Regulatory Impact Analysis
                                   for the
                          Clean Power Plan Final Rule

                     [This page intentionally left blank]

                                                               EPA-452/R-15-003
                                                                      July 2015

        Regulatory Impact Analysis for the Clean Power Plan Final Rule

                     U.S. Environmental Protection Agency
                          Office of Air and Radiation
                 Office of Air Quality Planning and Standards
                       Research Triangle Park, NC 27711

                              CONTACT INFORMATION
      This document has been prepared by staff from the Office of Air Quality Planning and Standards, the Office of Atmospheric Programs, and the Office of Policy of the U.S. Environmental Protection Agency. Questions related to this document should be addressed to Alexander Macpherson, U.S. Environmental Protection Agency, Office of Air Quality Planning and Standards, Research Triangle Park, North Carolina 27711 (email: macpherson.alex@epa.gov).

                               ACKNOWLEDGEMENTS
      Thank you to the many staff who worked on this document from EPA Offices including the Office of Air Quality Planning and Standards, the Office of Atmospheric Programs, and the Office of Policy.  Contributions to this report were also made by ICF International and RTI International.

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Table of Contents
List of Tables	x
List of Figures	xvi
Acronyms	xviii
Executive Summary	1
ES.1	Background and Context	1
ES.2	Summary of Clean Power Plan Final Rule	1
ES.3	Illustrative Plan Approaches Examined in RIA	4
ES.4	Emissions Reductions	5
ES.5	Costs	7
ES.6	Monetized Climate Benefits and Health Co-benefits	9
ES.6.1	Estimating Global Climate Benefits	13
ES 6.2	Estimating Air Quality Health Co-Benefits	15
ES 6.3	Combined Benefits Estimates	18
ES.7	Net Benefits	20
ES.8	Economic Impacts	24
ES.9	Employment Impacts	25
ES.10	References	26
Chapter 1: Introduction and Background for the Clean Power Plan	1
1.1	Introduction	1
1.2	Legal, Scientific and Economic Basis for this Rulemaking	1
1.2.1	Statutory Requirement	1
1.2.2	Health and Welfare Impacts from Climate Change	2
1.2.3	Market Failure	3
1.3	Summary of Regulatory Analysis	4
1.4	Background for the Final Emission Guidelines	5
1.4.1	Base Case and Years of Analysis	5
1.4.2	Definition of Affected Sources	5
1.4.3	Regulated Pollutant	6
1.4.4	Emission Guidelines	6
1.5	Organization of the Regulatory Impact Analysis	7
1.6	References	7
Chapter 2: Industry Profile	1
2.1 	Introduction	1
2.2 	Power Sector Overview	1
2.2.1 	Generation	1
2.2.2 	Transmission	9
2.2.3 	Distribution	10
2.3 	Sales, Expenses and Prices	10
2.3.1	Electricity Prices	11
2.3.2	Prices of Fossil Fuels Used for Generating Electricity	16
2.3.3	Changes in Electricity Intensity of the U.S. Economy Between 2002 to 2012	17
2.4 	Deregulation and Restructuring	18
2.5	Emissions of Greenhouse Gases from Electric Utilities	23
2.6 	Carbon Dioxide Control Technologies	26
2.6.1 	Carbon Capture and Storage	27
2.6.2 	Geologic and Geographic Considerations for Geologic Sequestration	32
2.7.2 	Availability of geologic sequestration in deep saline formations	36
2.7.3	Availability of CO2 storage via enhanced oil recovery (EOR)	36
2.8	GHG and Clean Energy Regulation in the Power Sector	38
2.8.1 	State Policies	38
2.8.2 	Federal Policies	40
2.9 	Revenues and Expenses	43
2.10 	Natural Gas Market	44
2.11 	References	48
Chapter 3: Cost, Emissions, Economic, and Energy Impacts	1
3.1	Introduction	1
3.2	Overview	1
3.3	Power Sector Modelling Framework	1
3.3.1	Recent Updates to EPA's Base Case using IPM (v.5.15)	4
3.4	 State Goals in this Final Rule	5
3.5	Illustrative Plan Approaches Analyzed	7
3.6	Demand-Side Energy Efficiency	11
3.6.1	Demand-Side Energy Efficiency Improvements (Electricity Demand Reductions)	11
3.6.2	Demand-Side Energy Efficiency Costs	12
3.7	Projected Power Sector Impacts	14
3.7.1	Projected Emissions (in the Contiguous U.S.)	14
3.7.2	Projected Compliance Costs (in the Contiguous U.S.)	17
3.7.3	Projected Compliance Actions for Emissions Reductions	19
3.7.4	Projected Generation Mix	21
3.7.5	Projected Incremental Retirements	25
3.7.6	Projected Capacity Additions	26
3.7.7	Projected Coal Production and Natural Gas Use for the Electric Power Sector	28
3.7.8	Projected Fuel Price, Market, and Infrastructure Impacts	28
3.8	Projected Primary PM Emissions from Power Plants	30
3.9	Limitations of Analysis	31
3.10	Significant Energy Impacts	32
3.11	Monitoring, Reporting, and Recordkeeping Costs	33
3.12	Social Costs	36
3.13	References	39
Chapter 4: Estimated Climate Benefits and Human Health Co-benefits	1
4.1	Introduction	1
4.2	Estimated Climate Benefits from CO2	1
4.2.1	Climate Change Impacts	2
4.2.2	Social Cost of Carbon	3
4.3	Estimated Human Health Co-Benefits	10
4.3.1	Health Impact Assessment for PM2.5 and Ozone	12
4.3.2	Economic Valuation for Health Co-benefits	18
4.3.3	Benefit-per-ton Estimates for PM2.5	20
4.3.4	Benefit-per-ton Estimates for Ozone	21
4.3.5	Estimated Health Co-Benefits Results	22
4.3.6	Characterization of Uncertainty in the Estimated Health Co-benefits	36
4.4	Combined Climate Benefits and Health Co-benefits Estimates	42
4.5	Unquantified Co-benefits	46
4.5.1	HAP Co-benefits	48
4.5.2	Additional NO2 Health Co-Benefits	51
4.5.3	Additional SO2 Health Co-Benefits	52
4.5.4	Additional NO2 and SO2 Welfare Co-Benefits	53
4.5.5	Ozone Welfare Co-Benefits	54
4.5.6	Carbon Monoxide Co-Benefits	54
4.5.7	Visibility Impairment Co-Benefits	55
4.6	References	55
Appendix 4A: Generating Regional Benefit-per-Ton Estimates	1
4A.1	Overview of Benefit-per-Ton Estimates	1
4A.2	Air Quality Modeling for the Proposed Clean Power Plan	1
4A.3	Regional PM2.5 Benefit-per-Ton Estimates for EGUs Derived from Air Quality Modeling of the Proposed Clean Power Plan	5
4A.4	Regional Ozone Benefit-per-Ton Estimates	14
4A.6	References	17
Chapter 5: Economic Impacts  -  Markets Outside the Utility Power Sector	1
5.1	Introduction	1
5.2	Methods	2
5.3	Summary of Secondary Market Impacts of Energy Price Changes	3
5.3.1	Share of Total Production Costs	5
5.3.2	Ability to Substitute between Inputs to the Production Process	5
5.3.3	Availability of Substitute Goods and Services	5
5.4 	Effect of Changes in Input Demand from Electricity Sector	6
5.5	Conclusions	6
5.6	References	7
Chapter 6: Employment Impact Analysis	1
6.1	Introduction	1
6.2	Economic Theory and Employment	2
6.3	Current State of Knowledge Based on the Peer-Reviewed Literature	6
6.3.1	Regulated Sector	7
6.3.2 Economy-Wide	8
6.3.3	Labor Supply Impacts	10
6.4	Recent Employment Trends	11
6.4.1	Electric Power Generation	11
6.4.2	Fossil Fuel Extraction	12
6.4.3	Clean Energy Employment Trends	14
6.5	Projected Sectoral Employment Changes due to the Final Emission Guidelines	18
6.5.1	Projected Changes in Employment in Electricity Generation and Fossil Fuel Extraction	19
6.5.2	Projected Changes in Employment in Demand-Side Energy Efficiency Activities	25
6.6	Conclusion	33
6.7	References	35
Appendix 6A: Estimating Supply Side Employment impacts	1
6A.1	General Approach	1
6A.1.1	Employment Effects Included In the Analysis	2
6A.2	Employment Changes due to Heat Rate Improvements	3
6A.2.1	Employment Changes Due to Building (or Avoiding) New Generation Capacity	5
6A.2.2	Employment Changes due to Coal and Oil/Gas Retirements	8
6A.2.3	Employment Changes due to Coal and Oil/Gas Retirements	8
Chapter 7: Statutory and Executive Order Analysis	1
7.1	Executive Order 12866: Regulatory Planning and Review, and Executive Order 13563: Improving Regulation and Regulatory Review	1
7.2	Paperwork Reduction Act (PRA)	3
7.3	Regulatory Flexibility Act (RFA)	5
7.4	Unfunded Mandates Reform Act (UMRA)	6
7.5	Executive Order 13132: Federalism	6
7.6	Executive Order 13175: Consultation and Coordination with Indian Tribal Governments	11
7.7	Executive Order 13045: Protection of Children from Environmental Health Risks and Safety Risks	13
7.8	Executive Order 13211: Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use	14
7.9	National Technology Transfer and Advancement Act	14
7.10	Executive Order 12898: Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations	15
7.11	Congressional Review Act (CRA)	18
Chapter 8: Comparison of Benefits and Costs	1
8.1	Comparison of Benefits and Costs	1
8.2	Uncertainty Analysis	5
8.2.1	Uncertainty in Costs and Illustrative Plan Approaches	5
8.2.2	Uncertainty Associated with Estimating the Social Cost of Carbon	6
8.2.3	Uncertainty Associated with PM2.5 and Ozone Health Co-Benefits Assessment	7
8.3	References	9

