[Federal Register Volume 80, Number 205 (Friday, October 23, 2015)]
[Rules and Regulations]
[Pages 64661-64964]
[FR Doc No: 2015-22842]

Vol. 80

Friday,

No. 205

October 23, 2015

Part III

Environmental Protection Agency

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40 CFR Part 60

Carbon Pollution Emission Guidelines for Existing Stationary Sources:
Electric Utility Generating Units; Final Rule

Federal Register / Vol. 80 , No. 205 / Friday, October 23, 2015 /
Rules and Regulations

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 60

[EPA-HQ-OAR-2013-0602; FRL-9930-65-OAR]
RIN 2060-AR33

Carbon Pollution Emission Guidelines for Existing Stationary
Sources: Electric Utility Generating Units

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: In this action, the Environmental Protection Agency (EPA) is
establishing final emission guidelines for states to follow in
developing plans to reduce greenhouse gas (GHG) emissions from existing
fossil fuel-fired electric generating units (EGUs). Specifically, the
EPA is establishing: Carbon dioxide (CO2) emission
performance rates representing the best system of emission reduction
(BSER) for two subcategories of existing fossil fuel-fired EGUs--fossil
fuel-fired electric utility steam generating units and stationary
combustion turbines; state-specific CO2 goals reflecting the
CO2 emission performance rates; and guidelines for the
development, submittal and implementation of state plans that establish
emission standards or other measures to implement the CO2
emission performance rates, which may be accomplished by meeting the
state goals. This final rule will continue progress already underway in
the U.S. to reduce CO2 emissions from the utility power
sector.

DATES: This final rule is effective on December 22, 2015.

ADDRESSES: Docket. The EPA has established a docket for this action
under Docket No. EPA-HQ-OAR-2013-0602. All documents in the docket are
listed in the http://www.regulations.gov index. Although listed in the
index, some information is not publicly available (e.g., confidential
business information (CBI) or other information for which disclosure is
restricted by statute). Certain other material, such as copyrighted
material, will be publicly available only in hard copy. Publicly
available docket materials are available either electronically in
http://www.regulations.gov or in hard copy at the EPA Docket Center,
EPA WJC West Building, Room 3334, 1301 Constitution Ave. NW.,
Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30
p.m., Monday through Friday, excluding federal holidays. The telephone
number for the Public Reading Room is<PHONE_NUMBER>, and the telephone
number for the Air Docket is<PHONE_NUMBER>. For additional information
about the EPA's public docket, visit the EPA Docket Center homepage at
http://www2.epa.gov/dockets.
    World Wide Web. In addition to being available in the docket, an
electronic copy of this final rule will be available on the World Wide
Web (WWW). Following signature, a copy of this final rule will be
posted at the following address: http://www.epa.gov/cleanpowerplan/. A
number of documents relevant to this rulemaking, including technical
support documents (TSDs), a legal memorandum, and the regulatory impact
analysis (RIA), are also available at http://www.epa.gov/cleanpowerplan/. These and other related documents are also available
for inspection and copying in the EPA docket for this rulemaking.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Vasu, Sector Policies and
Programs Division (D205-01), U.S. EPA, Research Triangle Park, NC
27711; telephone number<PHONE_NUMBER>, facsimile number (919) 541-
4991; email address<EMAIL_ADDRESS>or Mr. Colin Boswell,
Measurements Policy Group (D243-05), Sector Policies and Programs
Division, U.S. EPA, Research Triangle Park, NC 27711; telephone number
(919) 541-2034, facsimile number<PHONE_NUMBER>; email address:
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:
    Acronyms. A number of acronyms and chemical symbols are used in
this preamble. While this may not be an exhaustive list, to ease the
reading of this preamble and for reference purposes, the following
terms and acronyms are defined as follows:

ACEEE American Council for an Energy-Efficient Economy
AEO Annual Energy Outlook
AFL-CIO American Federation of Labor and Congress of Industrial
Organizations
ASTM American Society for Testing and Materials
BSER Best System of Emission Reduction
Btu/kWh British Thermal Units per Kilowatt-hour
CAA Clean Air Act
CBI Confidential Business Information
CCS Carbon Capture and Storage (or Sequestration)
CEIP Clean Energy Incentive Program
CEMS Continuous Emissions Monitoring System
CHP Combined Heat and Power
CO2 Carbon Dioxide
DOE U.S. Department of Energy
ECMPS Emission Collection and Monitoring Plan System
EE Energy Efficiency
EERS Energy Efficiency Resource Standard
EGU Electric Generating Unit
EIA Energy Information Administration
EM&V Evaluation, Measurement and Verification
EO Executive Order
EPA Environmental Protection Agency
FERC Federal Energy Regulatory Commission
ERC Emission Rate Credit
FR Federal Register
GHG Greenhouse Gas
GW Gigawatt
HAP Hazardous Air Pollutant
HRSG Heat Recovery Steam Generator
IGCC Integrated Gasification Combined Cycle
IPCC Intergovernmental Panel on Climate Change
IPM Integrated Planning Model
IRP Integrated Resource Plan
ISO Independent System Operator
kW Kilowatt
kWh Kilowatt-hour
lb CO2/MWh Pounds of CO2 per Megawatt-hour
LBNL Lawrence Berkeley National Laboratory
MMBtu Million British Thermal Units
MW Megawatt
MWh Megawatt-hour
NAAQS National Ambient Air Quality Standards
NAICS North American Industry Classification System
NAS National Academy of Sciences
NGCC Natural Gas Combined Cycle
NOX Nitrogen Oxides
NRC National Research Council
NSPS New Source Performance Standard
NSR New Source Review
NTTAA National Technology Transfer and Advancement Act
OMB Office of Management and Budget
PM Particulate Matter
PM2.5 Fine Particulate Matter
PRA Paperwork Reduction Act
PUC Public Utilities Commission
RE Renewable Energy
REC Renewable Energy Credit
RES Renewable Energy Standard
RFA Regulatory Flexibility Act
RGGI Regional Greenhouse Gas Initiative
RIA Regulatory Impact Analysis
RPS Renewable Portfolio Standard
RTO Regional Transmission Organization
SBA Small Business Administration
SCC Social Cost of Carbon
SIP State Implementation Plan
SO2 Sulfur Dioxide
Tg Teragram (one trillion (10\12\) grams)
TSD Technical Support Document
TTN Technology Transfer Network
UMRA Unfunded Mandates Reform Act of 1995
UNFCCC United Nations Framework Convention on Climate Change
USGCRP U.S. Global Change Research Program
VCS Voluntary Consensus Standard

    Organization of This Document. The information presented in this
preamble is organized as follows:

I. General Information
    A. Executive Summary
    B. Organization and Approach for This Final Rule

II. Background
    A. Climate Change Impacts From GHG Emissions
    B. GHG Emissions From Fossil Fuel-Fired EGUs
    C. The Utility Power Sector
    D. Challenges in Controlling Carbon Dioxide Emissions
    E. Clean Air Act Regulations for Power Plants
    F. Congressional Awareness of Climate Change
    G. International Agreements and Actions
    H. Legislative and Regulatory Background for CAA Section 111
    I. Statutory and Regulatory Requirements
    J. Clean Power Plan Proposal and Supplemental Proposal
    K. Stakeholder Outreach and Consultations
    L. Comments on the Proposal
III. Rule Requirements and Legal Basis
    A. Summary of Rule Requirements
    B. Summary of Legal Basis
IV. Authority for This Rulemaking, Definition of Affected Sources,
and Treatment of Categories
    A. EPA's Authority Under CAA Section 111(d)
    B. CAA Section 112 Exclusion to CAA Section 111(d) Authority
    C. Authority To Regulate EGUs
    D. Definition of Affected Sources
    E. Combined Categories and Codification in the Code of Federal
Regulations
V. The Best System of Emission Reduction and Associated Building
Blocks
    A. The Best System of Emission Reduction (BSER)
    B. Legal Discussion of Certain Aspects of the BSER
    C. Building Block 1--Efficiency Improvements at Affected Coal-
Fired Steam EGUs
    D. Building Block 2--Generation Shifts Among Affected EGUs
    E. Building Block 3--Renewable Generating Capacity
VI. Subcategory-Specific CO2 Emission Performance Rates
    A. Overview
    B. Emission Performance Rate Requirements
    C. Form of the Emission Performance Rates
    D. Emission Performance Rate-Setting Equation and Computation
Procedure
VII. Statewide CO2 Goals
    A. Overview
    B. Reconstituting Statewide Rate-Based CO2 Emission
Performance Goals From the Subcategory-Specific Emission Performance
Rates
    C. Quantifying Mass-Based CO2 Emission Performance
Goals From the Statewide Rate-Based CO2 Emission
Performance Goals
    D. Addressing Potential Leakage in Determining the Equivalence
of Statewide CO2 Emission Performance Goals
    E. State Plan Adjustments of State Goals
    F. Geographically Isolated States and Territories With Affected
EGUs
VIII. State Plans
    A. Overview
    B. Timeline for State Plan Performance and Provisions To
Encourage Early Action
    C. State Plan Approaches
    D. State Plan Components and Approvability Criteria
    E. State Plan Submittal and Approval Process and Timing
    F. State Plan Performance Demonstrations
    G. Additional Considerations for State Plans
    H. Resources for States to Consider in Developing Plans
    I. Considerations for CO2 Emission Reduction Measures
That Occur at Affected EGUs
    J. Additional Considerations and Requirements for Mass-Based
State Plans
    K. Additional Considerations and Requirements for Rate-Based
State Plans
    L. Treatment of Interstate Effects
IX. Community and Environmental Justice Considerations
    A. Proximity Analysis
    B. Community Engagement in State Plan Development
    C. Providing Communities With Access to Additional Resources
    D. Federal Programs and Resources Available to Communities
    E. Multi-Pollutant Planning and Co-Pollutants
    F. Assessing Impacts of State Plan Implementation
    G. EPA Continued Engagement
X. Interactions With Other EPA Programs and Rules
    A. Implications for the NSR Program
    B. Implications for the Title V Program
    C. Interactions With Other EPA Rules
XI. Impacts of This Action
    A. What are the air impacts?
    B. Endangered Species Act
    C. What are the energy impacts?
    D. What are the compliance costs?
    E. What are the economic and employment impacts?
    F. What are the benefits of the proposed action?
XII. Statutory and Executive Order Reviews
    A. Executive Order 12866, Regulatory Planning and Review, and
Executive Order 13563, Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act (PRA)
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act (UMRA)
    E. Executive Order 13132, Federalism
    F. Executive Order 13175, Consultation and Coordination With
Indian Tribal Governments
    G. Executive Order 13045, Protection of Children From
Environmental Health Risks and Safety Risks
    H. Executive Order 13211, Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act (NTTAA)
    J. Executive Order 12898, Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
    K. Congressional Review Act (CRA)
XIII. Statutory Authority

