadmap, the EPA describes essentially the same approach, where regulators estimate 

total avoided emissions by multiplying the total estimated avoided generation by a non–base load 

emissions rate provided by eGRID.70

An average emissions rate for marginal units is simple to use but suffers from inaccuracy,

because it roughly estimates affected marginal EGUs and does not fully capture the variations in 

emissions rates at individual facilities.71 The inherent imprecision of this approach may be 

incompatible with Section 111(d) regulations, depending on the level of accuracy required in 

emissions reductions estimates.

The quantification approaches used in the EE/RE Roadmap demonstrate compliance with the 

NAAQS and are part of a larger modeling effort to predict the ambient air quality of 

nonattainment regions. Less precise quantification approaches may be more tolerable for 

complying with NAAQS because estimated emissions reductions are used merely for forecasting 

air quality, which is ultimately measured with monitoring devices. In Section 111(d), by contrast, 

the quantification measures would be used to determine total tons of achieved emissions

reductions because there is no air quality measurement as the final regulatory compliance metric. 

On the other hand, CO2 is unique from the pollutants regulated under NAAQS in that it has no 

localized health impacts, suggesting that accurately identifying the location of CO2 emissions 

reductions is less important than identifying the location of the pollutants contemplated in the 

EE/RE Roadmap. Though the roadmap focuses on ambient air quality and Section 111(d) focuses 

on performance standards, the EPA’s recent guidance on emissions quantification methods 

applied to energy efficiency may still be an informative precedent. It remains to be seen which 

approaches might be permissible under 111(d), but the range of options in the EE/RE Roadmap 

provides some context for the range of options air regulators could apply. 

 

68 Id..at 8.4.1 (listing sources as the Ozone Transport Commission’s “OTC Workbook,” the Clean Air-Climate 

Protection Software (CACPS), and the EPA’s eGRID database). 

69 Id. at 8.4.3. In its second guidance document for energy-efficiency set-asides under the NOx Budget Trading 

Program, the EPA recommended that states use a uniform emissions rate of 0.0015 lbs/kWh. U.S. EPA, “Creating an 

Energy Efficiency and Renewable Energy Set-Aside in the NOx Budget Trading Program: Designing the 

Administrative and Quantitative Elements,” vol. 2 (2000), 18 (“EPA recommends that states use a single SIP Call 

region-wide NOx emissions rate of 0.0015 lbs/kWh.”). The agency’s 2007 guidance document did not identify use of 

this uniform rate as acceptable for quantifying emissions reductions. U.S. EPA, NOx Budget Trading Program Vol. 3,

8.4 (listing system average emission rate, dispatch models, and medium effort calculation approaches as options). The 

agency did endorse use of this rate as an allocation rate—the number of kWh savings a state requires for a project to 

qualify for one NOx set-aside allowance. Id. at 8.2. The allocation rate can differ from the emissions rate used to 

quantify emissions reductions. Id. at 8.1 (“States may choose a conservative allocation rate or a high allocation rate, 

i.e., an ‘incentive rate,’ if they believe it will encourage additional EE/RE projects. Another option is to adopt an 

allowance allocation rate based on the estimated rate at which EE/RE projects displace pollution from electric 

generation units (EGUs).”). 

70 The Emissions & Generation Resource Integrated Database (eGRID) is a comprehensive source of data on the 

environmental characteristics of almost all electric power generated in the United States. 71 U.S. EPA, NOx Budget Trading Program vol. 3, at 8.4.3.
19

CONCLUSION

End-use energy efficiency measures have a long track record of achieving meaningful, costeffective CO2 emissions reductions from the electric power sector. The forthcoming performance 

standards limiting CO2 emissions from existing coal-fired EGUs and natural gas-fired combinedcycle units present the opportunity to expand the use of energy efficiency as a compliance option 

for Clean Air Act programs. While there is limited history with Section 111(d), the Acid Rain 

Trading Program, the NOx SIP Call, New Source Review, and the recently issued EE/RE 

Roadmap each provide useful lessons to guide the EPA and the states as they consider whether 

and how to incorporate energy efficiency into CO2 performance standards for existing fossil fuelfired EGUs. In particular, precedents from these established programs and guidance documents 

can help regulators determine how to tie energy savings to the sources subject to the performance 

standards, how to measure the energy savings, and how to quantify the impacts on CO2 emissions 

of a given energy efficiency program.