List of Tables

Table ES-1.	Climate and Air Pollutant Emission Reductions for the Rate-Based Illustrative Plan Approach[1,2]	6
Table ES-2.	Climate and Air Pollutant Emission Reductions for the Mass-Based Illustrative Plan Appproach[1,2]	7
Table ES-3.	Compliance Costs for the Illustrative Rate-Based and Mass-Based Plan Approaches	8
Table ES-4.     Quantified and Unquantified Benefits	11
Table ES-5.	Combined Estimates of Climate Benefits and Health Co-Benefits for Rate-Based Approach (billions of 2011$)*	19
Table ES-6.	Combined Estimates of Climate Benefits and Health Co-benefits for Mass-Based Approach (billions of 2011$)*	20
Table ES-7.	Monetized Benefits, Compliance Costs, and Net Benefits Under the Rate-based Illustrative Plan Approach (billions of 2011$) [a]	22
Table ES-8.	Monetized Benefits, Compliance Costs, and Net Benefits under the Mass-based Illustrative plan approach (billions of 2011$) [a]	23
Table 2-1.         Existing Electricity Generating Capacity by Energy Source, 2002 and 2012	3
Table 2-2.         Net Generation in 2002 and 2012 (Trillion kWh = TWh)	6
Table 2-3.         Coal and Natural Gas Generating Units, by Size, Age, Capacity, and Thermal Efficiency (Heat Rate)	7
Table 2-4.	Total U.S. Electric Power Industry Retail Sales in 2012 (billion kWh)	11
Table 2-5.	Domestic Emissions of Greenhouse Gases, by Economic Sector (million metric tonnes of CO2 equivalent)	24
Table 2-6.	Greenhouse Gas Emissions from the Electricity Sector (Generation, Transmission and Distribution), 2002 and 2012 (million metric tonnes of CO2 equivalent)	25
Table 2-7.	Fossil Fuel Emission Factors in EPA Base Case 5.14 IPM Power Sector Modeling Application	26
Table 2-8.	Total CO2 Storage Resource	34
Table 2-9.	Revenue and Expense Statistics for Major U.S. Investor-Owned Electric Utilities for 2010 (nominal $millions)	44
Table 3-1.	Rate-Based and Mass-Based State Goals	6
Table 3-3.	Demand-Side Energy Efficiency Plan Scenario: Net Cumulative Demand Reductions [Contiguous U.S.] (GWh and as Percent of BAU Sales)	12
Table 3-4.	Annualized Cost of Demand-Side Energy Efficiency Plan Scenario [Contiguous U.S.] (at discount rates of 3 percent and 7 percent, billions 2011$)	14
Table 3-5.	Projected CO2 Emission Impacts, Relative to Base Case	15
Table 3-6.	Projected CO2 Emission Impacts, Relative to 2005	15
Table 3-7. Projected Non-CO2 Emission Impacts, 2020-2030	16
Table 3-8.	Annualized Compliance Costs (billions of 2011$)	18
Table 3-9.	Total Power Sector Generating Costs (IPM) (billions 2011$)	19
Table 3-10.	Projected Capacity Factor of Existing Coal Steam and Natural Gas Combined Cycle Capacity	21
Table 3-11.	Generation Mix (thousand GWh)	23
Table 3-12.	Total Generation Capacity by 2020-2030 (GW)	26
Table 3-13.	Projected Capacity Additions, Gas (GW)	27
Table 3-14.	Projected Capacity Additions, Renewable (GW)	27
Table 3-15.	Coal Production for the Electric Power Sector, 2025	28
Table 3-16.	Power Sector Gas Use	28
Table 3-17.	Projected Average Minemouth and Delivered Coal Prices (2011$/MMBtu)	30
Table 3-19.	Projected Average Henry Hub (spot) and Delivered Natural Gas Prices (2011$/MMBtu)	30
Table 3-25.	Years 2020, 2025 and 2030: Summary of State Annual Respondent Burden and Cost of Reporting and Recordkeeping Requirements (2011$)	35
Table 3-26.	Years 2020, 2025 and 2030: Summary of Industry Annual Respondent Burden and Cost of Reporting and Recordkeeping Requirements (2011$)	35
Table 3-27.	Years 2020, 2025 and 2030: Summary of Territories Annual Respondent Burden and Cost of Reporting and Recordkeeping Requirements (2011$)	36
Table 3-28.	Annualized Compliance Costs Including Monitoring, Reporting and Recordkeeping Costs Requirements (billions of 2011$)	36
Table 4-1.	Climate Effects	2
Table 4-2.	Social Cost of CO2, 2015-2050 (in 2011$)*	8
Table 4-3.	Estimated Global Climate Benefits of CO2 Reductions for the Final Emission Guidelines in 2020 (billions of 2011$)*	8
Table 4-4.	Estimated Global Climate Benefits of CO2 Reductions for the Final Emission Guidelines in 2025 (billions of 2011$)*	8
Table 4-5.	Estimated Global Climate Benefits of CO2 Reductions for the Final Emission Guidelines in 2030 (billions of 2011$)*	9
Table 4-6.	Human Health Effects of Ambient PM2.5 and Ozone	14
Table 4-7.	Summary of Regional PM2.5 Benefit-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2020 (2011$)*	23
Table 4-8.	Summary of Regional PM2.5 Benefit-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2025 (2011$)*	23
Table 4-9.	Summary of Regional PM2.5 Benefit-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2030 (2011$)*	24
Table 4-10.	Emission Reductions of Criteria Pollutants for the Final Emission Guidelines Rate-based Scenario in 2020 (thousands of short tons)*	24
Table 4-11.	Emission Reductions of Criteria Pollutants for the Final Emission Guidelines Rate-based Scenario in 2025 (thousands of short tons)*	24
Table 4-12.	Emission Reductions of Criteria Pollutants for the Final Emission Guidelines Rate-based Scenario in 2030 (thousands of short tons)*	25
Table 4-13.	Emission Reductions of Criteria Pollutants for the Final Emission Guidelines Mass-based Scenario in 2020 (thousands of short tons)*	25
Table 4-14.	Emission Reductions of Criteria Pollutants for the Final Emission Guidelines Mass-based Scenario in 2025 (thousands of short tons)*	25
Table 4-15.	Emission Reductions of Criteria Pollutants for the Final Emission Guidelines Mass-based Scenario in 2030 (thousands of short tons)*	25
Table 4-16.	Summary of Estimated Monetized Health Co-Benefits for the Final Emission Guidelines Rate-based Scenario in 2020 (billions of 2011$) *	26
Table 4-17.	Summary of Estimated Monetized Health Co-Benefits for the Final Emission Guidelines Rate-based Scenario in 2025 (billions of 2011$) *	26
Table 4-18.	Summary of Estimated Monetized Health Co-Benefits for the Final Emission Guidelines Rate-based Scenario in 2030 (billions of 2011$) *	27
Table 4-19.	Summary of Estimated Monetized Health Co-Benefits for the Final Emission Guidelines Mass-based Scenario in 2020 (billions of 2011$) *	27
Table 4-20.	Summary of Estimated Monetized Health Co-Benefits for the Final Emission Guidelines Mass-based Scenario in 2025 (billions of 2011$) *	28
Table 4-21.	Summary of Estimated Monetized Health Co-Benefits for the Final Emission Guidelines Mass-based Scenario in 2030 (billions of 2011$) *	28
Table 4-22.	Summary of Avoided Health Incidences from PM2.5-Related and Ozone-Related Co-benefits for the Final Emission Guidelines Rate-based Scenario in 2020*	29
Table 4-23.	Summary of Avoided Health Incidences from PM2.5-Related and Ozone-Related Co-benefits for Final Emission Guidelines Rate-based Scenario in 2025*	30
Table 4-24.	Summary of Avoided Health Incidences from PM2.5-Related and Ozone-Related Co-Benefits for Final Emission Guidelines Rate-based Scenario in 2030*	31
Table 4-25.	Summary of Avoided Health Incidences from PM2.5-Related and Ozone-Related Co-benefits for the Final Emission Guidelines Mass-based Scenario in 2020*	32
Table 4-26.	Summary of Avoided Health Incidences from PM2.5-Related and Ozone-Related Co-benefits for Final Emission Guidelines Mass-based Scenario in 2025*	33
Table 4-27.	Summary of Avoided Health Incidences from PM2.5-Related and Ozone-Related Co-Benefits for Final Emission Guidelines Mass-based Scenario in 2030*	34
Table 4-28.	Population Exposure in the Clean Power Plan Proposal Modeling (used to generate the benefit-per-ton estimates) Above and Below Various Concentrations Benchmarks in the Underlying Epidemiology Studies *	40
Table 4-29.	Combined Climate Benefits and Health Co-Benefits for Final Emission Guidelines in 2020 (billions of 2011$)*	44
Table 4-30.	Combined Climate Benefits and Health Co-Benefits for Final Emission Guidelines in 2025 (billions of 2011$)*	44
Table 4-31.	Combined Climate Benefits and Health Co-Benefits for Final Emission Guidelines in 2030 (billions of 2011$)*	45
Table 4-32.	Unquantified Health and Welfare Co-benefits Categories	46
Table 4A-3.	Summary of Regional PM2.5 Benefit-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2020 (2011$)*	9
Table 4A-4.	Summary of Regional PM2.5 Benefit-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2025 (2011$)*	9
Table 4A-5.	Summary of Regional PM2.5 Benefit-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2030 (2011$)*	10
Table 4A-6.	Summary of Regional PM2.5 Incidence-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2020*	11
Table 4A-7.	Summary of Regional PM2.5 Incidence-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2025*	12
Table 4A-8.	Summary of Regional PM2.5 Incidence-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2030*	13
Table 4A-9.	Summary of Regional Ozone Benefit-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2020 (2011$)*	15
Table 4A-10.	Summary of Regional Ozone Benefit-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2025 (2011$)*	15
Table 4A-11.	Summary of Regional Ozone Benefit-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2030 (2011$)*	15
Table 4A-12.	Summary of Regional Ozone Incidence-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2020*	16
Table 4A-13.	Summary of Regional Ozone Incidence-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2025*	16
Table 4A-14.	Summary of Regional Ozone Incidence-per-Ton Estimates Based on Air Quality Modeling from Proposed Clean Power Plan in 2030*	16
Table 5-1.	Estimated Percentage Changes in Average Energy Prices by Energy Type for the Final Emission Guidelines, Rate-based and Mass-based Illustrative Plan Approaches	4
Table 6-1.	U. S. Green Goods and Services (GGS) Employment (annual average)	16
Table 6-2.	Renewable Electricity Generation-Related Employment	17
Table 6-3.	Energy and Resources Efficiency-Related Employment	18
Table 6-4.	Engineering-Based[a] Changes in Labor Utilization, Rate-based Scenario (Number of Job-Years[b] of Employment in a Single Year)	24
Table 6-5.	Engineering-Based[a] Changes in Labor Utilization, Mass-Based Illustrative Plan Approach (Number of Job-Years of Employment in Year)	25
Table 6-6.	Estimated Demand-Side Energy Efficiency Employment Impacts: Target 1 percent Growth in Energy Efficiency	30
Table 6A-1.	Labor Productivity Growth Rate due to Heat Rate Improvement	4
Table 6A-2.	Capital Charge Rate and Duration Assumptions	6
Table 6A-3.	Expenditure Breakdown due to New Generating Capacity	6
Table 6A-4.	Labor Productivity due to New Generating Capacity	7
Table 6A-5.	Average FOM Cost Assumptions	8
Table 6A-6.	Labor Productivity due to New Generating Capacity	9