I. General Information

A. Executive Summary

1. Introduction
    This final rule is a significant step forward in reducing
greenhouse gas (GHG) emissions in the U.S. In this action, the EPA is
establishing for the first time GHG emission guidelines for existing
power plants. These final emission guidelines, which rely in large part
on already clearly emerging growth in clean energy innovation,
development and deployment, will lead to significant carbon dioxide
(CO2) emission reductions from the utility power sector that
will help protect human health and the environment from the impacts of
climate change. This rule establishes, at the same time, the foundation
for longer term GHG emission reduction strategies necessary to address
climate change and, in so doing, confirms the international leadership
of the U.S. in the global effort to address climate change. In this
final rule, we have taken care to ensure that achievement of the
required emission reductions will not compromise the reliability of our
electric system, or the affordability of electricity for consumers.
This final rule is the result of unprecedented outreach and engagement
with states, tribes, utilities, and other stakeholders, with
stakeholders providing more than 4.3 million comments on the proposed
rule. In this final rule, we have addressed the comments and concerns
of states and other stakeholders while staying consistent with the law.
As a result, we have followed through on our commitment to issue a plan
that is fair, flexible and relies on the accelerating transition to
cleaner power generation that is already well underway in the utility
power sector.
    Under the authority of Clean Air Act (CAA) section 111(d), the EPA
is establishing CO2 emission guidelines for existing fossil
fuel-fired electric generating units (EGUs)--the Clean Power Plan.
These final guidelines, when fully implemented, will achieve
significant reductions in CO2 emissions by 2030, while
offering states and utilities substantial flexibility and latitude in
achieving these reductions. In this final rule, the EPA is establishing
a CO2 emission performance rate for each of two
subcategories of fossil fuel-fired EGUs--fossil fuel-fired electric
steam generating units and stationary combustion turbines--that
expresses the ``best system of emissions reduction . . . adequately
demonstrated'' (BSER)

for CO2 from the power sector.\1\ The EPA is also
establishing state-specific rate-based and mass-based goals that
reflect the subcategory-specific CO2 emission performance
rates and each state's mix of affected EGUs. The guidelines also
provide for the development, submittal and implementation of state
plans that implement the BSER--again, expressed as CO2
emission performance rates--either directly by means of source-specific
emission standards or other requirements, or through measures that
achieve equivalent CO2 reductions from the same group of
EGUs.
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    \1\ Under CAA section 111(d), pursuant to 40 CFR 60.22(b)(5),
states must establish, in their state plans, emission standards that
reflect the degree of emission limitation achievable through the
application of the ``best system of emission reduction'' that,
taking into account the cost of achieving such reduction and any
non-air quality health and environmental impacts and energy
requirements, the Administrator determines has been adequately
demonstrated (i.e., the BSER). Under CAA section 111(a)(1) and (d),
the EPA is authorized to determine the BSER and to calculate the
amount of emission reduction achievable through applying the BSER.
The state is authorized to identify the emission standard or
standards that reflect that amount of emission reduction.
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    States with one or more affected EGUs will be required to develop
and implement plans that set emission standards for affected EGUs. The
CAA section 111(d) emission guidelines that the EPA is promulgating in
this action apply to only the 48 contiguous states and any Indian tribe
that has been approved by the EPA pursuant to 40 CFR 49.9 as eligible
to develop and implement a CAA section 111(d) plan.\2\ Because Vermont
and the District of Columbia do not have affected EGUs, they will not
be required to submit a state plan. Because the EPA does not possess
all of the information or analytical tools needed to quantify the BSER
for the two non-contiguous states with otherwise affected EGUs (Alaska
and Hawaii) and the two U.S. territories with otherwise affected EGUs
(Guam and Puerto Rico), these emission guidelines do not apply to those
areas, and those areas will not be required to submit state plans on
the schedule required by this final action.
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    \2\ In the case of a tribe that has one or more affected EGUs in
its area of Indian country, the tribe has the opportunity, but not
the obligation, to establish a CO2 emission standard for
each affected EGU located in its area of Indian country and a CAA
section 111(d) plan for its area of Indian country. If the tribe
chooses to establish its own plan, it must seek and obtain authority
from the EPA to do so pursuant to 40 CFR 49.9. If it chooses not to
seek this authority, the EPA has the responsibility to determine
whether it is necessary or appropriate, in order to protect air
quality, to establish a CAA section 111(d) plan for an area of
Indian country where affected EGUs are located.
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    The emission standards in a state's plan may incorporate the
subcategory-specific CO2 emission performance rates set by
the EPA or, in the alternative, may be set at levels that ensure that
the state's affected EGUs, individually, in aggregate, or in
combination with other measures undertaken by the state achieve the
equivalent of the interim and final CO2 emission performance
rates between 2022 and 2029 and by 2030, respectively. State plans must
also: (1) Ensure that the period for emission reductions from the
affected EGUs begin no later than 2022, (2) show how goals for the
interim and final periods will be met, (3) ensure that, during the
period from 2022 to 2029, affected EGUs in the state collectively meet
the equivalent of the interim subcategory-specific CO2
emission performance rates, and (4) provide for periodic state-level
demonstrations prior to and during the 2022-2029 period that will
ensure required CO2 emission reductions are being
accomplished and no increases in emissions relative to each state's
planned emission reduction trajectory are occurring. A Clean Energy
Incentive Program (CEIP) will provide opportunities for investments in
renewable energy (RE) and demand-side energy efficiency (EE) that
deliver results in 2020 and/or 2021. The plans must be submitted to the
EPA in 2016, though an extension to 2018 is available to allow for the
completion of stakeholder and administrative processes.
    The EPA is promulgating: (1) Subcategory-specific CO2
emission performance rates, (2) state rate-based goals, and (3) state
mass-based CO2 goals that represent the equivalent of each
state's rate-based goal. This will facilitate states' choices in
developing their plans, particularly for those seeking to adopt mass-
based allowance trading programs or other statewide policy measures as
well as, or instead of, source-specific requirements. The EPA received
significant comment to the effect that mass-based allowance trading was
not only highly familiar to states and EGUs, but that it could be more
readily applied than rate-based trading for achieving emission
reductions in ways that optimize affordability and electric system
reliability.
    In this summary, we discuss the purpose of this rule, the major
provisions of the final rule, the context for the rulemaking, key
changes from the proposal, the estimated CO2 emission
reductions, and the costs and benefits expected to result from full
implementation of this final action. Greater detail is provided in the
body of this preamble, the RIA, the response to comments (RTC)
documents, and various TSDs and memoranda addressing specific topics.
2. Purpose of This Rule
    The purpose of this rule is to protect human health and the
environment by reducing CO2 emissions from fossil fuel-fired
power plants in the U.S. These plants are by far the largest domestic
stationary source of emissions of CO2, the most prevalent of
the group of air pollutant GHGs that the EPA has determined endangers
public health and welfare through its contribution to climate change.
This rule establishes for the first time emission guidelines for
existing power plants. These guidelines will lead to significant
reductions in CO2 emissions, result in cleaner generation
from the existing power plant fleet, and support continued investments
by the industry in cleaner power generation to ensure reliable,
affordable electricity now and into the future.
    Concurrent with this action, the EPA is also issuing a final rule
that establishes CO2 emission standards of performance for
new, modified, and reconstructed power plants. Together, these rules
will reduce CO2 emissions by a substantial amount while
ensuring that the utility power sector in the U.S. can continue to
supply reliable and affordable electricity to all Americans using a
diverse fuel supply. As with past EPA rules addressing air pollution
from the utility power sector, these guidelines have been designed with
a clear recognition of the unique features of this sector.
Specifically, the agency recognizes that utilities provide an essential
public service and are regulated and managed in ways unlike any other
industrial activity. In providing assurances that the emission
reductions required by this rule can be achieved without compromising
continued reliable, affordable electricity, this final rule fully
accounts for the critical service utilities provide.
    As with past rules under CAA section 111, this rule relies on
proven technologies and measures to set achievable emission performance
rates that will lead to cost-effective pollutant emission reductions,
in this case CO2 emission reductions at power plants, across
the country. In fact, the emission guidelines reflect strategies,
technologies and approaches already in widespread use by power
companies and states. The vast preponderance of the input we received
from stakeholders is supportive of this conclusion.
    States will play a key role in ensuring that emission reductions
are achieved at a reasonable cost. The experience of

states in this regard is especially important because CAA section
111(d) relies on the well-established state-EPA partnership to
accomplish the required CO2 emission reductions. States will
have the flexibility to choose from a range of plan approaches and
measures, including numerous measures beyond those considered in
setting the CO2 emission performance rates, and this final
rule allows and encourages states to adopt the most effective set of
solutions for their circumstances, taking account of cost and other
considerations. This rulemaking, which will be implemented through the
state-EPA partnership, is a significant step that will reduce air
pollution, in this case GHG emissions, in the U.S. At the same time,
the final rule greatly facilitates flexibility for EGUs by establishing
a basis for states to set trading-based emission standards and
compliance strategies. The rule establishes this basis by including
both uniform emission performance rates for the two subcategories of
sources and also state-specific rate- and mass-based goals.
    This final rule is a significant step forward in implementing the
President's Climate Action Plan.\3\ To address the far-reaching harmful
consequences and real economic costs of climate change, the President's
Climate Action Plan details a broad array of actions to reduce GHG
emissions that contribute to climate change and its harmful impacts on
public health and the environment. Climate change is already occurring
in this country, affecting the health, economic well-being and quality
of life of Americans across the country, and especially those in the
most vulnerable communities. This CAA section 111(d) rulemaking to
reduce GHG emissions from existing power plants, and the concurrent CAA
section 111(b) rulemaking to reduce GHG emissions from new, modified,
and reconstructed power plants, implement one of the strategies of the
Climate Action Plan.
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    \3\ The President's Climate Action Plan, June 2013. http://www.whitehouse.gov/sites/default/files/image/president27sclimateactionplan.pdf.
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    Nationwide, by 2030, this final CAA section 111(d) existing source
rule will achieve CO2 emission reductions from the utility
power sector of approximately 32 percent from CO2 emission
levels in 2005.
    The EPA projects that these reductions, along with reductions in
other air pollutants resulting directly from this rule, will result in
net climate and health benefits of $25 billion to $45 billion in 2030.
At the same time, coal and natural gas will remain the two leading
sources of electricity generation in the U.S., with coal providing
about 27 percent of the projected generation and natural gas providing
about 33 percent of the projected generation.
3. Summary of Major Provisions
    a. Overview. The fundamental goal of this rule is to reduce harmful
emissions of CO2 from fossil fuel-fired EGUs in accordance
with the requirements of the CAA. The June 2014 proposal for this rule
was designed to meet this overarching goal while accommodating two
important objectives. The first was to establish guidelines that
reflect both the unique interconnected and interdependent manner in
which the power system operates and the actions, strategies, and
policies states and utilities have already been undertaking that are
resulting in CO2 emission reductions. The second objective
was to provide states and utilities with broad flexibility and choice
in meeting those requirements in order to minimize costs to ratepayers
and to ensure the reliability of electricity supply. In this final
rule, the EPA has focused on changes that, in addition to being
responsive to the critical concerns and priorities of stakeholders,
more fully accomplish these objectives.
    While our consideration of public input and additional information
has led to notable revisions from the emission guidelines we proposed
in June 2014, the proposed guidelines remain the foundation of this
final rule. These final guidelines build on the progress already
underway to reduce the carbon intensity of power generation in the
U.S., especially through the lowest carbon-intensive technologies,
while reflecting the unique interconnected and interdependent system
within which EGUs operate. Thus, the BSER, as determined in these
guidelines, incorporates a range of CO2-reducing actions,
while at the same time adhering to the fundamental approach the EPA has
relied on for decades in implementing section 111 of the CAA.
Specifically, in making its BSER determination, the EPA examined not
only actions, technologies and measures already in use by EGUs and
states, but also deliberately incorporated in its identification of the
BSER the unique way in which affected EGUs actually operate in
providing electricity services. This latter feature of the BSER mirrors
Congress' approach to regulating air pollution in this sector, as
exemplified by Title IV of the CAA. There, Congress established a
pollution reduction program specifically for fossil fuel-fired EGUs and
designed the sulfur dioxide (SO2) portion of that program
with express recognition of the utility power sector's ability to shift
generation among various EGUs, which enabled pollution reduction by
increasing reliance on RE and even on demand-side EE. The result of our
following Congress' recognition of the interdependent operation of EGUs
within an interconnected grid is the incorporation in the BSER of
measures, such as shifting generation to lower-emitting NGCC units and
increased use of RE, that rely on the current interdependent operation
of EGUs. As we noted in the proposal and note here as well, the EPA
undertook an unprecedented and sustained process of engagement with the
public and stakeholders. It is, in many ways, as a direct result of
public discussion and input that the EPA came to recognize the
substantial extent to which the BSER needed to account for the unique
interconnected and interdependent operations of EGUs if it was to meet
the criteria on which the EPA has long relied in making BSER
determinations.
    Equally important, these guidelines offer states and owners and
operators of EGUs broad flexibility and latitude in complying with
their obligations. Because affordability and electricity system
reliability are of paramount importance, the rule provides states and
utilities with time for planning and investment, which is instrumental
to ensuring both manageable costs and system reliability, as well as to
facilitating clean energy innovation. The final rule continues to
express the CO2 emission reduction requirements in terms of
state goals, as well as in terms of emission performance rates for the
two subcategories of affected EGUs, reflecting the particular mix of
power generation in each state, and it continues to provide until 2030,
fifteen years from the date of this final rule, for states and sources
to achieve the CO2 reductions. Numerous commenters,
including most sources, states and energy agencies, indicated that this
was a reasonable timeframe. The final guidelines also continue to
provide an option where programs beyond those directly limiting power
plant emission rates can be used for compliance (i.e., policies,
programs and other measures). The final rule also continues to allow,
but not require, multi-state approaches. Finally, EPA took care to
ensure that states could craft their own emissions reduction
trajectories in meeting the interim goals included in this final rule.
    b. Opportunities for states. As stated above, the final guidelines
are designed to build on and reinforce progress by states, cities and
towns, and companies on a growing variety of sustainable strategies to
reduce power sector CO2

