U.S. EPA’s Clean Power Plan does far more than the draft proposal to support states pursuing carbon trading, offering a “panoply” of tools, in the rule’s words.

States can still choose to write plans to direct individual carbon-cutting actions, from burning more natural gas to building renewable power.

Or they can tell power plants to meet emissions rates—to reduce the amount of carbon they emit with each unit of energy they produce—or buy credits to make up for the difference.

States that pick the second option have new resources at their disposal.

“There are a lot of questions still to be answered, but they’ve definitely made it a lot easier for states that are interested in trading,” said Kate Zyla, deputy director of the Georgetown Climate Center, which has been organizing Clean Power Plan meetings among states.

The final rule allows states to write “trading-ready” plans without creating formal multi-state proposals. EPA has rewritten state goals based on uniform emissions rates for power plants, which should make it easier to trade.

EPA set one rate for coal-fired power plants and another one for natural gas plants. The rates are the same in every state.

In a blog post yesterday, EPA air chief Janet McCabe said “relying on the performance rates is one way that a state can put its power plants in a position to use emissions trading” inside and outside their own states.

“The rates are achievable because no power plant has to meet the rates on its own,” McCabe said. “It can use the fact that it operates on an interconnected grid to access a range of low- or zero-emitting energy resources to come into compliance.”

That means fossil fuel power plants can purchase credits or allowances from cleaner energy sources, like wind and solar power.

EPA’s rule says this sort of trading is an “integral” part of its “best system of emissions reduction” analysis, which is used to set state goals. But states don’t have to use trading.

The agency’s reliance on trading is “simply a recognition of the nature of this industry and the long history of trading as an important regulatory tool in establishing regulatory regimes for this industry and its reasonable availability to states in establishing standards of performance,” according to the rule.

Who will run a trading platform?
“EPA hit a lot of the high points,” said Sarah Adair, a senior policy associate at Duke University’s Nicholas Institute for Environmental Policy Solutions. “They’ve resolved the ambiguity about what exactly you’d be trading.” EPA is calling the trading unit an “emission rate credit,” or ERC, she said.

Jonas Monast, climate and energy program director at the Nicholas Institute, said the rule “provides a lot of detail that streamlines the approaches for the states that want to allow their regulated units to have the option to trade without the state having to design the trading program.”

In another move to promote carbon emissions trading, EPA offered to provide “resources and capacity” to create a tracking platform for states to trade carbon credits.

The final Clean Power Plan set much more even goals for states. The draft rule required emissions rate changes ranging from 11 percent to 72 percent. The final rule goals range from 7 percent for Connecticut to 47 percent for Montana.

Franz Litz, a program consultant with Minneapolis-based think tank the Great Plains Institute, said the less disparate goals will make trading easier.

“In the sense, EPA has leveled the playing field more,” Litz said. “If you are a state and you are thinking about whether to allow trading with another state, it makes it much easier to say ‘Yes, I’ll allow trading’ if that other state is shouldering a similar burden.”

The rule also provided mass-based goals for states that want a system similar to cap and trade. Mass-based standards would cap the total amount of carbon that the entire state’s power sector could emit each year.

Experts say mass-based standards would be simpler to employ than rate-based standards.

Zyla said states still have sufficient leeway to avoid using an emissions trading program.

“It’s still just one option, so they’ve made it easier for states to choose trading, but by no means have they required it,” Zyla said. “States will still choose whatever approach they want—some may choose trading and some may not choose trading, and it’s just one of the suite of things they get to use, but now there’s a good model to work from.”

Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500