List of Figures

Figure 2-1.	New Build and Retired Capacity (MW) by Fuel Type, 2002-2012	4
Figure 2-2.	Cumulative Distribution in 2010 of Coal and Natural Gas Electricity Capacity and Generation, by Age	8
Figure 2-3.	Fossil Fuel-Fired Electricity Generating Facilities, by Size	9
Figure 2-4.	Average Retail Electricity Price by State (cents/kWh), 2011	12
Figure 2-5.	Nominal National Average Electricity Prices for Three Major End-Use Categories	13
Figure 2-6.	Relative Increases in Nominal National Average Electricity Prices for Major End-Use Categories, With Inflation Indices	14
Figure 2-7.	Real National Average Electricity Prices (2011$) for Three Major End-Use Categories	15
Figure 2-8.	Relative Change in Real National Average Electricity Prices (2011$) for Three Major End-Use Categories	16
Figure 2-9.	Relative Real Prices of Fossil Fuels for Electricity Generation; Change in National Average Real Price per MBtu Delivered to EGU	16
Figure 2-10.	Relative Growth of Electricity Generation, Population and Real GDP Since 2002	17
Figure 2-11.	Relative Change of Real GDP, Population and Electricity Generation Intensity Since 2002	18
Figure 2-12.	Status of State Electricity Industry Restructuring Activities	20
Figures 2-13 and 2-14.	Capacity and Generation Mix by Ownership Type, 2002 & 2012	22
Figures 2-15 and 2-16.	Generation Capacity Built and Retired between 2002 and 2012 by Ownership Type	23
Figure 2-17.	Domestic Emissions of Greenhouse Gases from Major Sectors, 2002 and 2013 (million metric tonnes of CO2 equivalent)	25
Figure 2-18.	Post-Combustion CO2 Capture for a Pulverized Coal Power Plant	28
Figure 2-18.	Pre-Combustion CO2 Capture for an IGCC Power Plant	30
Figure 2-19.	Geologic Sequestration in the Continental United States	33
Figure 2-20.	Relative Change Nominal and Real (2011$) Prices of Natural Gas Delivered to the Power Sector ($/MMBtu)	45
Figure 2-21.	Relative Change in Real (2011$) Prices of Fossil Fuels Delivered to the Power Sector ($/MMBtu)	46
Figure 3-3.	Illustrative Regions for EE/RE Procurement Used in this Analysis	9
Figure 3-4.	Generation Mix with the Base Case and 111(d) Options, 2020-2030 (thousand GWh)	24
Figure 4-1.	Monetized Health Co-benefits of Rate-based and Mass-based Scenarios for the Final Emission Guidelines in 2025 *	35
Figure 4-2.	Breakdown of Monetized Health Co-benefits by Precursor Pollutant at a 3% Discount Rate for Rate-based Scenario for Final Emission Guidelines in 2025*	36
Figure 4-3.	Percentage of Adult Population (age 30+) by Annual Mean PM2.5 Exposure in the Clean Power Plan Proposal Modeling (used to generate the benefit-per-ton estimates)	41
Figure 4-4.	Cumulative Distribution of Adult Population (age 30+) by Annual Mean PM2.5 Exposure in the Clean Power Plan Proposal Modeling (used to generate the benefit-per-ton estimates)	42
Figure 4-5.	Breakdown of Combined Monetized Climate and Health Co-benefits of Final Emission Guidelines in 2025 for Rate-based and Mass-based Scenarios and Pollutant (3% discount rate)*	45
Figure 4A-1.	Regional Breakdown	6
Figure 6.1.	Electric Power Industry Employment	12
Figure 6.2.	Coal Production Employment	13
Figure 6.3.	Oil and Gas Production Employment	14
Figure 6.4. Demand-Side Energy Efficiency Employment: Jobs per One Million Dollars (2011$)	32

Acronyms
ACS		American Cancer Society
AEO 		Annual Energy Outlook
AQ 		Air quality
ASM		Annual Survey of Manufactures
ATSDR 	Agency for Toxic Substances and Disease Registry
BACT 		Best Available Control Technology
BenMAP	Benefits Mapping and Analysis Program
BPT 		Benefit-per-Ton
BSER 		Best System of Emissions Reduction
Btu 		British Thermal Units
C 		Celsius
CAA 		Clean Air Act
CAIR 		Clean Air Interstate Rule
CCR 		Coal Combustion Residuals
CCS 		Carbon Capture and Sequestration or Carbon Capture and Storage
CCSP		Climate Change Science Program
CFR 		Code of Federal Regulations
CH4 		Methane
CO		Carbon Monoxide
CO2 		Carbon Dioxide
CRF 		Capital Recovery Factor
CSAPR 	Cross State Air Pollution Rule
CT 		Combustion Turbines
CUA 		Climate Uncertainty Adder
DICE 		Dynamic Integrated Climate and Economy Model
DOE 		U.S. Department of Energy
EAB 		Environmental Appeals Board
EC 		Elemental carbon
ECS		Energy Cost Share
EG 		Emissions guidelines
EGR 		Enhanced Gas Recovery
EGU 		Electric Generating Unit
EIA 		U.S. Energy Information Administration
EMM 		Electricity Market Module
EO 		Executive Order
EOR 		Enhanced Oil Recovery
EPA 		U.S. Environmental Protection Agency
ER 		Enhanced Recovery
FERC 		Federal Energy Regulatory Commission
FGD 		Flue Gas Desulfurization
FOAK 		First of a Kind
FOM 		Fixed Operating and Maintenance
FR 		Federal Register
FRCC 		Florida Reliability Coordinating Council
FUND 		Framework for Uncertainty, Negotiation, and Distribution Model v
GDP 		Gross Domestic Product
GHG 		Greenhouse Gas
GS 		Geologic Sequestration
Gt 		Gigaton
H2S 		Hydrogen Sulfide
HAP 		Hazardous air pollutant
HCl 		Hydrogen chloride
HFC 		Hydrofluorocarbons
HIA 		Health impact assessment
IARC 		International Agency for Research on Cancer
IAM 		Integrated Assessment Model
ICR 		Information Collection Request
IGCC 		Integrated Gasification Combined Cycle
IOU 		Investor Owned Utility
IPCC 		Intergovernmental Panel on Climate Change
IPM 		Integrated Planning Model
IRIS 		Integrated Risk Information System
IRP 		Integrated Resource Plan
ISA 		Integrated Science Assessment
kWh 		Kilowatt-hour
lbs 		Pounds
LCOE 		Levelized Cost of Electricity
LML 		Lowest measured level
LNB 		Low NOX Burners
MATS 		Mercury and Air Toxics Standards
MEA 		Monoethanolamine
MECSA	Manufacturing Energy Consumption Survey
MeHg 		Methylmercury
MGD 		Millions of Gallons per Day
mg/L 		Milligrams per Liter
mmBtu 		Million British Thermal Units
MW	 	Megawatt
MWh 		Megawatt-hour
N2O 		Nitrous Oxide
NAAQS 	National Ambient Air Quality Standards
NAICS		North American Industry Classification System
NaOH 		Sodium Hydroxide
NATCARB 	National Carbon Sequestration Database and Geographic Information System
NEEDS 	National Electric Energy Data System
NEMS 		National Energy Modeling System
NERC 		North American Electric Reliability Corporation
NETL 		National Energy Technology Laboratory
NGCC 		Natural Gas Combined Cycle
NMMAPS 	National Morbidity, Mortality Air Pollution Study
NOAK 		Next of a Kind or Nth of a Kind
NOX 		Nitrogen Oxide
NRC 		National Research Council
NSPS 		New Source Performance Standard
NSR 		New Source Review
NTTAA 	National Technology Transfer and Advancement Act
OC 		Organic carbon
OFA 		Overfire Air
OMB 		Office of Management and Budget
PAGE 		Policy Analysis of the Greenhouse Gas Effect Model
PFC 		Perfluorocarbons
PM2.5 		Fine Particulate Matter
ppm 		Parts per Million
PRA 		Paperwork Reduction Act
PSD 		Prevention of Significant Deterioration
RCSP 		Regional Carbon Sequestration Partnerships
RADS 		Relative Airways Dysfunction Syndrome
RES 		Renewable Electricity Standards
RFA 		Regulatory Flexibility Act
RGGI 		Regional Greenhouse Gas Initiative
RIA 		Regulatory Impact Analysis
RPS 		Renewable Portfolio Standards
SAB-CASAC 	Science Advisory Board Clean Air Scientific Advisory Committee
SAB-HES 	Science Advisory Board Health Effects Subcommittee of the Advisory Council on 			Clean Air Compliance
SAB-EEAC 	Science Advisory Board Environmental Economics Advisory Committee
SBA		Small Business Administration
SBREFA	Small Business Regulatory Enforcement Fairness Act
SCC 		Social Cost of Carbon
SCPC 		Super Critical Pulverized Coal
SCR 		Selective Catalytic Reduction
SF6 		Sulfur Hexafluoride
SIP 		State Implementation Plan
SO2 		Sulfur Dioxide
Tcf 		Trillion Cubic Feet
TDS 		Total Dissolved Solids
TSD 		Technical Support Document
TSM		Transportation Storage and Monitoring
UMRA 	Unfunded Mandates Reform Act
U.S.C. 		U.S. Code
USGCRP 	U.S. Global Change Research Program
USGS		U.S. Geological Survey
USG SCC	U.S. Government's Social Cost of Carbon
U.S. NRC 	U.S. Nuclear Regulatory Commission
VCS 		Voluntary Consensus Standards
VOC 		Volatile Organic Compounds
VOM 		Variable Operating and Maintenance
VSL 		Value of a statistical life
WTP 		Willingness to pay