emissions. States, in their CAA section 111(d) plans, will be able to
rely on, and extend, programs they may already have created to address
emissions of air pollutants, and in particular CO2, from the
utility power sector or to address the sector from an overall
perspective. Those states committed to Integrated Resource Planning
(IRP) will be able to establish their CO2 reduction plans
within that framework, while states with a more deregulated power
sector system will be able to develop CO2 reduction plans
within that specific framework. Each state will have the opportunity to
take advantage of a wide variety of strategies for reducing
CO2 emissions from affected EGUs, including demand-side EE
programs and mass-based trading, which some suggested in their
comments. The EPA and other federal entities, including the U.S.
Department of Energy (DOE), the Federal Energy Regulatory Commission
(FERC) and the U.S. Department of Agriculture (USDA), among others, are
committed to sharing expertise with interested states as they develop
and implement their plans.
    States will be able to address the economic interests of their
utilities and ratepayers by using the flexibilities in this final
action to reduce costs to consumers, minimize stranded assets, and spur
private investments in RE and EE technologies and businesses. They may
also, if they choose, work with other states on multi-state approaches
that reflect the regional structure of electricity operating systems
that exists in most parts of the country and is critical to ensuring a
reliable supply of affordable energy. The final rule gives states the
flexibility to implement a broad range of approaches that recognize
that the utility power sector is made up of a diverse range of
companies of various sizes that own and operate fossil fuel-fired EGUs,
including vertically integrated companies in regulated markets,
independent power producers, rural cooperatives and municipally-owned
utilities, some of which are likely to have more direct access than
others to certain types of GHG emission reduction opportunities, but
all of which have a wide range of opportunities to achieve reductions
or acquire clean generation.
    Again, with features that facilitate mass-based and/or interstate
trading, the final guidelines also empower affected EGUs to pursue a
broad range of choices for compliance and for integrating compliance
action with the full range of their investments and operations.
    c. Main elements. This final rule comprises three main elements:
(1) Two subcategory-specific CO2 emission performance rates
resulting from application of the BSER to the two subcategories of
affected EGUs; (2) state-specific CO2 goals, expressed as
both emission rates and as mass, that reflect the subcategory-specific
CO2 emission performance rates and each state's mix of
affected EGUs the two performance rates; and (3) guidelines for the
development, submittal and implementation of state plans that implement
those BSER emission performance rates either through emission standards
for affected EGUs, or through measures that achieve the equivalent, in
aggregate, of those rates as defined and expressed in the form of the
state goals.
    In this final action, the EPA is setting emission performance
rates, phased in over the period from 2022 through 2030, for two
subcategories of affected fossil fuel-fired EGUs--fossil fuel-fired
electric utility steam-generating units and stationary combustion
turbines. These rates, applied to each state's particular mix of fossil
fuel-fired EGUs, generate the state's carbon intensity goal for 2030
(and interim rates for the period 2022-2029). Each state will determine
whether to apply these to each affected EGU or to take an alternative
approach and meet either an equivalent statewide rate-based goal or
statewide mass-based goal. The EPA does not prescribe how a state must
meet the emission guidelines, but, if a state chooses to take the path
of meeting a state goal, these final guidelines identify the methods
that a state can or, in some cases, must use to demonstrate that the
combination of measures and standards that the state adopts meets its
state-level CO2 goals. While the EPA accomplishes the phase-
in of the interim goal by way of annual emission performance rates,
states and EGUs may meet their respective emission reduction
obligations ``on average'' over that period following whatever emission
reduction trajectory they determine to pursue over that period.
    CAA section 111(d) creates a partnership between the EPA and the
states under which the EPA establishes emission guidelines and the
states take the lead on implementing them by establishing emission
standards or creating plans that are consistent with the EPA emission
guidelines. The EPA recognizes that each state has differing policy
considerations--including varying regional emission reduction
opportunities and existing state programs and measures--and that the
characteristics of the electricity system in each state (e.g., utility
regulatory structure and generation mix) also differ. Therefore, as in
the proposal, each state will have the latitude to design a program to
meet source-category specific emission performance rates or the
equivalent statewide rate- or mass-based goal in a manner that reflects
its particular circumstances and energy and environmental policy
objectives. Each state can do so on its own, or a state can collaborate
with other states and/or tribal governments on multi-state plans, or
states can include in their plans the trading tools that EGUs can use
to realize additional opportunities for cost savings while continuing
to operate across the interstate system through which electricity is
produced. A state would also have the option of adopting the model
rules for either a rate- or a mass-based program that the EPA is
proposing concurrently with this action.\4\
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    \4\ The EPA's proposed CAA section 111(d) federal plan and model
rules for existing fossil fuel-fired EGUs are being published
concurrently with this final rule.
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    To facilitate the state planning process, this final rule
establishes guidelines for the development, submittal, and
implementation of state plans. The final rule describes the components
of a state plan, the additional latitude states have in developing
strategies to meet the emission guidelines, and the options they have
in the timing of submittal of their plans. This final rule also gives
states considerable flexibility with respect to the timeframes for plan
development and implementation, as well as the choice of emission
reduction measures. The final rule provides up to fifteen years for
full implementation of all emission reduction measures, with
incremental steps for planning and then for demonstration of
CO2 reductions that will ensure that progress is being made
in achieving CO2 emission reductions. States will be able to
choose from a wide range of emission reduction measures, including
measures that are not part of the BSER, as discussed in detail in
section VIII.G of this preamble.
    d. Determining the BSER. In issuing this final rulemaking, the EPA
is implementing statutory provisions that have been in place since
Congress first enacted the CAA in 1970 and that have been implemented
pursuant to regulations promulgated in 1975 and followed in numerous
subsequent CAA section 111 rulemakings. These requirements call on the
EPA to develop emission guidelines that reflect the EPA's determination
of the ``best system of emission reduction . . . adequately
demonstrated'' for states to follow in

formulating plans to establish emission standards to implement the
BSER.
    As the EPA has done in making BSER determinations in previous CAA
section 111 rulemakings, for this final BSER determination, the agency
considered the types of strategies that states and owners and operators
of EGUs are already employing to reduce the covered pollutant (in this
case, CO2) from affected sources (in this case, fossil fuel-
fired EGUs).\5\
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    \5\ The final emission guidelines for landfill gas emissions
from municipal solid waste landfills, published on March 12, 1996,
and amended on June 16, 1998 (61 FR 9905 and 63 FR 32743,
respectively), provide an example, as the guidelines allow either of
two approaches for controlling landfill gas--by recovering the gas
as a fuel, for sale, and removing from the premises, or by
destroying the organic content of the gas on the premises using a
control device. Recovering the gas as a fuel source was a practice
already being used by some affected sources prior to promulgation of
the rulemaking.
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    In so doing, as has always been the case, our considerations were
not limited solely to specific technologies or equipment in
hypothetical operation; rather, our analysis encompassed the full range
of operational practices, limitations, constraints and opportunities
that bear upon EGUs' emission performance, and which reflect the unique
interconnected and interdependent operations of EGUs and the overall
electricity grid.
    In this final action, the agency has determined that the BSER
comprises the first three of the four proposed ``building blocks,''
with certain refinements to the three building blocks.
    The three building blocks are:

    1. Improving heat rate at affected coal-fired steam EGUs.
    2. Substituting increased generation from lower-emitting
existing natural gas combined cycle units for generation from
higher-emitting affected steam generating units.
    3. Substituting increased generation from new zero-emitting
renewable energy generating capacity for generation from affected
fossil fuel-fired generating units.

    These three building blocks are approaches that are available to
all affected EGUs, either through direct investment or operational
shifts or through emissions trading where states, which must establish
emission standards for affected EGUs, do so by incorporating emissions
trading.\6\ At the same time, and as we noted in the proposal, there
are numerous other measures available to reduce CO2
emissions from affected EGUs, and our determination of the BSER does
not necessitate the use of the three building blocks to their maximum
extent, or even at all. The building blocks and the BSER determination
are described in detail in section V of this preamble.
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    \6\ The EPA notes that, in quantifying the emission reductions
that are achievable through application of the BSER, some building
blocks will apply to some, but not all, affected EGUs. Specifically,
building block 1 will apply to affected coal-fired steam EGUs,
building block 2 will apply to all affected steam EGUs (both coal-
fired and oil/gas-fired), and building block 3 will apply to all
affected EGUs.
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    e. CO2 state-level goals and subcategory-specific emission
performance rates.
    (1) Final CO2 goals and emission performance rates.
    In this action, the EPA is establishing CO2 emission
performance rates for two subcategories of affected EGUs--fossil fuel-
fired electric utility steam generating units and stationary combustion
turbines. For fossil fuel-fired steam generating units, we are
finalizing an emission performance rate of 1,305 lb CO2/MWh.
For stationary combustion turbines, we are finalizing an emission
performance rate of 771 lb CO2/MWh. As we did at proposal,
for each state, we are also promulgating rate-based CO2
goals that are the weighted aggregate of the emission performance rates
for the state's EGUs. To ensure that states and sources can choose
additional alternatives in meeting their obligations, the EPA is also
promulgating each state's goal expressed as a CO2 mass goal.
The inclusion of mass-based goals, along with information provided in
the proposed federal plan and model rules that are being issued
concurrently with this rule, paves the way for states to implement
mass-based trading, as some states have requested, reflecting their
view that mass-based trading provides significant advantages over rate-
based trading.
    Affected EGUs, individually, in aggregate, or in combination with
other measures undertaken by the state, must achieve the equivalent of
the CO2 emission performance rates, expressed via the state-
specific rate- and mass-based goals, by 2030.
    (2) Interim CO2 emission performance rates and state-specific
goals.
    The best system of emission reduction includes both the measures
for reducing CO2 emissions and the timeframe over which they
can be implemented. In this final action, the EPA is establishing an 8-
year interim period, beginning in 2022 instead of 2020, over which to
achieve the full required reductions to meet the CO2
performance rates, a commencement date more than six years from October
23, 2015, the date of this rulemaking. This 8-year interim period from
2022 through 2029 is separated into three steps, 2022-2024, 2025-2027,
and 2028-2029, each associated with its own interim CO2
emission performance rates. The interim steps are presented both in
terms of emission performance rates for the two subcategories of
affected EGUs and in terms of state goals, expressed both as a rate and
as a mass. A state may adopt emission standards for its sources that
are identical to these interim emission performance rates or,
alternatively, adapt these steps to accommodate the timing of expected
reductions, as long as the state's interim goal is met over the 8-year
period.
    f. State plans.\7\
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    \7\ The CAA section 111(d) emission guidelines apply to the 50
states, the District of Columbia, U.S. territories, and any Indian
tribe that has been approved by the EPA pursuant to 40 CFR 49.9 as
eligible to develop and implement a CAA section 111(d) plan. In this
preamble, in instances where these governments are not specifically
listed, the term ``state'' is used to represent them. Because
Vermont and the District of Columbia do not have affected EGUs, they
will not be required to submit a state plan. Because the EPA does
not possess all of the information or analytical tools needed to
quantify the BSER for the two non-contiguous states with affected
EGUs (Alaska and Hawaii) and the two U.S. territories with affected
EGUs (Guam and Puerto Rico), we are not finalizing emission
performance rates in those areas at this time, and those areas will
not be required to submit state plans until we do.
---------------------------------------------------------------------------