Executive Summary
This Regulatory Impact Analysis (RIA) discusses potential benefits, costs, and economic impacts of the Final Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units (herein referred to as "final emission guidelines" or the "Clean Power Plan Final Rule").
ES.1	Background and Context
The emission of greenhouse gases (GHGs) threatens Americans' health and welfare by leading to long-lasting changes in our climate. Carbon dioxide (CO2) is the primary greenhouse gas pollutant, accounting for roughly three-quarters of global greenhouse gas emissions in 2010 and 82 percent of U.S. greenhouse gas emissions in 2013. Fossil fuel-fired electric generating units (EGUs) are, by far, the largest emitters of GHGs, primarily in the form of CO2, among stationary sources in the U.S.
In this action, the Environmental Protection Agency (EPA) is establishing final emission guidelines for states, U.S. territories, and tribes to follow in developing plans to reduce greenhouse gas emissions from existing fossil fuel-fired EGUs. Specifically, the EPA is establishing: 1) CO2 emission performance rates for two source categories of existing fossil fuel-fired EGUs, fossil fuel-fired electric utility steam generating units and stationary combustion turbines, and 2) guidelines for the development, submittal and implementation of state plans that implement the CO2 emission performance rates. This final rule will continue progress already underway in the U.S. to reduce CO2 emissions from the utility power sector.
ES.2	Summary of Clean Power Plan Final Rule
Under CAA section 111(d), 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 (BSER) 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. To determine the BSER for reducing CO2 emissions at affected EGUs, the EPA considered numerous measures that are already being implemented and can be implemented more broadly to improve emission rates and to reduce overall CO2 emissions from fossil fuel-fired EGUs. Overall, the BSER is based on a range of measures that fall into three main categories (or "building blocks") that have been amply demonstrated via their current widespread use by utilities and states:
1. Reducing the carbon intensity of generation at individual affected coal-fired steam EGUs through heat rate improvements.
2. Substituting increased generation from lower-emitting existing natural gas combined cycle units for reduced generation from higher-emitting affected steam generating units.
3. Substituting increased generation from new low- and certain zero-emitting generating units, including renewable energy, for reduced generation from affected fossil fuel-fired generating units.
Specifically, the EPA is establishing CO2 emission performance rates for two source categories of existing fossil fuel-fired EGUs, fossil fuel-fired electric utility steam generating units and stationary combustion turbines. Also, states, U.S. territories, and tribes with one or more affected EGUs will be required to develop and implement plans to ensure that their affected EGUs, individually, in aggregate, or in combination with other measures undertaken by the state, achieve the equivalent of the final CO2 emission performance rates by 2030.
The EPA derived statewide rate-based CO2 emissions performance goals as a weighted average of the uniform rate goals with weights based on baseline generation for the two types of units (fossil steam and NGCC) in the state. This blended rate reflects the aggregate emission rate a state may expect to achieve when its fleet is meeting its technology-specific emission performance rates. The Clean Power Plan Final Rule also establishes an 8-year interim compliance period that begins in 2022 with a glide path for meeting interim CO2 emission performance rates separated into three steps: 2022-2024, 2025-2027, and 2028-2029.This results in interim and final statewide goal values unique to each state's historical blend of fossil steam and NGCC generation. Chapter 3 presents finalized state goals.
The EPA is providing equivalent mass-based statewide CO2 emission performance goals for each state, which are presented in Chapter 3. The mass-based statewide CO2 emission performance goals are based on the tonnage totals from the numerator of the statewide rate-based CO2 emission performance goals. These mass levels are then adjusted to account for the ability of affected EGUs to increase utilization under rate-based compliance by engaging in emission reduction strategies that are in excess of what is necessary to demonstrate compliance if affected EGUs choose to replace their own generation.
The final guidelines are structured so that states and affected EGUs are not required to use each and every one of the measures that the EPA determines constitute the BSER or to apply any one of those measures to the same extent that the EPA determines is achievable at a reasonable cost on a national basis. Instead, in developing its plan, each state will have the flexibility to select the measure or combination of measures it prefers in order to achieve the CO2 emission performance rates for its affected EGUs or meet the equivalent statewide rate- or mass-based CO2 goal. Thus, a state could choose to achieve more reductions from one measure encompassed by the BSER and less from another, or it could choose to include measures such as demand-side energy efficiency programs that are not part of the EPA's BSER determination. Expressing the states' obligation in terms of a state-level goal that can be met in aggregate, including through the adoption of CO2 emission reduction measures that are not identical to the components of the BSER or are not included in the BSER, rather than exclusively through source-specific emission performance rates, is entirely permissible. This is precisely because the approach mirrors the foundation of the BSER approach itself, namely the interconnected nature of the electricity system in which affected EGUs operate. Given the flexibilities afforded states in complying with the emission guidelines, the benefits, cost and economic impacts reported in this RIA are not definitive estimates, but are instead illustrative of approaches that states may take.
ES.3	Illustrative Plan Approaches Examined in RIA
This RIA depicts two illustrative plan approaches designed to achieve these goals, which we term the "rate-based approach" and "mass-based approach". In the rate-based illustrative plan approach, states within each interconnect region are assumed to collaborate in order meet the CO2 emission performance goals. In the mass-based illustrative plan approach, affected sources within each state are assumed to collaborate to meet the mass-based CO2 emission performance goals. The equilibrium distribution of the mass levels across the existing fossil fuel-fired EGUs is modeled to yield a least-cost outcome, such that the marginal compliance cost of reducing a ton of emissions is equal across all of the existing fossil fuel-fired EGUs within each region. This equilibrium outcome holds for all years of the interim period and for each period after 2030.
The analysis for both illustrative plan approaches includes the assumptions regarding policy design noted in Chapter 3, but does not incorporate any additional flexibilities that states are able to use in developing policy mechanisms to achieve the state goals. Alternative compliance approaches other than those modelled are also possible, which may have different levels and distributions of emissions and electricity generation as well as costs. While IPM finds a least cost way to achieve the state goals implemented through the rate-based or mass-based emissions constraints imposed in the illustrative plan approaches, individual states or multi-state regional groups may develop alternate approaches to achieve their state goals. Meanwhile, because IPM models the power sector within the 48 contiguous states, including areas of Indian Country, and the District of Columbia, the EPA performed supplementary analysis to account for the potential benefits and costs of the Clean Power Plan Final Rule for Alaska, Hawaii, and U.S. territories with affected EGUs.
To present a complete picture of costs and benefits of the final emission guidelines, this RIA presents results for the analysis years 2020, 2025, and 2030. While 2020 is before the first year of the interim compliance period (2022), the EPA expects states and affected EGUs to perform voluntary activities that that facilitate compliance with interim and final goals. These pre-compliance period activities might include investments in demand-side energy efficiency projects, for example, that produce emissions reductions in the compliance period. Activities might also include preparatory investments in monitoring, reporting, and recordkeeping systems. As a result, there are likely to be benefits and costs in 2020, so these are reported in the illustrative analysis of this RIA. Meanwhile, cost and benefits are estimated in this RIA for 2025, which is intended to represent a central period of the interim compliance time-frame as states, U.S. territories, and tribes are on glide paths toward fully meeting the final CO2 emission performance rates. Lastly, the RIA presents costs and benefits for 2030, when the emission performance rates are fully achieved.
ES.4	Emissions Reductions
Table ES-1 shows the emission reductions associated with the modelled rate-based illustrative plan approach. In 2020, the EPA estimates that CO2 emissions will be reduced by 109 million short tons under the rate-based scenario compared to base case levels. In 2025, the EPA estimates that CO2 emissions will be reduced by 430 million short tons under the rate-based approach compared to base case levels. CO2 emission reductions increase to 559 million short tons annually in 2030 when compared to the base case emissions. Table ES-1 also shows emission reductions for criteria air pollutants.

Table ES-1.	Climate and Air Pollutant Emission Reductions for the Rate-Based Illustrative Plan Approach[1][,2]

                                     CO2
                             (million short tons)
                                     SO2
                              (thousands of tons)
                        Annual NOX (thousands of tons)
                                    PM2.5
                              (thousands of tons)
2020 Rate-Based Approach
   Base Case
                                     2,220
                                     1,350
                                     1,420
                                      [X]
   Final Guidelines
                                     2,110
                                     1,300
                                     1,330
                                      [X]
   Emissions Change
                                      109
                                      49
                                      85
                                      [X]
2025 Rate-Based Approach
   Base Case
                                     2,300
                                     1,410
                                     1,430
                                      [X]
   Final Guidelines
                                     1,870
                                     1,080
                                     1,090
                                      [X]
   Emissions Change
                                      430
                                      331
                                      347
                                      [X]
2030 Rate-Based Approach
   Base Case
                                     2,370
                                     1,430
                                     1,420
                                      [X]
   Final Guidelines
                                     1,810
                                     1,030
                                     1,020
                                      [X]
   Emission Change
                                      559
                                      395
                                      396
                                      [X]
Source: Integrated Planning Model, 2015.
1 CO2 emission reductions are used to estimate the climate benefits of the guidelines. SO2, NOx, and directly emitted PM2.5 emission reductions are relevant for estimating air quality health co-benefits of the final guidelines.
[2] Emissions rounded to three significant digits. Emissions may not sum due to rounding.

Table ES-2 shows the emission reductions associated with the modeled mass-based illustrative plan approach. In 2020, the EPA estimates that CO2 emissions will be reduced by [X] million short tons under the mass-based approach compared to base case levels. In 2025, the EPA estimates that CO2 emissions will be reduced by [X] million short tons under the mass-based approach compared to base case levels. CO2 emission reductions increase to [X] million short tons annually in 2030 when compared to the base case emissions. Table ES-2 also shows emission reductions for criteria air pollutants.

Table ES-2.	Climate and Air Pollutant Emission Reductions for the Mass-Based Illustrative Plan Appproach[1][,2]

                                     CO2
                             (million short tons)
                                      SO2
                              (thousands of tons)
                        Annual NOX (thousands of tons)
                                    PM2.5
                              (thousands of tons)
2020 Mass-Based Approach
   Base Case
                                      [X]
                                      [X]
                                      [X]
                                      [X]
   Final Guidelines
                                      [X]
                                      [X]
                                      [X]
                                      [X]
   Emissions Change
                                      [X]
                                      [X]
                                      [X]
                                      [X]
2025 Mass-Based Approach
   Base Case
                                      [X]
                                      [X]
                                      [X]
                                      [X]
   Final Guidelines
                                      [X]
                                      [X]
                                      [X]
                                      [X]
   Emissions Change
                                      [X]
                                      [X]
                                      [X]
                                      [X]
2030 Mass-Based Approach
   Base Case
                                      [X]
                                      [X]
                                      [X]
                                      [X]
   Final Guidelines
                                      [X]
                                      [X]
                                      [X]
                                      [X]
   Emission Change
                                      [X]
                                      [X]
                                      [X]
                                      [X]
Source: Integrated Planning Model, 2015.
1 CO2 emission reductions are used to estimate the climate benefits of the guidelines. SO2, NOx, and directly emitted PM2.5 emission reductions are relevant for estimating air quality health co-benefits of the final guidelines.
[2] Emissions rounded to three significant digits. Emissions may not sum due to rounding.

Comparing the rate-based and mass-based illustrative plan approaches indicates...
ES.5	Costs
 The compliance cost estimated for this final action are represented in this analysis as the change in electric power generation costs between the base case and illustrative plan approach policy cases, inclusive of the cost of demand-side EE measures. The modelled implementation plan approaches reflect states pursuing strategies which are not limited to the technologies and measures included in the BSER to meet the final emission guidelines. Additionally, the compliance cost estimates include the costs of implementing demand-side energy efficiency measures. In the rate-based approach, energy efficiency activities are modeled as being used by EGUs as a low-cost method of demonstrating compliance with their rate-based emissions standards. In the mass-based approach, energy efficiency activities are assumed to be adopted by states to lower demand, which in turn reduces the cost of achieving the mass limitations. The level of energy efficiency measures is determined outside of IPM and is assumed to be the same in the two illustrative plan approaches. The compliance assumptions, and therefore the projected "compliance costs" set forth in this analysis, are illustrative in nature and do not represent the full suite of compliance flexibilities states may ultimately pursue.
The annual incremental cost is the projected additional cost of complying with the final rule in the year analyzed and includes the net change in the annualized cost of capital investment in new generating sources and heat rate improvements at coal-fired steam generating units, the change in the ongoing costs of operating pollution controls, shifts between or amongst various fuels, demand-side energy efficiency measures, and other actions associated with compliance. The total compliance cost estimates presented here include illustrative compliance cost estimates for Alaska, Hawaii, and U.S. territories, as well as estimates of the costs associated with monitoring, reporting, and recordkeeping (MR&R). The costs for both illustrative plan approaches are reflected in Table ES-3 below and discussed more extensively in Chapter 3 of this RIA. All dollar estimates are in 2011 dollars.
The EPA estimates the annual incremental compliance cost for the rate-based approach for final emission guidelines to be $2.4 billion in 2020, $1.1 billion in 2025 and $8.4 billion in 2030, including the costs associated with monitoring, reporting, and recordkeeping. The EPA estimates the annual incremental compliance cost for the mass-based approach for final emission guidelines to be $[X] billion in 2020, $[X] billion in 2025 and $[X] billion in 2030, including the costs associated with monitoring, reporting, and recordkeeping.
Table ES-3.	Compliance Costs for the Illustrative Rate-Based and Mass-Based Plan Approaches

              Incremental Cost from Base Case (billions of 2011$)

                             Rate-based Approach
                             Mass-based Approach
                                     2020
                                     $2.4
                                     $[X]
                                     2025
                                     $1.1
                                     $[X]
                                     2030
                                     $8.4
                                     $[X]
Source: Integrated Planning Model, 2015, with post-processing to account for exogenous demand-side management energy efficiency costs. See Chapter 3 of this RIA for a more complete explanation. Compliance costs shown include monitoring, reporting, and recordkeeping costs. Costs currently do not include costs for Alaska, Hawaii, and U.S. Territories.

The costs reported in Table ES-3 represent the estimated incremental electric utility generating costs changes from the base case plus the estimates of demand-side energy efficiency program costs (which are paid by electric utilities), demand-side energy efficiency participant costs (which are paid by electric utility consumers), cost estimates for Alaska, Hawaii, and U.S. Territories, and MR&R costs. For example, in 2030, under the rate-based approach, the incremental electric utility generating costs decline by $17.9 billion from the base case. The costs associated with illustrative plan approaches for Alaska, Hawaii, and U.S. territories in 2030 are estimated at $[X]. MR&R requirements in 2030 are estimated at $17 million. Demand-side energy efficiency costs in 2030 are estimated to be $26.3 billion, split equally between program and participants using a 3 percent discount rate (see Chapter 3 of this RIA for more details on these estimates). These cost estimates sum to the $8.4 shown in Table ES-3 and represent the total costs of the rate-based illustrative plan approach in 2030. The same approach applies in each year of analysis for the rate-based and mass-based illustrative plan approaches.
Comparing the rate-based and mass-based illustrative plan approaches indicates...
The compliance costs reported in Table ES-3 are not social costs. These costs represent the estimated expenditures incurred by EGUs and states to comply with the BSER goals for the Clean Power Plan Final Rule. These compliance cost estimates are compared to estimates of social benefits to derive net benefits of the final emission guidelines, which are presented later in this Executive Summary. For a more extensive discussion of social costs and benefits, see Chapter 3 and Chapter 4, respectively, of this RIA.
ES.6	Monetized Climate Benefits and Health Co-benefits
Implementing the final emission guidelines is expected to reduce emissions of CO2 and have ancillary emission reductions (i.e., co-benefits) of SO2, NO2, and directly emitted PM2.5, which would lead to lower ambient concentrations of PM2.5 and ozone. The climate benefits estimates have been calculated using the estimated values of marginal climate impacts presented in the Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis under Executive Order 12866 (May 2013, Revised June 2015), henceforth denoted as the current SC-CO2 TSD. Also, the range of combined benefits reflects different concentration-response functions for the air quality health co-benefits, but it does not capture the full range of uncertainty inherent in the health co-benefits estimates. Furthermore, we were unable to quantify or monetize all of the climate benefits and health and environmental co-benefits associated with the final emission guidelines, including reducing exposure to SO2, NOX, and hazardous air pollutants (e.g., mercury and hydrogen chloride), as well as ecosystem effects and visibility improvement. The omission of these endpoints from the monetized results should not imply that the impacts are small or unimportant. Table ES-4 provides the list of the quantified and unquantified health and environmental benefits in this analysis.
Table ES-4.     Quantified and Unquantified Benefits
Benefits Category
Specific Effect
Effect Has Been Quantified
Effect Has Been Monetized
More Information
Improved Environment

Reduced climate effects
Global climate impacts from CO2
                                     -- [1]

SC-CO2 TSD

Climate impacts from ozone and black carbon (directly emitted PM)
                                       --
                                       --
Ozone ISA, PM ISA[2]

Other climate impacts (e.g., other GHGs such as methane, aerosols, other impacts)
                                       --
                                       --
IPCC[2]
Improved Human Health (co-benefits)

Reduced incidence of premature mortality from exposure to PM2.5
Adult premature mortality based on cohort study estimates and expert elicitation estimates (age >25 or age >30)

PM ISA

Infant mortality (age <1)

PM ISA
Reduced incidence of morbidity from exposure to PM2.5
Non-fatal heart attacks (age > 18)

PM ISA

Hospital admissions -- respiratory (all ages)

PM ISA

Hospital admissions -- cardiovascular (age >20)

PM ISA

Emergency room visits for asthma (all ages)

PM ISA

Acute bronchitis (age 8-12)

PM ISA

Lower respiratory symptoms (age 7-14)

PM ISA

Upper respiratory symptoms (asthmatics age 9-11)

PM ISA

Asthma exacerbation (asthmatics age 6-18)

PM ISA

Lost work days (age 18-65)

PM ISA

Minor restricted-activity days (age 18-65)

PM ISA

Chronic Bronchitis (age >26)
                                       --
                                       --
PM ISA[2]

Emergency room visits for cardiovascular effects (all ages)
                                       --
                                       --
PM ISA[2]

Strokes and cerebrovascular disease (age 50-79)
                                       --
                                       --
PM ISA[2]

Other cardiovascular effects (e.g., other ages)
                                       --
                                       --
PM ISA[3]

Other respiratory effects (e.g., pulmonary function, non-asthma ER visits, non-bronchitis chronic diseases, other ages and populations)
                                       --
                                       --
PM ISA[3]

Reproductive and developmental effects (e.g., low birth weight, pre-term births, etc.)
                                       --
                                       --
PM ISA[3,4]

Cancer, mutagenicity, and genotoxicity effects
                                       --
                                       --
PM ISA[3,4]
Reduced incidence of mortality from exposure to ozone
Premature mortality based on short-term study estimates (all ages)

Ozone ISA

Premature mortality based on long-term study estimates (age 30 - 99)
                                       --
                                       --
Ozone ISA[2]

Reduced incidence of morbidity from exposure to ozone
Hospital admissions -- respiratory causes (age > 65)

Ozone ISA

Hospital admissions -- respiratory causes (age <2)

Ozone ISA

Emergency department visits for asthma (all ages)

Ozone ISA

Minor restricted-activity days (age 18 - 65)

Ozone ISA

School absence days (age 5 - 17)

Ozone ISA

Decreased outdoor worker productivity (age 18 - 65)
                                       --
                                       --
Ozone ISA[2]

Other respiratory effects (e.g., premature aging of lungs)
                                       --
                                       --
Ozone ISA[3]

Cardiovascular and nervous system effects
                                       --
                                       --
Ozone ISA[3]

Reproductive and developmental effects
                                       --
                                       --
Ozone ISA[3,4]

Table ES-4.  Continued

Reduced incidence of morbidity from exposure to NO2
Asthma hospital admissions (all ages)
                                       --
                                       --
NO2 ISA[2]

Chronic lung disease hospital admissions (age > 65)
                                       --
                                       --
NO2 ISA[2]