    In this action, the EPA is establishing final guidelines for states
to follow in developing, submitting and implementing their plans. In
developing plans, states will need to choose the type of plan they will
develop. They will also need to include required plan components in
their plan submittals, meet plan submittal deadlines, achieve the
required CO2 emission reductions over time, and provide for
monitoring and periodic reporting of progress. As with the BSER
determination, stakeholder comments have provided both data and
recommendations to which these final guidelines are responsive.
    (1) Plan approaches.
    To comply with these emission guidelines, a state will have to
ensure, through its plan, that the emission standards it establishes
for its sources individually, in aggregate, or in combination with
other measures undertaken by the state, represent the equivalent of the
subcategory-specific CO2 emission performance rates. This
final rule includes several options for state plans, as discussed in
the proposal and in many of the comments we received.
    First, in the final rule, states may establish emission standards
for their affected EGUs that mirror the uniform emission performance
rates for the two subcategories of sources included in this final rule.
They may also pursue alternative approaches that adopt emission
standards that meet the

uniform emission performance rates, or emission standards that meet
either the rate-based goal promulgated for the state or the alternative
mass-based goal promulgated for the state. It is for the purpose of
providing states with these choices that the EPA is providing state-
specific rate-based and mass-based goals equivalent to the emission
performance rates that the EPA is establishing for the two
subcategories of fossil fuel-fired EGUs. A detailed explanation of
rate- and mass-based goals is provided in section VII of this preamble
and in a TSD.\8\ In developing its plan, each state and eligible tribe
electing to submit a plan will need to choose whether its plan will
result in the achievement of the CO2 emission performance
rates, statewide rate-based goals, or statewide mass-based goals by the
affected EGUs.
---------------------------------------------------------------------------

    \8\ The CO2 Emission Performance Rate and Goal
Computation TSD for the CPP Final Rule, available in the docket for
this rulemaking.
---------------------------------------------------------------------------

    The second major set of options provided in the final rule includes
the types of measures states may rely on through the state plans. A
state will be able to choose to establish emission standards for its
affected EGUs sufficient to meet the requisite performance rates or
state goal, thus placing all of the requirements directly on its
affected EGUs, which we refer to as the ``emission standards
approach.'' Alternatively, a state can adopt a ``state measures
approach,'' which would result in the affected EGUs meeting the
statewide mass-based goal by allowing a state to rely upon state-
enforceable measures on entities other than affected EGUs, in
conjunction with any federally enforceable emission standards the state
chooses to impose on affected EGUs. With a state measures approach, the
plan must also include a contingent backstop of federally enforceable
emission standards for affected EGUs that fully meet the emission
guidelines and that would be triggered if the plan failed to achieve
the required emission reductions on schedule. A state would have the
option of basing its backstop emission standards on the model rule,
which focuses on the use of emissions trading as the core mechanism and
which the EPA is proposing today. A state that adopts a state measures
approach must use its mass CO2 emission goal as the metric
for demonstrating plan performance.
    The final rule requires that the state plan submittal include a
timeline with all of the programmatic plan milestone steps the state
will take between the time of the state plan submittal and the year
2022 to ensure that the plan is effective as of 2022. States must
submit a report to the EPA in 2021 that demonstrates that the state has
met the programmatic plan milestone steps that the state indicated it
would take during the period from the submittal of the final plan
through the end of 2020, and that the state is on track to implement
the approved state plan as of January 1, 2022.
    The plan must also include a process for reporting on plan
implementation, progress toward achieving CO2 emission
reductions, and implementation of corrective actions, in the event that
the state fails to achieve required emission levels in a timely
fashion. Beginning January 1, 2025, and then January 1, 2028, January
1, 2030, and then every two calendar years thereafter, the state will
be required to compare emission levels achieved by affected EGUs in the
state with the emission levels projected in the state plan and report
the results of that comparison to the EPA by July 1 of those calendar
years.
    Existing state programs can be aligned with the various state plan
options further described in Section VIII. A state plan that uses one
of the finalized model rules, which the EPA is proposing concurrently
with this action, could be presumptively approvable if the state plan
meets all applicable requirements.\9\ The plan guidelines provide the
states with the ability to achieve the full reductions over a multi-
year period, through a variety of reduction strategies, using state-
specific or multi-state approaches that can be achieved on either a
rate or mass basis. They also address several key policy considerations
that states can be expected to contemplate in developing their plans.
---------------------------------------------------------------------------

    \9\ The EPA would take action on such a state plan through
independent notice and comment rulemaking.
---------------------------------------------------------------------------

    State plan approaches and plan guidelines are explained further in
section VIII of this preamble.
    (2) State plan components and approvability criteria.
    The EPA's implementing regulations provide certain basic elements
required for state plans submitted pursuant to CAA section 111(d).\10\
In the proposal, the EPA identified certain additional elements that
should be contained in state plans. In this final action, in response
to comments, the EPA is making several revisions to the components
required in a state plan submittal and is also incorporating the
approvability criteria into the final list of components required in a
state plan submittal. In addition, we have organized the state plan
components to reflect: (1) Components required for all state plan
submittals; (2) additional components required for the emission
standards approach; and (3) additional components required for the
state measures approach.
---------------------------------------------------------------------------

    \10\ 40 CFR 60.23.
---------------------------------------------------------------------------

    All state plans must include the following components:

     Description of the plan
     Applicability of state plans to affected EGUs
     Demonstration that the plan submittal is projected to
achieve the state's CO2 emission performance rates or
state CO2 goal \11\
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    \11\ A state that chooses to set emission standards that are
identical to the emission performance rates for both the interim
period and in 2030 and beyond need not identify interim state goals
nor include a separate demonstration that its plan will achieve the
state goals.
---------------------------------------------------------------------------

     Monitoring, reporting and recordkeeping requirements
for affected EGUs
     State recordkeeping and reporting requirements
     Public participation and certification of hearing on
state plan
     Supporting documentation

    Also, in submitting state plans, states must provide documentation
demonstrating that they have considered electric system reliability in
developing their plans.
    Further, in this final rule, the EPA is requiring states to
demonstrate how they are meaningfully engaging all stakeholders,
including workers and low-income communities, communities of color, and
indigenous populations living near power plants and otherwise
potentially affected by the state's plan. In their plan submittals,
states must describe their engagement with their stakeholders,
including their most vulnerable communities. The participation of these
communities, along with that of ratepayers and the public, can be
expected to help states ensure that state plans maintain the
affordability of electricity for all and preserve and expand jobs and
job opportunities as they move forward to develop and implement their
plans.
    State plan submittals using the emission standards approach must
also include:

     Identification of each affected EGU; identification of
federally enforceable emission standards for the affected EGUs; and
monitoring, recordkeeping and reporting requirements.
     Demonstrations that each emission standard will result
in reductions that are quantifiable, non-duplicative, permanent,
verifiable, and enforceable.

    State plan submittals using the state measures approach must also
include:

     Identification of each affected EGU; identification of
federally enforceable emission standards for affected EGUs (if
applicable); identification of backstop of

federally enforceable emission standards; and monitoring,
recordkeeping and reporting requirements.
     Identification of each state measure and demonstration
that each state measure will result in reductions that are
quantifiable, non-duplicative, permanent, verifiable, and
enforceable.

    In addition to these requirements, each state plan must follow the
EPA implementing regulations at 40 CFR 60.23.
    (3) Timing and process for state plan submittal and review.
    Because of the compelling need for actions to begin the steps
necessary to reduce GHG emissions from EGUs, the EPA proposed that
states submit their plans within 13 months of the date of this final
rule and that reductions begin in 2020. In light of the comments
received and in order to provide maximum flexibility to states while
still taking timely action to reduce CO2 emissions, in this
final rule the EPA is allowing for a 2-year extension until September
6, 2018, for both individual and multi-state plans, to provide a total
of 3 years for states to submit a final plan if an extension is
received. Specifically, the final rule requires each state to submit a
final plan by September 6, 2016. Since some states may need more than
one year to complete all of the actions needed for their final state
plans, including technical work, state legislative and rulemaking
activities, a robust public participation process, coordination with
third parties, coordination among states involved in multi-state plans,
and consultation with reliability entities, the EPA is allowing an
optional two-phased submittal process for state plans. If a state needs
additional time to submit a final plan, then the state may request an
extension by submitting an initial submittal by September 6, 2016. For
the extension to be granted, the initial submittal must address three
required components sufficiently to demonstrate that a state is able to
undertake steps and processes necessary to timely submit a final plan
by the extended date of September 6, 2018. These components are: An
identification of final plan approach or approaches under
consideration, including a description of progress made to date; an
appropriate explanation for why the state needs additional time to
submit a final plan beyond September 6, 2016; and a demonstration of
how they have been engaging with the public, including vulnerable
communities, and a description of how they intend to meaningfully
engage with community stakeholders during the additional time (if an
extension is granted) for development of the final plan, as described
in section VIII.E of this preamble. As further described in section
VIII.B of this preamble, the EPA is establishing a CEIP in order to
promote early action. States' participation in the CEIP is optional. In
order for a state to participate in the program, it must include in its
initial submittal, if applicable, a non-binding statement of intent to
participate in the CEIP; if a state is submitting a final plan by
September 6, 2016, it must include such a statement of intent as part
of its supporting documentation for the plan.
    If the initial submittal includes those components and if the EPA
does not notify the state that the initial submittal does not contain
the required components, then, within 90 days of the submittal, the
extension of time to submit a final plan will be deemed granted. A
state will then have until no later than September 6, 2018, to submit a
final plan. The EPA will also be working with states during the period
after they make their initial submittals and provide states with any
necessary information and assistance during the 90-day period. Further,
states participating in a multi-state plan may submit a single joint
plan on behalf of all of the participating states.
    States and tribes that do not have any affected EGUs in their
jurisdictional boundaries may provide emission rate credits (ERCs) to
adjust CO2 emissions, provided they are connected to the
contiguous U.S. grid and meet other requirements for eligibility. There
are certain limitations and restrictions for generating ERCs, and
these, as well as associated requirements, are explained in section
VIII of this preamble.
    Following submission of final plans, the EPA will review plan
submittals for approvability. Given a similar timeline accorded under
section 110 of the CAA, and the diverse approaches states may take to
meet the CO2 emission performance rates or equivalent
statewide goals in the emission guidelines, the EPA is extending the
period for EPA review and approval or disapproval of plans from the
four-month period provided in the EPA implementing regulations to a
twelve-month period. This timeline will provide adequate time for the
EPA to review plans and follow notice-and-comment rulemaking procedures
to ensure an opportunity for public comment. The EPA, especially
through our regional offices, will be available to work with states as
they develop their plans, in order to make review of submitted plans
more straightforward and to minimize the chances of unexpected issues
that could slow down approval of state plans.
    (4) Timing for implementing the CO2 emission guidelines.
    The EPA recognizes that the measures states and utilities have been
and will be taking to reduce CO2 emissions from existing
EGUs can take time to implement. We also recognize that investments in
low-carbon intensity and RE and in EE strategies are currently underway
and in various stages of planning and implementation widely across the
country. We carefully reviewed information submitted to us regarding
the feasible timing of various measures and identifying concerns that
the required CO2 emission reductions could not be achieved
as early as 2020 without compromising electric system reliability,
imposing unnecessary costs on ratepayers, and requiring investments in
more carbon-intensive generation, while diverting investment in cleaner
technologies. The record is compelling. To respond to these concerns
and to reflect the period of time required for state plan development
and submittal by states, review and approval by the EPA, and
implementation of approved plans by states and affected EGUs, the EPA
is determining in this final rule that affected EGUs will be required
to begin to make reductions by 2022, instead of 2020, as proposed, and
meet the final CO2 emission performance rates or equivalent
statewide goals by no later than 2030. The EPA is establishing an 8-
year interim period that begins in 2022 and goes through 2029, and
which is separated into three steps, 2022-2024, 2025-2027, and 2028-
2029, each associated with its own interim goal. Affected EGUs must
meet each of the interim period step 1, 2, and 3 CO2
emission performance rates, or, following the emissions reduction
trajectory designed by the state itself, must meet the equivalent
statewide interim period goals, on average, that a state may establish
over the 8-year period from 2022-2029. The CAA section 111(d) plan must
include those specific requirements. Affected EGUs must also achieve
the final CO2 performance rates or the equivalent statewide
goal by 2030 and maintain that level subsequently. This approach
reflects adjustments to the timeframe over which reductions must be
achieved that mirror the determination of the final BSER, which
incorporates the phasing in of the BSER measures in keeping with the
achievability of those measures. The agency believes that this approach
to timing is reasonable and appropriate, is consistent with many of the
comments we received, and will