Respiratory emergency department visits (all ages)
                                       --
                                       --
NO2 ISA[2]

Asthma exacerbation (asthmatics age 4 - 18)
                                       --
                                       --
NO2 ISA[2]

Acute respiratory symptoms (age 7 - 14)
                                       --
                                       --
NO2 ISA[2]

Premature mortality
                                       --
                                       --
NO2 ISA[2,3,4]

Other respiratory effects (e.g., airway hyperresponsiveness and inflammation, lung function, other ages and populations)
                                       --
                                       --
NO2 ISA[3,4]
              Reduced incidence of morbidity from exposure to SO2
Respiratory hospital admissions (age > 65)
                                       --
                                       --
SO2 ISA[2]

Asthma emergency department visits (all ages)
                                       --
                                       --
SO2 ISA[2]

Asthma exacerbation (asthmatics age 4 - 12)
                                       --
                                       --
SO2 ISA[2]

Acute respiratory symptoms (age 7 - 14)
                                       --
                                       --
SO2 ISA[2]

Premature mortality
                                       --
                                       --
SO2 ISA[2,3,4]

Other respiratory effects (e.g., airway hyperresponsiveness and inflammation, lung function, other ages and populations)
                                       --
                                       --
SO2 ISA[2,3]
Reduced incidence of morbidity from exposure to methylmercury
Neurologic effects -- IQ loss
                                       --
                                       --
IRIS; NRC, 2000[2]

Other neurologic effects (e.g., developmental delays, memory, behavior)
                                       --
                                       --
IRIS; NRC, 2000[3]

Cardiovascular effects
                                       --
                                       --
IRIS; NRC, 2000[3,4]

Genotoxic, immunologic, and other toxic effects
                                       --
                                       --
IRIS; NRC, 2000[3,4]
Reduced incidence of morbidity from exposure to HAP
Effects associated with exposure to hydrogen chloride
                                       --
                                       --
ATSDR, IRIS[2,3]
Improved Environment (co-benefits)

Reduced visibility impairment
Visibility in Class 1 areas
                                       --
                                       --
PM ISA[2]

Visibility in residential areas
                                       --
                                       --
PM ISA[2]
Reduced effects on materials
Household soiling
                                       --
                                       --
PM ISA[2,3]

Materials damage (e.g., corrosion, increased wear)
                                       --
                                       --
PM ISA[3]
Reduced PM deposition (metals and organics)
Effects on Individual organisms and ecosystems
                                       --
                                       --
PM ISA[3]
Reduced vegetation and ecosystem effects from exposure to ozone
Visible foliar injury on vegetation
                                       --
                                       --
Ozone ISA[2]

Reduced vegetation growth and reproduction
                                       --
                                       --
Ozone ISA[2]

Yield and quality of commercial forest products and crops
                                       --
                                       --
Ozone ISA[2]

Damage to urban ornamental plants
                                       --
                                       --
Ozone ISA[3]

Carbon sequestration in terrestrial ecosystems
                                       --
                                       --
Ozone ISA[2]

Recreational demand associated with forest aesthetics
                                       --
                                       --
Ozone ISA[3]

Other non-use effects

Ozone ISA[3]

Ecosystem functions (e.g., water cycling, biogeochemical cycles, net primary productivity, leaf-gas exchange, community composition)
                                       --
                                       --
Ozone ISA[3]
Reduced effects from acid deposition
Recreational fishing
                                       --
                                       --
NOx SOx ISA[2]

Tree mortality and decline
                                       --
                                       --
NOx SOx ISA[3]

Commercial fishing and forestry effects
                                       --
                                       --
NOx SOx ISA[3]

Recreational demand in terrestrial and aquatic ecosystems
                                       --
                                       --
NOx SOx ISA[3]

Other non-use effects

NOx SOx ISA[3]

Ecosystem functions (e.g., biogeochemical cycles)
                                       --
                                       --
NOx SOx ISA[3]

Table ES-4.  Continued

Reduced effects from nutrient enrichment
Species composition and biodiversity in terrestrial and estuarine ecosystems
                                       --
                                       --
NOx SOx ISA[3]

Coastal eutrophication
                                       --
                                       --
NOx SOx ISA[3]

Recreational demand in terrestrial and estuarine ecosystems
                                       --
                                       --
NOx SOx ISA[3]

Other non-use effects

NOx SOx ISA[3]

Ecosystem functions (e.g., biogeochemical cycles, fire regulation)
                                       --
                                       --
NOx SOx ISA[3]
Reduced vegetation effects from exposure to SO2 and NOx
Injury to vegetation from SO2 exposure
                                       --
                                       --
NOx SOx ISA[3]

Injury to vegetation from NOx exposure
                                       --
                                       --
NOx SOx ISA[3]
Reduced ecosystem effects from exposure to methylmercury
Effects on fish, birds, and mammals (e.g., reproductive effects)
                                       --
                                       --
Mercury Study RTC[3]

Commercial, subsistence and recreational fishing
                                       --
                                       --
Mercury Study RTC[2]
[1] The global climate and related impacts of CO2 emissions changes, such as sea level rise, are estimated within each integrated assessment model as part of the calculation of the SC-CO2. The resulting monetized damages, which are relevant for conducting the benefit-cost analysis, are used in this RIA to estimate the welfare effects of quantified changes in CO2 emissions.
[2] We assess these co-benefits qualitatively due to data and resource limitations for this analysis.
[3] We assess these co-benefits qualitatively because we do not have sufficient confidence in available data or methods.
[4] We assess these co-benefits qualitatively because current evidence is only suggestive of causality or there are other significant concerns over the strength of the association.

ES.6.1	Estimating Global Climate Benefits
We estimate the global social benefits of CO2 emission reductions expected from this rulemaking using the SC-CO2 estimates presented in the current SC-CO2 TSD. We refer to these estimates, which were developed by the U.S. government, as "SC-CO2 estimates" for the remainder of this document. The SC-CO2 is a metric that estimates the monetary value of impacts associated with marginal changes in CO2 emissions in a given year. It includes a wide range of anticipated climate impacts, such as net changes in agricultural productivity and human health, property damage from increased flood risk, and changes in energy system costs, such as reduced costs for heating and increased costs for air conditioning. It is typically used to assess the avoided damages as a result of regulatory actions (i.e., benefits of rulemakings that lead to an incremental reduction in cumulative global CO2 emissions).
The SC-CO2 estimates used in this analysis have been developed over many years, using the best science available, and with input from the public. The EPA and other federal agencies have considered the extensive public comments on ways to improve SC-CO2 estimation received via the notice and comment period that was part of numerous rulemakings. In addition, OMB's Office of Information and Regulatory Affairs recently issued a response to the public comments it sought through a separate comment period on the approach used to develop the SC-CO2 estimates.
An interagency working group (IWG) that included the EPA and other executive branch entities used three integrated assessment models (IAMs) to develop SC-CO2 estimates and recommended four global values for use in regulatory analyses. The SC-CO2 estimates represent global measures because of the distinctive nature of the climate change problem. Emissions of greenhouse gases contribute to damages around the world, even when they are released in the United States, and the world's economies are now highly interconnected. Therefore, the SC-CO2 estimates incorporate the worldwide damages caused by carbon dioxide emissions in order to reflect the global nature of the problem, and we expect other governments to consider the global consequences of their greenhouse gas emissions when setting their own domestic policies. See RIA Chapter 4 for more discussion.
The IWG first released the estimates in February 2010 and updated them in 2013 using new versions of each IAM. The general approach to estimating the SC-CO2 values in 2010 and 2013 was to run the three integrated assessment models (DICE, FUND, and PAGE) using the following three inputs in each model: a probabilistic distribution for climate sensitivity; five approach s capturing economic, population, and emission trajectories; and constant annual discount rates. The 2010 SC-CO2 Technical Support Document (2010 SC-CO2 TSD) provides a complete discussion of the methodology and the current SC-CO2 TSD presents and discusses the updated estimates. The four SC-CO2 estimates are as follows: $13, $45, $66, and $130 per metric ton of CO2 emissions in the year 2020 (2011$), and each estimate increases over time. These SC-CO2 estimates are associated with different discount rates. The first three estimates are the model average at 5 percent discount rate, 3 percent, and 2.5 percent, respectively, and the fourth estimate is the 95[th] percentile at 3 percent.
The 2010 SC-CO2 TSD noted a number of limitations to the SC-CO2 analysis, including the incomplete way in which the IAMs capture catastrophic and non-catastrophic impacts, their incomplete treatment of adaptation and technological change, uncertainty in the extrapolation of damages to high temperatures, and assumptions regarding risk aversion. Currently integrated assessment models do not assign value to all of the important physical, ecological, and economic impacts of climate change recognized in the climate change literature because of a lack of precise information on the nature of damages and because the science incorporated into these models understandably lags behind the most recent research. In particular, the IPCC Fourth Assessment Report concluded that "It is very likely that [SC-CO2 estimates] underestimate the damage costs because they cannot include many non-quantifiable impacts." Nonetheless, these estimates and the discussion of their limitations represent the best available information about the social benefits of CO2 emission reductions to inform the benefit-cost analysis.
In addition, after careful evaluation of the full range of comments submitted to OMB's Office of Information and Regulatory Affairs, the IWG continues to recommend the use of these SC-CO2 estimates in regulatory impact analysis. With the release of the response to comments, the IWG announced plans to obtain expert independent advice from the National Academy of Sciences' National Research Council (NRC) to ensure that the SC-CO2 estimates continue to reflect the best available scientific and economic information on climate change. The NRC process will be informed by the public comments received and focus on the technical merits and challenges of potential approaches to improving the SC-CO2 estimates in future updates.
ES 6.2	Estimating Air Quality Health Co-Benefits
The final emission guidelines would reduce emissions of precursor pollutants (e.g., SO2, NOx, and directly emitted particles), which in turn would lower ambient concentrations of PM2.5 and ozone. This co-benefits analysis quantifies the monetized benefits associated with the reduced exposure to these two pollutants. Unlike the global SC-CO2 estimates, the air quality health co-benefits are only estimated for the contiguous U.S. The estimates of monetized PM2.5 co-benefits include avoided premature deaths (derived from effect coefficients in two cohort studies [Krewski et al. 2009 and Lepeule et al. 2012] for adults and one for infants [Woodruff et al. 1997]), as well as avoided morbidity effects for ten non-fatal endpoints ranging in severity from lower respiratory symptoms to heart attacks (U.S. EPA, 2012). The estimates of monetized ozone co-benefits include avoided premature deaths (derived from the range of effect coefficients represented by two short-term epidemiology studies [Bell et al. (2004) and Levy et al. (2005)]), as well as avoided morbidity effects for five non-fatal endpoints ranging in severity from school absence days to hospital admissions (U.S. EPA, 2008, 2011).
We use a "benefit-per-ton" approach to estimate the PM2.5 and ozone co-benefits in this RIA. Benefit-per-ton approaches apply an average benefit per ton derived from modeling of benefits of specific air quality scenarios to estimates of emissions reductions for scenarios where no air quality modeling is available. The benefit-per-ton approach we use in this RIA relies on estimates of human health responses to exposure to PM and ozone obtained from the peer-reviewed scientific literature. These estimates are used in conjunction with population data, baseline health information, air quality data and economic valuation information to conduct health impact and economic benefits assessments.
Specifically, in this analysis, we multiplied the benefit-per-ton estimates by the corresponding emission reductions that were generated from air quality modeling of the proposed Clean Power Plan. Similar to the co-benefits analysis conducted for the RIA for this rule at proposal, we generated regional benefit-per-ton estimates by aggregating the impacts in BenMAP to the region (i.e., East, West, and California) rather than aggregating to the nation. To calculate the co-benefits for the final emission guidelines, we then multiplied the regional benefit-per-ton estimates for the EGU sector by the corresponding emission reductions. All benefit-per-ton estimates reflect the geographic distribution of the modeled emissions, which may not exactly match the emission reductions in this rulemaking, and thus they may not reflect the local variability in population density, meteorology, exposure, baseline health incidence rates, or other local factors for any specific location.
Our estimate of the monetized co-benefits is based on the EPA's interpretation of the best available scientific literature (U.S. EPA, 2009) and methods and supported by the EPA's Science Advisory Board and the NAS (NRC, 2002). Below are key assumptions underlying the estimates for PM2.5-related premature mortality, which accounts for 98 percent of the monetized PM2.5 health co-benefits:
      1. We assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality. This is an important assumption, because PM2.5 varies considerably in composition across sources, but the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type. The PM ISA concluded that "many constituents of PM2.5 can be linked with multiple health effects, and the evidence is not yet sufficient to allow differentiation of those constituents or sources that are more closely related to specific outcomes" (U.S. EPA, 2009b).
      2. We assume that the health impact function for fine particles is log-linear without a threshold in this analysis. Thus, the estimates include health co-benefits from reducing fine particles in areas with varied concentrations of PM2.5, including both areas that do not meet the National Ambient Air Quality Standard for fine particles and those areas that are in attainment, down to the lowest modeled concentrations.
      3. We assume that there is a "cessation" lag between the change in PM exposures and the total realization of changes in mortality effects. Specifically, we assume that some of the incidences of premature mortality related to PM - 2.5 exposures occur in a distributed fashion over the 20 years following exposure based on the advice of the SAB-HES (U.S. EPA-SAB, 2004c), which affects the valuation of mortality co-benefits at different discount rates.
Every benefits analysis examining the potential effects of a change in environmental protection requirements is limited, to some extent, by data gaps, model capabilities (such as geographic coverage) and uncertainties in the underlying scientific and economic studies used to configure the benefit and cost models. In addition, given the flexibilities afforded states in complying with the emission guidelines, the co-benefits estimated presented in this RIA are not definitive estimates, but are instead illustrative of approaches that states may take. Despite these uncertainties, we believe this analysis provides a reasonable indication of the expected health co-benefits of the air quality emission reductions for the final emission guidelines under a set of reasonable assumptions. This analysis does not include the type of detailed uncertainty assessment found in the 2012 PM2.5 National Ambient Air Quality Standard (NAAQS) RIA (U.S. EPA, 2012) because we lack the necessary air quality input and monitoring data to conduct a complete benefits assessment. In addition, using a benefit-per-ton approach adds another important source of uncertainty to the benefits estimates.
ES 6.3	Combined Benefits Estimates
The EPA has evaluated the range of potential impacts by combining all four SC-CO2 values with health co-benefits values at the 3 percent and 7 percent discount rates. Different discount rates are applied to SC-CO2 than to the health co-benefit estimates; because CO2 emissions are long-lived and subsequent damages occur over many years. Moreover, several discount rates are applied to SC-CO2 because the literature shows that the estimate of SC-CO2 is sensitive to assumptions about discount rate and because no consensus exists on the appropriate rate to use in an intergenerational context. The U.S. government centered its attention on the average SC-CO2 at a 3 percent discount rate but emphasized the importance of considering all four SC-CO2 estimates. Table ES-5 (rate-based illustrative plan approach) and Table ES-6 (mass-based illustrative plan approach) provide the combined climate benefits and health co-benefits for the Clean Power Plan Final Rule estimated for 2020, 2025, and 2030 for each discount rate combination. All dollar estimates are in 2011 dollars.

Table ES-5.	Combined Estimates of Climate Benefits and Health Co-Benefits for Rate-Based Approach (billions of 2011$)*
                     SC-CO2 Discount Rate and Statistic**
                             Climate Benefits Only
                   Climate Benefits plus Health Co-benefits
                 (Discount Rate Applied to Health Co-benefits)

                                      3%
                                      7%
                                    In 2020
                                      63
million metric tons CO2

                                      5%
                                     $0.8
                                                                           $1.5
                                      to
$2.6
                                                                           $1.4
                                      to
$2.5
                                      3%
                                     $2.8
                                                                           $3.5
                                      to
$4.6
                                                                           $3.4
                                      to
$4.5
                                     2.5%
                                     $4.1
                                                                           $4.8
                                      to
$5.9
                                                                           $4.8
                                      to
$5.8
                            3% (95[th] percentile)
                                     $8.2
                                                                           $8.9
                                      to
$10
                                                                           $8.8
                                      to
$9.9
                                    In 2025
                                     210
million metric tons CO2

                                      5%
                                     $3.1
                                                                            $11
                                      to
$21
                                                                            $10
                                      to
$19
                                      3%
                                      $10
                                                                            $18
                                      to
$28
                                                                            $17
                                      to
$26
                                     2.5%
                                      $15
                                                                            $23
                                      to
$33
                                                                            $22
                                      to
$31
                            3% (95[th] percentile)
                                      $31
                                                                            $38
                                      to
$49
                                                                            $38
                                      to
$47
                                    In 2030
                                     377
million metric tons CO2

                                      5%
                                     $6.4
                                                                            $21
                                      to
$40
                                                                            $19
                                      to
$37
                                      3%
                                      $20
                                                                            $34
                                      to
$54
                                                                            $33
                                      to
$51
                                     2.5%
                                      $29
                                                                            $43
                                      to
$63
                                                                            $42
                                      to
$60
                            3% (95[th] percentile)
                                      $61
                                                                            $75
                                      to
$95
                                                                            $74
                                      to
$92
*Benefit estimates are for affected sources in contiguous states and have been rounded to two significant figures. Climate benefits are based on reductions in CO2 emissions. Co-benefits are based on regional benefit-per-ton estimates. Ozone co-benefits occur in analysis year, so they are the same for all discount rates. The health co-benefits reflect the sum of the PM2.5 and ozone co-benefits and reflect the range based on adult mortality functions (e.g., from Krewski et al. (2009) with Bell et al. (2004) to Lepeule et al. (2012) with Levy et al. (2005)). The monetized health co-benefits do not include reduced health effects from direct exposure to NOx, SO2, and HAP; ecosystem effects; or visibility impairment. See Chapter 4 for more information about these estimates and for more information regarding the uncertainty in these estimates.
**Unless otherwise specified, it is the model average.

Table ES-6.	Combined Estimates of Climate Benefits and Health Co-benefits for Mass-Based Approach (billions of 2011$)*
                     SC-CO2 Discount Rate and Statistic**
                             Climate Benefits Only
                   Climate Benefits plus Health Co-benefits
                 (Discount Rate Applied to Health Co-benefits)

                                      3%
                                      7%
                                    In 2020
                                      [X]
million metric tonnes CO2

                                      5%
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
                                      3%
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
                                     2.5%
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
                            3% (95[th] percentile)
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
                                    In 2025
                                      [X]
million metric tonnes CO2

                                      5%
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
                                      3%
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
                                     2.5%
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
                            3% (95[th] percentile)
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
                                    In 2030
                                      [X]
million metric tonnes CO2

                                      5%
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
                                      3%
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
                                     2.5%
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
                            3% (95[th] percentile)
                                     $[X]
                                                                           $[X]
                                      to
$[X]
                                                                           $[X]
                                      to
$[X]
*All benefit estimates are rounded to two significant figures. Climate benefits are based on reductions in CO2 emissions. Co-benefits are based on regional benefit-per-ton estimates. Ozone co-benefits occur in analysis year, so they are the same for all discount rates. The health co-benefits reflect the sum of the PM2.5 and ozone co-benefits and reflect the range based on adult mortality functions (e.g., from Krewski et al. (2009) with Bell et al. (2004) to Lepeule et al. (2012) with Levy et al. (2005)). The monetized health co-benefits do not include reduced health effects from direct exposure to NOX, SO2, and HAP; ecosystem effects; or visibility impairment. See Chapter 4 for more information about these estimates and for more information regarding the uncertainty in these estimates.
**Unless otherwise specified, it is the model average.

Comparing the rate-based and mass-based illustrative plan approaches indicates...
ES.7	Net Benefits
Table ES-7 and ES-8 provide the estimates of the climate benefits, health co-benefits, compliance costs and net benefits of the final emission guidelines for rate-based and mass-based approaches, respectively. Comparing the rate-based and mass-based illustrative plan approaches indicates...
There are additional important benefits that the EPA could not monetize. Due to current data and modeling limitations, our estimates of the benefits from reducing CO2 emissions do not include important impacts like ocean acidification or potential tipping points in natural or managed ecosystems. Unquantified benefits also include climate benefits from reducing emissions of non-CO2 greenhouse gases and co-benefits from reducing exposure to SO2, NOX, and hazardous air pollutants (e.g., mercury and hydrogen chloride), as well as ecosystem effects and visibility impairment. Upon considering these limitations and uncertainties, it remains clear that the benefits of this final rule are substantial and far outweigh the costs.