best support the optimization of overall CO2 reductions,
ratepayer affordability and electricity system reliability.
    The EPA recognizes that successfully achieving reductions by 2022
will be facilitated by actions and investments that yield
CO2 emission reductions prior to 2022. The final guidelines
include provisions to encourage early actions. States will be able to
take advantage of the impacts of early investments that occur prior to
the beginning of a plan performance period. Under a mass-based plan,
those impacts will be reflected in reductions in the reported
CO2 emissions of affected EGUs during the plan performance
period. Under a rate-based plan, states may recognize early actions
implemented after 2012 by crediting MWh of electricity generation and
savings that are achieved by those measures during the interim and
final plan performance periods. This provision is discussed in section
VIII.K of the preamble.
    In addition, to encourage early investments in RE and demand-side
EE, the EPA is establishing the CEIP. Through this program, detailed in
section VIII.B of this preamble, states will have the opportunity to
award allowances and ERCs to qualified providers that make early
investments in RE, as well as in demand-side EE programs implemented in
low-income communities. Those states that take advantage of this option
will be eligible to receive from the EPA matching allowances or ERCs,
up to a total for all states that represents the equivalent of 300
million short tons of CO2 emissions.
    The EPA will address design and implementation details of the CEIP
in a subsequent action. Prior to doing so, the EPA will engage with
states, utilities and other stakeholders to gather information
regarding their interests and priorities with regard to implementation
of the CEIP.
    The CEIP can play an important role in supporting one of the
critical policy benefits of this rule. The incentives and market signal
generated by the CEIP can help sustain the momentum toward greater RE
investment in the period between now and 2022 so as to offset any
dampening effects that might be created by setting the period for
mandatory reductions to begin in 2022, two years later than at
proposal.
    (5) Community and environmental justice considerations.
    Climate change is an environmental justice issue. Low-income
communities and communities of color already overburdened by pollution
are disproportionately affected by climate change and are less
resilient than others to adapt to or recover from climate-change
impacts. While this rule will provide broad benefits to communities
across the nation by reducing GHG emissions, it will be particularly
beneficial to populations that are disproportionately vulnerable to the
impacts of climate change and air pollution.
    Conventional pollutants emitted by power plants, such as
particulate matter (PM), SO2, hazardous air pollutants
(HAP), and nitrogen oxides (NOx), will also be reduced as
the plants reduce their carbon emissions. These pollutants can have
significant adverse local and regional health impacts. The EPA analyzed
the communities in closest proximity to power plants and found that
they include a higher percentage of communities of color and low-income
communities than national averages. We thus expect an important co-
benefit of this rule to be a reduction in the adverse health impacts of
air pollution on these low-income communities and communities of color.
We refer to these communities generally as ``vulnerable'' or
``overburdened,'' to denote those communities least resilient to the
impacts of climate change and central to environmental justice
considerations.
    While pollution will be cut from power plants overall, there may be
some relatively small number of coal-fired plants whose operation and
corresponding emissions increase as energy providers balance energy
production across their fleets to comply with state plans. In addition,
a number of the highest-efficiency natural gas-fired units are also
expected to increase operations, but they have correspondingly low
carbon emissions and are also characterized by low emissions of the
conventional pollutants that contribute to adverse health effects in
nearby communities and regionally. The EPA strongly encourages states
to evaluate the effects of their plans on vulnerable communities and to
take the steps necessary to ensure that all communities benefit from
the implementation of this rule. In order to identify whether state
plans are causing any adverse impacts on overburdened communities,
mindful that substantial overall reductions, nevertheless, may be
accompanied by potential localized increases, the EPA intends to
perform an assessment of the implementation of this rule to determine
whether it and other air quality rules are leading to improved air
quality in all areas or whether there are localized impacts that need
to be addressed.
    Effective engagement between states and affected communities is
critical to the development of state plans. The EPA encourages states
to identify communities that may be currently experiencing adverse,
disproportionate impacts of climate change and air pollution, how state
plan designs may affect them, and how to most effectively reach out to
them. This final rule requires that states include in their initial
submittals a description of how they engaged with vulnerable
communities as they developed their initial submittals, as well as the
means by which they intend to involve communities and other
stakeholders as they develop their final plans. The EPA will provide
training and other resources for states and communities to facilitate
meaningful engagement.
    In addition to the benefits for vulnerable communities from
reducing climate change impacts and effects of conventional pollutant
emissions, this rule will also help communities by moving the utility
industry toward cleaner generation and greater EE. The federal
government is committed to ensuring that all communities share in these
benefits.
    The EPA also encourages states to consider how they may incorporate
approaches already used by other states to help low-income communities
share in the investments in infrastructure, job creation, and other
benefits that RE and demand-side EE programs provide, have access to
financial assistance programs, and minimize any adverse impacts that
their plans could have on communities. To help support states in taking
concrete actions that provide economic development, job and electricity
bill-cutting benefits to low-income communities directly, the EPA has
designed the CEIP specifically to target the incentives it creates on
investments that benefit low-income communities.
    Community and environmental justice considerations are discussed
further in section IX of this preamble.
    (6) Addressing employment concerns.
    In addition, the EPA encourages states in designing their state
plans to consider the effects of their plans on employment and overall
economic development to assure that the opportunities for economic
growth and jobs that the plans offer are realized. To the extent
possible, states should try to assure that communities that can be
expected to experience job losses can also take advantage of the
opportunities for job growth or otherwise transition to healthy,
sustainable economic growth. The President has proposed the POWER+ Plan
to help communities impacted by power sector transition. The POWER+
plan invests in workers and jobs, addresses important legacy costs in
coal country, and drives

development of coal technology.\12\ Implementation of one key part of
the POWER+ Plan, the Partnerships for Opportunity and Workforce and
Economic Revitalization (POWER) initiative, has already begun. The
POWER initiative specifically targets economic and workforce
development assistance to communities affected by ongoing changes in
the coal industry and the utility power sector.\13\
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    \12\ https://www.whitehouse.gov/the-press-office/2015/03/27/fact-sheet-partnerships-opportunity-and-workforce-and-economic-revitaliz.
    \13\ http://www.eda.gov/power/.
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    (7) Electric system reliability.
    In no small part thanks to the comments we received and our
extensive consultation with key agencies responsible for reliability,
including FERC and DOE, among others, along with EPA's longstanding
principles in setting emission standards for the utility power sector,
these guidelines reflect the paramount importance of ensuring electric
system reliability. The input we received on this issue focused heavily
on the extent of the reductions required at the beginning of the
interim period, proposed as 2020. We are addressing these concerns in
large part by moving the beginning of the period for mandatory
reductions under the program from 2020 to 2022 and significantly
adjusting the interim goals so that they provide a less abrupt initial
reduction expectation. This, in turn, will provide states and utilities
with a great deal more latitude in determining their emission reduction
trajectories over the interim period. As a result, there will be more
time for planning, consultation and decision making in the formulation
of state plans and in EGUs' choice of compliance strategies, all within
the existing extensive structure of energy planning at the state and
regional levels. These adjustments in the interim goals are supported
by the information in the record concerning the time needed to develop
and implement reductions under the BSER. In addition, the various forms
of flexibility retained and enhanced in this final rule, including
opportunities for trading within and between states, and other multi-
state compliance approaches, will further support electric system
reliability.
    The final guidelines address electric system reliability in several
additional important ways. Numerous commenters urged us to include, as
part of the plan development or approval process, input from review by
energy regulatory agencies and reliability entities. In the final rule,
we are requiring that each state demonstrate in its final state plan
submittal that it has considered reliability issues in developing its
plan. Second, we recognize that issues may arise during the
implementation of the guidelines that may warrant adjustments to a
state's plan in order to maintain electric system reliability. The
final guidelines make clear that states have the ability to propose
amendments to approved plans in the event that unanticipated and
significant electric system reliability challenges arise and compel
affected EGUs to generate at levels that conflict with their compliance
obligations under those plans.
    As a final element of reliability assurance, the rule also provides
for a reliability safety valve for individual sources where there is a
conflict between the requirements the state plan imposes on a specific
affected EGU and the maintenance of electric system reliability in the
face of an extraordinary and unanticipated event that presents
substantial reliability concerns.
    We anticipate that these situations will be extremely rare because
the states have the flexibility to craft requirements for their EGUs
that will provide long averaging periods and/or compliance mechanisms,
such as trading, whose inherent flexibility will make it unlikely that
an individual unit will find itself in this kind of situation. As one
example, under compliance regimes that allow individual EGUs to
establish compliance through the acquisition and holding of allowances
or ERCs equal to their emissions, an EGU's need to continue to
operate--and emit--for the purposes of ensuring system reliability will
not put the EGU into non-compliance, provided, of course, it obtains
the needed allowances or credits in a timely fashion. We, nevertheless,
agree with many commenters that it is prudent to provide an electric
system reliability safety valve as a precaution.
    Finally, the EPA, DOE and FERC have agreed to coordinate their
efforts, at the federal level, to help ensure continued reliable
electricity generation and transmission during the implementation of
the final rule. The three agencies have set out a memorandum that
reflects their joint understanding of how they will work together to
monitor implementation, share information, and to resolve any
difficulties that may be encountered.
    As a result of the many features of this final rule that provide
states and affected EGUs with meaningful time and decision making
latitude, we believe that the comprehensive safeguards already in place
in the U.S. to ensure electric system reliability will continue to
operate effectively as affected EGUs reduce their CO2
emissions under this program.
    (8) Outreach and resources for stakeholders.
    To provide states, U.S. territories, tribes, utilities,
communities, and other interested stakeholders with understanding about
the rule requirements, and to provide efficiencies where possible and
reduce the cost and administrative burden, the EPA will continue to
work with states, tribes, territories, and stakeholders to provide
information and address questions about the final rule. Outreach will
include opportunities for states and tribes to participate in
briefings, teleconferences, and meetings about the final rule. The
EPA's ten regional offices will continue to be the entry point for
states, tribes and territories to ask technical and policy questions.
The agency will host (or partner with appropriate groups to co-host) a
number of webinars about various components of the final rule; these
webinars are planned for the first two months after the final rule is
issued. The EPA will also offer consultations with tribal governments.
The EPA will continue outreach throughout the plan development and
submittal process. The EPA will use information from this outreach
process to inform the training and other tools that will be of most use
to the state, tribes, and territories that are implementing the final
rule.
    The EPA has worked with communities, states, tribes and relevant
associations to develop an extensive training plan that will continue
in the months after the Clean Power Plan is finalized. The EPA has
assembled resources from a variety of sources to create a comprehensive
training curriculum for those implementing this rule. Recorded
presentations from the EPA, DOE and other federal entities will be
available for communities, states, and others involved in composing and
participating in the development of state plans. This curriculum is
available online at EPA's Air Pollution Training Institute.
    The EPA also expects to issue guidance on specific topics. As
guidance documents, tools, templates and other resources become
available, the EPA, in consultation with DOE and other federal
agencies, will continue to make these resources available via a
dedicated Web site.\14\
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    \14\ www.epa.gov/cleanpowerplantoolbox.
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    We intend to continue to work actively with states and tribes, as
appropriate, to provide information and technical support that will be
helpful to

them in developing and implementing their plans. The EPA will engage in
formal consultations with tribal governments and provide training
tailored to the needs of tribes and tribal governments.
    Additional detail on aspects of the final rule is included in
several technical support documents (TSDs) and memoranda that are
available in the rulemaking docket.
4. Key Changes From Proposal
    a. Overview and highlights. As noted earlier in this overview, the
June 2014 proposal for the rule was designed to meet the fundamental
goal of reducing harmful emissions of CO2 from fossil fuel-
fired EGUs in a manner consistent with the CAA requirements, while
accommodating two important objectives. The first objective was to
establish guidelines that reflect both the manner in which the power
system operates and the actions and measures already underway across
states and the utility power sector that are resulting in
CO2 emission reductions. The second objective was to provide
states and utilities maximum flexibility, control and choice in meeting
their compliance obligations. In this final rule, the EPA has focused
on changes that, in addition to being responsive to the critical
concerns and priorities of stakeholders, more fully accomplish these
two crucial objectives.
    To achieve these objectives, the June 2014 proposal featured
several important elements: The building block approach for the BSER;
state-specific, rather than source-specific, goals; a 10-year interim
goal that could be met ``on average'' over the 10-year period between
2020 and 2029; and a ``portfolio'' option for state plans. These
features were intended either to capture, in the emission guidelines,
emission reduction measures already in widespread use or to maximize
the range of choices that states and utilities could select in order to
achieve their emission limitations at low cost while ensuring electric
system reliability. In this final rule, we are retaining the key design
elements of the proposal and making certain adjustments to respond to a
variety of very constructive comments on ways that will implement the
CAA section 111(d) requirements efficiently and effectively.
    The building block approach is a key feature of the proposal that
we are retaining in the final rule, but have refined to include only
the first three building blocks and to reflect implementation of the
measures encompassed in the building blocks on a broad regional grid-
level. In the proposal, we expressed the emission limitation
requirements reflecting the BSER in terms of the state goals in order
to provide states with maximum flexibility and latitude. We viewed this
as an important feature because each state has its own energy profile
and state-specific policies and needs relative to the production and
use of electricity. In the final rule, we extend that flexibility
significantly in direct response to comments from states and utilities.
The final rule establishes source-level emission performance rates for
the source subcategories, while retaining state-level rate- and mass-
based goals. One of the key messages conveyed by state and utility
commenters was that the final rule should make it easier for states to
adopt mass-based programs and for utilities accustomed to operating
across broad multi-state grids to be able to avail themselves of more
``ready-made'' emissions trading regimes. The inclusion of both of
these new features--mass-based state goals in addition to rate-based
goals, and source-level emission performance rates for the two
subcategories of sources--is intended to make it easier for states and
utilities to achieve these outcomes. In fact, these additions, together
with the model rules and federal plan being proposed concurrently with
this rule, should demonstrate the relative ease with which states can
adopt mass-based trading programs, including interstate mass-based
programs that lend themselves to the kind of interstate compliance
strategies so well suited for integration with the current interstate
operations of the overall utility grid.
    Many stakeholders conveyed to the EPA that the proposal's interim
goals for the 2020-2029 period were designed in a way that defeated the
EPA's objective of allowing states and utilities to shape their
emission reduction trajectories. They pointed out that, in many cases,
the timing and stringency of the states' interim goals could require
actions that could result in high costs, threaten electric system
reliability or hinder the deployment of renewable technology. In
response, the EPA has revised the interim goals in two critical ways.
First, the period for mandatory reductions begin in 2022 rather than
2020; second, in keeping with the BSER, emission reduction requirements
are phased in more gradually over the interim period. These changes
will allow states and utilities to delineate their own emission
reduction trajectories so as to minimize costs and foster broader
deployment of RE technologies. The value of these changes is
demonstrated by our analysis of the final rule, which shows lower
program costs, especially in the early years of the interim period, and
greater RE deployment, relative to the analysis of the proposed rule.
At the same time, this re-design of the interim goals, together with
refinements we have made to state plan requirements and the inclusion
of a reliability safety valve, provide states, utilities and other
entities with the ability to continue to guarantee system reliability.
    b. Outreach, engagement and comment record. This final rule is the
product of one of the most extensive and long-running public engagement
processes the EPA has ever conducted, starting in the summer of 2013,
prior to proposal, and continuing through December 2014, when the
public comment period ended, and continuing beyond that with
consultations and meetings with stakeholders. The result of this
extensive consultation was millions of comments from stakeholders,
which we have carefully considered over the past several months. The
EPA gained crucial insights from the more than 4 million comments that
the agency received on the proposal and associated documents leading to
this final rulemaking. Comments were provided by stakeholders that
include state environmental and energy officials, tribal officials,
public utility commissioners, system operators, owners and operators of
every type of power generating facility, other industry
representatives, labor leaders, public health leaders, public interest
advocates, community and faith leaders, and members of the public.
    The insights gained from public comments contributed to the
development of final emission guidelines that build on the proposal and
the alternatives on which we sought comment. The modifications
incorporated in the final guidelines are directly responsive to the
comments we received from the many and diverse stakeholders. The
improved guidelines reflect information and ideas that states and
utilities provided to us about both the best approach to establishing
CO2 emission reduction requirements for EGUs and the most
effective ways to create true flexibility for states and utilities in
meeting these requirements. These final rules also reflect the results
of EPA's robust consultation with federal, state and regional energy
agencies and authorities, to ensure that the actions sources will take
to reduce GHG emissions will not compromise electric system reliability
or affordability of the U.S. electricity supply. Input and assistance
from FERC

and DOE have been particularly important in shaping some provisions in
these final guidelines. At the same time, input from faith-based,
community-based and environmental justice organizations, who provided
thoughtful comments about the potential impacts of this rule on
pollution levels in overburdened communities and economic impacts,
including utility rates in low-income communities, is also reflected in
this rule. The final rule also reflects our response to concerns raised
by labor leaders regarding the potential effects on workers and
communities of the transition away from higher-emitting power
generation to lower- and zero-emitting power generation.
    c. Key changes. The most significant changes in these final
guidelines are: (1) The period for mandatory emission reductions
beginning in 2022 instead of 2020 and a gradual application of the BSER
over the 2022-2029 interim period, such that a state has substantial
latitude in selecting its own emission reduction trajectory or ``glide
path'' over that period, (2) a revised BSER determination that focuses
on narrower generation options that do not include demand-side EE
measures and that includes refinements to the building blocks, more
complete incorporation in the BSER of the realities of electricity
operations over the three regional interconnections, and up-to-date
information about the cost and availability of clean generation
options, (3) establishment of source-specific CO2 emission
performance rates that are uniform across the two fossil fuel-fired
subcategories covered in these guidelines, as well as rate- and mass-
based state goals, to facilitate emission trading, including interstate
trading and, in particular, mass-based trading, (4) a variation on the
proposal's ``portfolio'' option for state plans--called here the
``state measures'' approach--that continues to provide states
flexibility while ensuring that all state plans have federally
enforceable measures as a backstop, (5) additional, more flexible
options for states and utilities to adopt multi-state compliance
strategies, (6) an extension of up to two years available to all states
for submittal of their final compliance plans following making initial
submittals in 2016, (7) provisions to encourage actions that achieve
early reductions, including a Clean Energy Incentive Program (CEIP),
(8) a combination of provisions expressly designed to ensure electric
system reliability, (9) the addition of employment considerations for
states in plan development, and (10) the expansion of considerations
and programs for low-income and vulnerable communities.
    We provide summary explanations in the following paragraphs and
more detailed explanations of all of these changes in later sections of
this preamble and associated documents.
    (1) Mandatory reduction period beginning in 2022 and a gradual
glide path.
    The proposal's mandatory emission reduction period beginning in
2020 and the trajectory of emission reduction requirements in the
interim period were both the subjects of significant comment. Earlier
this year, FERC conducted a series of technical conferences comprising
one national session and three regional sessions. The information
provided by workshop participants echoed much of the material that had
been submitted to the comment record for this rulemaking. On May 15,
2015, the FERC Commissioners, drawing upon information highlighted at
the technical conferences, transmitted to the EPA some suggestions for
the final rule. In addition, via comments, states, utilities, and
reliability entities asked us to ensure adequate time for them to
implement strategies to achieve CO2 reductions. They
expressed concern that, in the proposal, at least some states would be
required to reduce emissions in 2020 to levels that would require
abrupt shifts in generation in ways that raised concerns about impacts
to electric system reliability and ratepayer bills, as well as about
stranded assets. To many commenters, the proposal's requirement for
CO2 emission reductions beginning in 2020, together with the
stringency of the interim CO2 goal, posed significant
reliability implications, in particular. In this final rule, the agency
is addressing these concerns, in part, by adjusting the compliance
timeframe from a 10-year interim period that begins in 2020 to an 8-
year interim period that begins in 2022, and by refining the approach
for meeting interim CO2 emission performance rates to be a
gradual glide path separated into three steps, 2022-2024, 2025-2027,
and 2028-2029, that is also achievable ``on average'' over the 8-year
interim period. In response to the concerns of commenters that the
proposal's 10-year interim target failed to afford sufficient
flexibility, the final guidelines' approach will provide states with
realistic options for customizing their emission reduction
trajectories. Of equal importance, the approach provides more time for
planning, consultation and decision making in the formulation of state
plans and in EGUs' choices of compliance strategies. Both FERC's May
15, 2015 letter and the comment record, as well as other information
sources, made it clear that providing sufficient time for planning and
implementation was essential to ensuring electric system reliability.
    The final guidelines' approach to the interim emission performance
rates is the result of the application of the measures constituting the
BSER in a more gradual way, reflecting stakeholder comments and
information about the appropriate period of time over which those
measures can be deployed consistent with the BSER factors of cost and
feasibility. In addition to facilitating reliable system operations,
these changes provide states and utilities with the latitude to
consider a broader range of options to achieve the required reductions
while addressing concerns about ratepayer impacts and stranded assets.
    (2) Revised BSER determination.
    Commenters urged the EPA to confine its BSER determination to
actions that involve what they characterized as more ``traditional''
generation. While some stakeholders recognized demand-side EE as being
an integral part of the electricity system, with many of the
characteristics of more traditional generating resources, other
stakeholders did not. As explained in section V.B.3.c.(8) below, our
traditional interpretation and implementation of CAA section 111 has
allowed regulated entities to produce as much of a particular good as
they desire, provided that they do so through an appropriately clean
(or low-emitting) process. While building blocks 1, 2, and 3 fall
squarely within this paradigm, the proposed building block 4 does not.
In view of this, since the BSER must serve as the foundation of the
emission guidelines, the EPA has not included demand-side EE as part of
the final BSER determination. Thus, neither the final guidelines' BSER
determination nor the emission performance rates for the two
subcategories of affected EGUs take into account demand-side EE.
However, many commenters also urged the EPA to allow states and sources
to rely on demand-side EE as an element of their compliance strategies,
as demand-side EE is treated as functionally interchangeable with other
forms of generation for planning and operational purposes, as EE
measures are in widespread use across the country and provide energy
savings that reduce emissions, lower electric bills, and lead to
positive investments and job creation. We agree, and the final
guidelines provide ample latitude for states and utilities to rely on
demand-side EE in

meeting emission reduction requirements.
    In response to stakeholder comments on the first three building
blocks and considerable data in the record, the EPA has made
refinements to the building blocks, and these are reflected in the
final BSER. Refinements include adoption of a modified approach to
quantification of the RE component, exclusion of the proposed nuclear
generation components, and adoption of a consistent regionalized
approach to quantification of all three building blocks. The agency
also recognizes the important functional relationship between the
period of time over which measures are deployed and the stringency of
emission limitations those measures can achieve practically and at
reasonable cost. Therefore, the final BSER also reflects adjustments to
the stringency of the building blocks, after consideration of more and
less stringent levels, and refinements to the timeframe over which
reductions must be achieved. Sections V.C through V.E of this preamble
provide further information on the refinements made to the building
blocks and the rationale for doing so.
    Commenters pointed out--and practical experience confirms--what is
widely known: That the utility power sector operates over regional
interconnections that are not constrained by state borders. Across a
variety of issues raised in the proposal, many commenters urged that
the EPA take that reality into account in developing this final rule.
Consequently, the BSER determination itself (as well as a number of new
compliance features included in this final rule) and the resulting
subcategory-specific emission performance rates take into account the
grid-level operations of the source category.
    The final guidelines' BSER determination also takes into account
recent reductions in the cost of clean energy technology, as well as
projections of continuing cost reductions, and continuing increases in
RE deployment. We also updated the underlying analysis with the most
recent Energy Information Administration (EIA) projections that show
lower growth in electricity demand between 2020 and 2030 than
previously projected. In keeping with these recent EIA projections, we
expect the final guidelines will be more conducive to compliance,
consistent with a strategy that allows for the cleanest power
generation and greater CO2 reductions in 2030 than the
proposal. With a date of 2022, instead of 2020, as proposed, for the
mandatory CO2 emission reduction period to begin, the final
guidelines reflect that the additional time aligns with the adoption of
lower-cost clean technology and, thus, its incorporation in the BSER at
higher levels. At the same time, the 2022-2029 interim period will more
easily allow for companies to take advantage of improved clean energy
technologies as potential least cost options.
    (3) Uniform emission performance rates.
    Some stakeholders commented that the proposal's approach of
expressing the BSER in terms of state-specific goals deviated from the
requirements of CAA section 111 and from previous new source
performance standards (NSPS). The effect, they stated, was that the
proposal created de facto emission standards for all affected EGUs but
that these de facto standards varied widely depending on the state in
which a given EGU happened to be located. Instead, these and other
commenters stated, section 111 requires that EPA establish the BSER
specifically for affected sources, rather than by means of merely
setting state-specific goals, and that these standards be uniform.
Still other commenters observed that the effect of the approach taken
in the proposal of applying the BSER to each state's fleet was to put a
greater burden of reductions on lower-emitting or less carbon-intensive
states and a lesser emission reduction burden on sources and states
that were higher-emitting or more carbon-intensive. This, they argued,
was both inequitable and at odds with the way in which NSPS have been
applied in the past, where the higher-emitting sources have made the
greater and more cost-effective reductions, while lower-emitting
sources, whose reduction opportunities tend to be less cost-effective,
have been required to make fewer reductions to meet the applicable
standard.
    At the same time, state and utility commenters expressed concern
that relying on state-specific goals and state-by-state planning could
introduce complexity into the otherwise seamless integrated operation
of affected EGUs across the multi-state grids on which system
operators, states and utilities currently rely and intend to continue
to rely. Accordingly, they recommended that the final guidelines
facilitate emissions trading, in particular interstate trading, which
would enable EGU operators to integrate compliance with CO2
emissions limitations with facility and grid-level operations. These
sets of comments intersected at the point at which they focused on the
fact that it is at the source level at which the standard is set for
NSPS and at the source level at which compliance must be achieved.
    The EPA carefully considered these comments and while we believe
that the approach we took at proposal was well-founded and reflected a
number of important considerations, we have concluded that there is a
way to address these concerns while expanding upon the advantages
offered by the proposal. Accordingly, the final guidelines establish
uniform rates for the two subcategories of sources--an approach that is
valuable for creating greater equity between and among utilities and
states with widely varying emission levels and for expanding the
flexibility of the program, especially in ways that have been
identified as important to utilities and states. Specifically, the
final guidelines express the BSER by means of performance-based
CO2 emission rates that are uniform across each of two
subcategories--fossil fuel-fired electric steam generating units and
stationary combustion turbines--for the affected EGUs covered by the
guidelines. The rates are determined, in part, by applying the
methodology identified in the Notice of Data Availability (NODA)
published on October 30, 2014, which was based on the proposal's
building block approach. The final guidelines also maintain the
approach adopted in the proposal of establishing state-level goals; in
the final rule, those goals are equal to the weighted aggregate of the
two emission performance rates as applied to the EGUs in each state.
    This approach rectifies what would have been an inefficient,
unintended outcome of putting the greater reduction burden on lower-
emitting sources and states while exempting higher-emitting sources and
states. Expressing the BSER by means of these rates also augments the
range of options for both states and EGUs for securing needed
flexibility. Inclusion of state goals creates latitude for states as to
how they will meet the guidelines. States also may meet the guideline
requirements by adopting the CO2 emission performance rates
as emission standards that apply to the affected EGUs in their
jurisdiction. Such an approach would lend itself to the ready
establishment of intra-state and interstate trading, with the uniform
rate-based standards of performance established for each EGU as the
basis for such trading. At the same time, as at proposal, each state
also has the option of complying with these guidelines by adopting a
plan that takes a different approach to setting standards of
performance for its EGUs and/or by applying complementary or
alternative

measures to meet the state goal set by these guidelines--as either a
rate or a mass total.
    During the outreach process and through comments, a number of state
officials and other stakeholders expressed concern that the EPA's
approach at proposal necessitated or represented a significant
intrusion into state-level energy policy-making, drawing the EPA well
beyond the bounds of its CAA authority and expertise. In fact, these
final guidelines are entirely respectful of the EPA's responsibility
and authority to regulate sources of air pollution. Instead, by
establishing and operating through uniform performance rates for the
two subcategories of sources that can be applied by states at the
individual source level and that can readily be implemented through
emission standards that incorporate emissions trading, these final
guidelines align with the approach Congress and the EPA have
consistently taken to regulating emissions from this and other
industrial sectors, namely setting source-level, source category-wide
standards that individual sources can meet through a variety of
technologies and measures.
    We emphasize, at the same time, that while the final guidelines
express the BSER by means of source-level CO2 emission
performance rates, as well as state-level goals, as at proposal, each
state will have a goal reflecting its particular mix of sources, and
the final guidelines retain the flexibility inherent in the proposal's
state-specific goals approach (and, as discussed in section VIII of
this preamble, enhanced in various ways). Thus, in keeping with the
proposal's flexibility, states may choose to adopt either the emission
performance rates as emission standards for their sources, set
different but, in the aggregate, equivalent rates, or fulfill their
obligations by meeting their respective individual state goals.
    (4) State plan approaches.
    Commenters expressed support for the objectives served by the
``portfolio'' option in the state plan approaches included at proposal,
but many raised concerns about its legality, with respect, in
particular, to the CAA's enforceability requirements. Some of these
commenters identified a ``state commitment approach'' with backstop
measures as a variation of the ``portfolio'' approach that would retain
the benefits of the ``portfolio'' approach while resolving legal and
enforceability concerns. In this final rule, in response to stakeholder
comments on the portfolio approach and alternative approaches, the EPA
is finalizing two approaches: A source-based ``emission standards''
approach, and a ``state measures'' approach. Through the latter, states
may adopt a set of policies and programs, which would not be federally
enforceable, except that any standards imposed on affected EGUs would
be federally enforceable. In addition, states would be required to
include federally enforceable backstop measures applicable to each
affected EGU in the event that the measures included in the state plan
failed to achieve the state plan's emissions reduction trajectory.
Under these guidelines, states can implement the BSER through standards
of performance incorporating the uniform performance rates or
alternative but in the aggregate equivalent rates, or they can adopt
plans that achieve in aggregate the equivalent of the subcategory-
specific CO2 emission performance rates by relying on other
measures undertaken by the state that complement source-specific
requirements or, save for the contingent backstop requirement, supplant
them entirely. This revision provides consistency in the treatment of
sources while still providing maximum flexibility for states to design
their plans around reduction approaches that best suit their policy
objectives.
    (5) Emission trading programs.
    Many state and utility commenters supported the use of mass-based
and rate-based emission trading programs in state plans, including
interstate emission trading programs, and either pointed out obstacles
to establishing such programs or suggested approaches that would
enhance states' and utilities' ability to create and participate in
such programs.
    Through a combination of features retained from the proposal and
changes made to the proposal, these final guidelines provide states and
utilities with a panoply of tools that greatly facilitate their putting
in place and participating in emissions trading programs. These
include: (1) Expressing BSER in uniform emission performance rates that
states may rely on in setting emission standards for affected EGUs such
that EGUs operating under such standards readily qualify to trade with
affected EGUs in states that adopt the same approach, (2) promulgating
state mass goals so that states can move quickly to establish mass-
based programs such that their affected EGUs readily qualify to trade
with affected EGUs in states that adopt the same approach, and (3)
providing EPA resources and capacity to create a tracking system to
support state emissions trading programs.
    (6) Extension of plan submittal date.
    Stakeholders, particularly states, provided compelling information
establishing that it could take longer than the agency initially
anticipated for the states to develop and submit their required plans.
While the approach at proposal reflected the EPA's conclusion that it
was essential to the environmental and economic purposes of this
rulemaking that utilities and states establish the path towards
emissions reductions as early as possible, we recognize commenters'
concerns. To strike the proper balance, the EPA has developed a revised
state plan submittal schedule. For states that cannot submit a final
plan by September 6, 2016, the EPA is requiring those states to make an
initial submittal by that date to assure that states begin to address
the urgent needs for reductions quickly, and is providing until
September 6, 2018, for states to submit a final plan, if an extension
until that date is justified, to address the concern that a submitting
state needs more time to develop comprehensive plans that reflect the
full range of the state's and its stakeholders' interests.
    (7) Provisions to encourage early action.
    Many commenters supported providing incentives for states and
utilities to deploy CO2-reducing investments, such as RE and
demand-side EE measures, as early as possible. We also received
comments from stakeholders regarding the disproportionate burdens that
some communities already bear, and stating that all communities should
have equal access to the benefits of clean and affordable energy. The
EPA recognizes the validity and importance of these perspectives, and
as a result has determined to provide a program--called the CEIP--in
which states may choose to participate.
    The CEIP is designed to incentivize investment in certain RE and
demand-side EE projects that commence construction, in the case of RE,
or commence construction, in the case of demand-side EE, following the
submission of a final state plan to the EPA, or after September 6,
2018, for states that choose not to submit a final state plan by that
date, and that generate MWh (RE) or reduce end-use energy demand (EE)
during 2020 and/or 2021. State participation in the program is
optional.
    Under the CEIP, a state may set aside allowances from the
CO2 emission budget it establishes for the interim plan
performance period or may generate early action ERCs (ERCs are
discussed in more detail in section VIII.K.2), and allocate these
allowances or ERCs to

eligible projects for the MWh those projects generate or the end-use
energy savings they achieve in 2020 and/or 2021. For each early action
allowance or ERC a state allocates to such projects, the EPA will
provide the state with an appropriate number of matching allowances or
ERCs for the state to allocate to the project. The EPA will match
state-issued early action ERCs and allowances up to an amount that
represents the equivalent of 300 million short tons of CO2
emissions.
    For a state to be eligible for a matching award of allowances or
ERCs from the EPA, it must demonstrate that it will award allowances or
ERCs only to ``eligible'' projects. These are projects that:
     Are located in or benefit a state that has submitted a
final state plan that includes requirements establishing its
participation in the CEIP;
     Are implemented following the submission of a final state
plan to the EPA, or after September 6, 2018, for a state that chooses
not to submit a complete state plan by that date;
     For RE: Generate metered MWh from any type of wind or
solar resources;
     For EE: Result in quantified and verified electricity
savings (MWh) through demand-side EE implemented in low-income
communities; and
     Generate or save MWh in 2020 and/or 2021.
    The following provisions outline how a state may award early action
ERCs and allowances to eligible projects, and how the EPA will provide
matching ERCs or allowances to states.
     For RE projects that generate metered MWh from any type of
wind or solar resources: For every two MWh generated, the project will
receive one early action ERC (or the equivalent number of allowances)
from the state, and the EPA will provide one matching ERC (or the
equivalent number of allowances) to the state to award to the project.
     For EE projects implemented in low-income communities: For
every two MWh in end-use demand savings achieved, the project will
receive two early action ERCs (or the equivalent number of allowances)
from the state, and the EPA will provide two matching ERCs (or the
equivalent number of allowances) to the state to award to the project.
    Early action allowances or ERCs awarded by the state, and matching
allowances or ERCs awarded by the EPA pursuant to the CEIP, may be used
for compliance by an affected EGU with its emission standards and are
fully transferrable prior to such use.
    The EPA discusses the CEIP in the proposed federal plan rule and
will address design and implementation details of the CEIP in a
subsequent action. Prior to doing so, the EPA will engage with states,
utilities and other stakeholders to gather information regarding their
interests and priorities with regard to implementation of the CEIP.
    (8) Provisions for electric system reliability.
    A number of commenters stressed the importance of final guidelines
that addressed the need to ensure that EGUs could meet their emission
reduction requirements without being compelled to take actions that
would undermine electric system reliability. As noted above, the EPA
has consulted extensively with federal, regional and state energy
agencies, utilities and many others about reliability concerns and ways
to address them. The final guidelines support electric system
reliability in a number of ways, some inherent in the improvements made
in the program's design and some through specific provisions we have
included in the final rule. Most important are the two key changes we
made to the interim goal: Establishing 2022, instead of 2020, as the
period for mandatory emission reductions begin and phasing in, over the
8-year period, emission performance rates such that the level of
stringency of the emission performance rates in 2022-2024 is
significantly less than that for the years 2028 and 2029. Since states
and utilities need only to meet their interim goal ``on average'' over
the 8-year period, these changes provide them with a great deal of
latitude in determining for themselves their emission reduction
trajectory--and they have additional time to do so. As a result, the
final guidelines provide the ingredients that commenters, reliability
entities and expert agencies told the EPA were essential to ensuring
electric system reliability: Time and flexibility sufficient to allow
for planning, implementation and the integration of actions needed to
address reliability while achieving the required emissions reductions.
    In addition, the final guidelines add a requirement, based on
substantial input from experts in the energy field, for states to
demonstrate that they have considered electric system reliability in
developing their state plans. The final rule also offers additional
opportunities that support electric system reliability, including
opportunities for trading within and between states. The final
guidelines also make clear that states can adjust their plans in the
event that reliability challenges arise that need to be remedied by
amending the state plan. In addition, the final rule includes a
reliability safety valve to address situations where, because of an
unanticipated catastrophic event, there is a conflict between the
requirements imposed on an affected unit and the maintenance of
reliability.
    (9) Approaches for addressing employment concerns.
    Some commenters brought to our attention the concerns of workers,
their families and communities, particularly in coal-producing regions
and states, that the ongoing shift toward lower-carbon electricity
generation that the final rule reflects will cause harm to communities
that are dependent on coal. Others had concerns about whether new jobs
created as a result of actions taken pursuant to the final rule will
allow for overall economic development. In the final rule, the EPA
encourages states, in designing their state plans, to consider the
effects of their plans on employment and overall economic development
to assure that the opportunities for economic growth and jobs that the
plans offer are manifest. We also identify federal programs, including
the multi-agency Partnerships for Opportunity and Workforce and
Economic Revitalization (POWER) Initiative.\15\ The POWER Initiative is
competitively awarding planning assistance and implementation grants
with funding from the Department of Commerce, Department of Labor
(DOL), Small Business Administration, and the Appalachian Regional
Commission,\16\ whose mission is to assist communities affected by
changes in the coal industry and the utility power sector.
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    \15\ http://www.eda.gov/power/.
    \16\ https://www.whitehouse.gov/the-press-office/2015/03/27/fact-sheet-partnerships-opportunity-and-workforce-and-economic-revitaliz.
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    (10) Community and environmental justice considerations.
    Many community leaders, environmental justice advocates, faith-
based organizations and others commented that the benefits of this rule
must be shared broadly across society and that undue burdens should not
be imposed on low-income ratepayers. We agree. The federal government
is taking significant steps to help low-income families and individuals
gain access to RE and demand-side EE through new initiatives involving,
for example, increasing solar energy systems in federally subsidized
homes and supporting solar systems for others with low incomes. The
final rule ensures that bill-lowering measures such as demand-side EE
continue to be a major

compliance option. The CEIP will encourage early investment in these
types of projects as well. In addition to carbon reduction benefits, we
expect significant near- and long-term public health benefits in
communities as conventional air pollutants are reduced along with GHGs.
However, some stakeholders expressed concerns about the possibility of
localized increases in emissions from some power plants as the utility
industry complies with state plans, in particular in communities
already disproportionately affected by air pollution. This rule sets
expectations for states to engage with vulnerable communities as they
develop their plans, so that impacts on these communities are
considered as plans are designed. The EPA also encourages states to
engage with workers in the utility power and related sectors, as well
as their worker representatives, so that impacts on their communities
may be considered. The EPA commits, once implementation is under way,
to assess the impacts of this rule. Likewise, we encourage states to
evaluate the effects of their plans to ensure that there are no
disproportionate adverse impacts on their communities.
5. Additional Context for This Final Rule
    a. Climate change impacts. This final rule is an important step in
an essential series of long-term actions that are achieving and must
continue to achieve the GHG emission reductions needed to address the
serious threat of climate change, and constitutes a major commitment--
and international leadership-by-doing--on the part of the U.S., one of
the world's largest GHG emitters. GHG pollution threatens the American
public by leading to damaging and long-lasting changes in our climate
that can have a range of severe negative effects on human health and
the environment. CO2 is the primary GHG pollutant,
accounting for nearly three-quarters of global GHG emissions\17\ and 82
percent of U.S. GHG emissions.\18\ The May 2014 report of the National
Climate Assessment \19\ concluded that climate change impacts are
already manifesting themselves and imposing losses and costs. The
report documents increases in extreme weather and climate events in
recent decades, with resulting damage and disruption to human well-
being, infrastructure, ecosystems, and agriculture, and projects
continued increases in impacts across a wide range of communities,
sectors, and ecosystems. New scientific assessments since 2009, when
the EPA determined that GHGs pose a threat to human health and the
environment (the ``Endangerment Finding''), highlight the urgency of
addressing the rising concentration of CO2 in the
atmosphere. Certain groups, including children, the elderly, and the
poor, are most vulnerable to climate-related effects. Recent studies
also find that certain communities, including low-income communities
and some communities of color (more specifically, populations defined
jointly by ethnic/racial characteristics and geographic location), are
disproportionately affected by certain climate change related impacts--
including heat waves, degraded air quality, and extreme weather
events--which are associated with increased deaths, illnesses, and
economic challenges. Studies also find that climate change poses
particular threats to the health, well-being, and ways of life of
indigenous peoples in the U.S.
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    \17\ Intergovernmental Panel on Climate Change (IPCC) report,
``Contribution of Working Group I to the Fourth Assessment Report of
the Intergovernmental Panel on Climate Change,'' 2007. Available at
http://epa.gov/climatechange/ghgemissions/global.html.
    \18\ From Table ES-2 ``Inventory of U.S. Greenhouse Gas
Emissions and Sinks: 1990-2013'', Report EPA 430-R-15-004, United
States Environmental Protection Agency, April 15, 2015. Available at
http://epa.gov/climatechange/ghgemissions/usinventoryreport.html.
    \19\ U.S. Global Change Research Program, Climate Change Impacts
in the United States: The Third National Climate Assessment, May
2014. Available at http://nca2014.globalchange.gov/.
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    b. The utility power sector. One of the strategies of the
President's Climate Action Plan is to reduce CO2 emissions
from power plants.\20\ This is because fossil fuel-fired EGUs are by
far the largest emitters of GHGs, primarily in the form of
CO2. Among stationary sources in the U.S. and among fossil
fuel-fired EGUs, coal-fired units are by far the largest emitters of
GHGs. To accomplish the goal of reducing CO2 emissions from
power plants, President Obama issued a Presidential Memorandum \21\
that recognized the importance of significant and prompt action. The
Memorandum directed the EPA to complete carbon pollution standards,
regulations or guidelines, as appropriate, for new, modified,
reconstructed and existing power plants, and in doing so to build on
state leadership in moving toward a cleaner power sector. In this
action and the concurrent CAA section 111(b) rule, the EPA is
finalizing regulations to reduce GHG emissions from fossil fuel-fired
EGUs. This CAA section 111(d) action builds on actions states and
utilities are already taking to move toward cleaner generation of
electric power.
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    \20\ The President's Climate Action Plan, June 2013. http://www.whitehouse.gov/sites/default/files/image/president27sclimateactionplan.pdf.
    \21\ Presidential Memorandum--Power Sector Carbon Pollution
Standards, June 25, 2013. http://www.whitehouse.gov/the-press-office/2013/06/25/presidential-memorandum-power-sector-carbon-pollution-standards.
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    The utility power sector is unlike other industrial sectors. In
other sectors, sources effectively operate independently and on a
local-site scale, with control of their physical operations resting in
the hands of their respective owners and operators. Pollution control
standards, which focus on each source in a non-utility industrial
source category, have reflected the standalone character of individual
source investment decision-making and operations.
    In stark contrast, the utility power sector comprises a unique
system of electricity resources, including the EGUs affected under
these guidelines, that operate in a complex and interconnected grid
where electricity generally flows freely (e.g., portions of the system
cannot be easily isolated through the use of switches or valves as can
be done in other networked systems like trains and pipeline systems).
That grid is physically interconnected and operated on an integrated
basis across large regions. In this interconnected system, system
operators, whose decisions, protocols, and actions, to a significant
extent, dictate the operations of individual EGUs and large ensembles
of EGUs, must reliably balance supply and demand using available
generation and demand-side resources, including EE, demand response and
a wide range of low- and zero-emitting sources. These resources are
managed to meet the system needs in a reliable and efficient manner.
Each aspect of this interconnected system is highly regulated and
coordinated, with supply and demand constantly being balanced to meet
system needs. Each step of the process from the electric generator to
the end user is highly regulated by multiple entities working in
coordination and considering overall system reliability. For example,
in an independent system operator (ISO) or regional transmission
organization (RTO) with a centralized, organized capacity market,
electric generators are paid to be available to run when needed, must
bid into energy markets, must respond to dispatch instructions, and
must have permission to schedule maintenance. The ISO/RTO dispatches
resources in a way that maintains electric system reliability.
    The approach we take in the final guidelines--both in the way we
defined the BSER and established the resulting emission performance
rates, and in the ranges of options we created for states

and affected EGUs--is consistent with, and in some ways mirrors, the
interconnected, interdependent and highly regulated nature of the
utility power sector, the daily operation of affected EGUs within this
framework, and the critical role of utilities in providing reliable,
affordable electricity at all times and in all places within this
complex, regulated system. Thus, not only do these guidelines put a
premium on providing as much flexibility and latitude as possible for
states and utilities, they also recognize that a given EGU's operations
are determined by the availability and use of other generation
resources to which it is physically connected and by the collective
operating regime that integrates that individual EGU's activity with
other resources across the grid.
    In this integrated system, numerous entities have both the
capability and the responsibility to maintain a reliable electric
system. FERC, DOE, state public utility commissions, ISOs, RTOs, other
planning authorities, and the North American Electric Reliability
Corporation (NERC), all contribute to ensuring the reliability of the
electric system in the U.S. Critical to this function are dispatch
tools, applied primarily by RTOs, ISOs, and balancing authorities, that
operate such that actions taken or costs incurred at one source
directly affect or cause actions to occur at other sources. Generation,
outages, and transmission changes in one part of the synchronous grid
can affect the entire interconnected grid.\22\ The interconnection is
such that ``[i]f a generator is lost in New York City, its effect is
felt in Georgia, Florida, Minneapolis, St. Louis, and New Orleans.''
\23\ The U.S. Supreme Court has explicitly recognized the
interconnected nature of the electricity grid.\24\
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    \22\ Casazza, J. and Delea, F., Understanding Electric Power
Systems, IEEE Press, at 159 (2d ed. 2010).
    \23\ Casazza, J. and Delea, F., Understanding Electric Power
Systems, IEEE Press, at 160 (2d ed. 2010).
    \24\ Federal Power Comm'n v. Florida Power & Light Co., 404 U.S.
453, at 460 (1972) (quoting a Federal Power Commission hearing
examiner, `` `If a housewife in Atlanta on the Georgia system turns