Table ES-7.	Monetized Benefits, Compliance Costs, and Net Benefits Under the Rate-based Illustrative Plan Approach (billions of 2011$) [a]

                             Rate-Based Approach

                                     2020
                                     2025
                                     2030
Climate Benefits [b]

                               5% discount rate
                                    $0.80
                                     $3.1
                                     $6.4
                               3% discount rate
                                     $2.8
                                     $10
                                     $20
                              2.5% discount rate
                                     $4.1
                                     $15
                                     $29
                      95th percentile at 3% discount rate
                                     $8.2
                                     $31
                                     $61

                     Air Quality Co-benefits Discount Rate

                                      3%
                                      7%
                                      3%
                                      7%
                                      3%
                                      7%
Air Quality Health Co-benefits [c]
                                 $0.7 to $1.8
                                 $0.6 to $1.7
                                  $7.4 to $18
                                  $6.7 to $16
                                  $14 to $34
                                  $13 to $31
Compliance Costs [d]
                                     $2.4
                                     $1.1
                                     $8.4
Net Benefits [e]
                                 $1.1 to $2.2
                                 $1.0 to $2.1
                                  $17 to $27
                                  $16 to $25
                                  $26 to $46
                                  $25 to $43
Non-Monetized Benefits
                        Non-monetized climate benefits

                 Reductions in exposure to ambient NO2 and SO2

                       Reductions in mercury deposition

Ecosystem benefits associated with reductions in emissions of NOX, SO2, PM, and mercury and HCl

                             Visibility impairment
[a] All are rounded to two significant figures, so figures may not sum.
[b] The climate benefit estimate in this summary table reflects global impacts from CO2 emission changes and does not account for changes in non-CO2 GHG emissions. Also, different discount rates are applied to SC-CO2 than to the other estimates because CO2 emissions are long-lived and subsequent damages occur over many years. The benefit estimates in this table are based on the average SC-CO2 estimated for a 3% discount rate, however we emphasize the importance and value of considering the full range of SC-CO2 values. As shown in the RIA, climate benefits are also estimated using the other three SC-CO2 estimates (model average at 2.5 percent discount rate, 3 percent, and 5 percent; 95[th] percentile at 3 percent). The SC-CO2 estimates are year-specific and increase over time.
c The air quality health co-benefits reflect reduced exposure to PM2.5 and ozone associated with emission reductions of directly emitted PM2.5, SO2 and NOX. The range reflects the use of concentration-response functions from different epidemiology studies. The reduction in premature fatalities each year accounts for over 98 percent of total monetized co-benefits from PM2.5 and ozone. These models assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type. Estimates in the table are presented for three analytical years with air quality co-benefits calculated using two discount rates. The estimates of co-benefits are annual estimates in each of the analytical years, reflecting discounting of mortality benefits over the cessation lag between changes in PM2.5 concentrations and changes in risks of premature death (see RIA Chapter 4 for more details), and discounting of morbidity benefits due to the multiple years of costs associated with some illnesses. The estimates are not the present value of the benefits of the rule over the full compliance period.
d Total costs are approximated by the illustrative compliance costs estimated using the Integrated Planning Model for the proposed guidelines and a discount rate of approximately 5 percent. This estimate also includes monitoring, recordkeeping, and reporting costs and demand-side energy efficiency program and participant costs.
[e] The estimates of net benefits in this summary table are calculated using the global SC-CO2 at a 3 percent discount rate (model average). The RIA includes combined climate and health estimates based on additional discount rates.

Table ES-8.	Monetized Benefits, Compliance Costs, and Net Benefits under the Mass-based Illustrative plan approach (billions of 2011$) [a]

                             Mass-Based Approach

                                     2020
                                     2025
                                     2030
Climate Benefits [b]

                               5% discount rate
                                     $[X]
                                     $[X]
                                     $[X]
                               3% discount rate
                                     $[X]
                                     $[X]
                                     $[X]
                              2.5% discount rate
                                     $[X]
                                     $[X]
                                     $[X]
                      95th percentile at 3% discount rate
                                     $[X]
                                     $[X]
                                     $[X]

                     Air Quality Co-benefits Discount Rate

                                      3%
                                      7%
                                      3%
                                      7%
                                      3%
                                      7%
Air Quality Health Co-benefits [c]
                                 $[X] to $[X]
                                 $[X] to $[X]
                                 $[X] to $[X]
                                 $[X] to $[X]
                                 $[X] to $[X]
                                 $[X] to $[X]
Compliance Costs [d]
                                     $[X]
                                     $[X]
                                     $[X]
Net Benefits [e]
                                 $[X] to $[X]
                                 $[X] to $[X]
                                 $[X] to $[X]
                                 $[X] to $[X]
                                 $[X] to $[X]
                                 $[X] to $[X]
Non-Monetized Benefits
                        Non-monetized climate benefits

                 Reductions in exposure to ambient NO2 and SO2

                       Reductions in mercury deposition

Ecosystem benefits associated with reductions in emissions of NOX, SO2, PM, and mercury and HCl

                            Visibility improvement
[a] All are rounded to two significant figures, so figures may not sum.
[b] The climate benefit estimate in this summary table reflects global impacts from CO2 emission changes and does not account for changes in non-CO2 GHG emissions. Also, different discount rates are applied to SC-CO2 than to the other estimates because CO2 emissions are long-lived and subsequent damages occur over many years. The benefit estimates in this table are based on the average SC-CO2 estimated for a 3% discount rate, however we emphasize the importance and value of considering the full range of SC-CO2 values. As shown in the RIA, climate benefits are also estimated using the other three SC-CO2 estimates (model average at 2.5 percent discount rate, 3 percent, and 5 percent; 95[th] percentile at 3 percent). The SC-CO2 estimates are year-specific and increase over time.
c The air quality health co-benefits reflect reduced exposure to PM2.5 and ozone associated with emission reductions of directly emitted PM2.5, SO2 and NOX. The range reflects the use of concentration-response functions from different epidemiology studies. The reduction in premature fatalities each year accounts for over 98 percent of total monetized co-benefits from PM2.5 and ozone. These models assume that all fine particles, regardless of their chemical composition, are equally potent in causing premature mortality because the scientific evidence is not yet sufficient to allow differentiation of effect estimates by particle type. Estimates in the table are presented for three analytical years with air quality co-benefits calculated using two discount rates. The estimates of co-benefits are annual estimates in each of the analytical years, reflecting discounting of mortality benefits over the cessation lag between changes in PM2.5 concentrations and changes in risks of premature death (see RIA Chapter 4 for more details), and discounting of morbidity benefits due to the multiple years of costs associated with some illnesses. The estimates are not the present value of the benefits of the rule over the full compliance period.
d Total costs are approximated by the illustrative compliance costs estimated using the Integrated Planning Model for the proposed guidelines and a discount rate of approximately 5 percent. This estimate also includes monitoring, recordkeeping, and reporting costs and demand-side energy efficiency program and participant costs.
[e] The estimates of net benefits in this summary table are calculated using the global SC-CO2 at a 3 percent discount rate (model average). The RIA includes combined climate and health estimates based on additional discount rates.

ES.8	Economic Impacts
      The final emission guidelines have important energy market implications. Average nationwide retail electricity prices are projected to increase/decrease roughly [X] percent in 2020, increase/decrease roughly [X] percent in 2025, and increase/decrease roughly [X] percent in 2030 (contiguous U.S.), compared to base case price estimates modeled for these same years.
      Average monthly electricity bills are anticipated to increase/decrease by about [X] percent in 2020, increase/decrease by about [X] percent in 2025, and increase/decrease by about [X] percent by 2030, compared to base case price estimates modeled for these same years.
      The average delivered coal price to the power sector is projected to decrease by about [X] percent in 2020, [X] percent in 2025, and roughly [X] percent in 2030, relative to the base case.
      The EPA projects coal production for use by the power sector, a large component of total coal production, will decline by about [X] percent in 2025 and by about [X] percent in 2030, relative to base case levels.
      The EPA also projects that the electric power sector-delivered natural gas prices will increase by about [X] percent in 2020, increase by about [X] percent in 2025, and increase by about [X] percent in 2030, relative to base case levels.
      Natural gas use for electricity generation will increase by as much as [X] trillion cubic feet (TCF) in 2025 relative to the base case, declining over time.
      Renewable energy capacity is anticipated to increase by roughly [X] GW in 2025 and by [X] GW in 2030 under the final guidelines. Energy market impacts from the guidelines are discussed more extensively in Chapter 3 of this RIA.
      Changes in supply or demand for electricity, natural gas, and coal can impact markets for goods and services produced by sectors that use these energy inputs in the production process or that supply those sectors. Changes in cost of production may result in changes in price and/or quantity produced by these sectors and these market changes may affect the profitability of firms and the economic welfare of their consumers. The EPA recognizes that these final emission guidelines provide flexibility, and states implementing the guidelines may choose to mitigate impacts to some markets outside the EGU sector. Similarly, demand for new generation or energy efficiency, for example, can result in changes in production and profitability for firms that supply those goods and services.
ES.9	Employment Impacts
      Executive Order 13563 directs federal agencies to consider the effect of regulations on job creation and employment. According to the Executive Order, "our regulatory system must protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation. It must be based on the best available science" (Executive Order 13563, 2011). Although standard benefit-cost analyses have not typically included a separate analysis of regulation-induced employment impacts, we typically conduct employment analyses. During the current economic recovery, employment impacts are of particular concern and questions may arise about their existence and magnitude.
Given the wide range of approaches that may be used to meet the requirements of the Clean Power Plan Final Rule, quantifying the associated employment impacts is difficult. The EPA's illustrative employment analysis includes an estimate of projected employment impacts associated with these guidelines for the utility power sector, coal and natural gas production, and demand-side energy efficiency activities. These projections are derived, in part, from a detailed model of the utility power sector used for this regulatory analysis, and U.S government data on employment and labor productivity.
In the electricity, coal, and natural gas sectors, the EPA estimates that these guidelines could result in an increase of approximately [X] to [X] job-years in 2025 for the final guidelines under the rate-based illustrative plan approach and [X] to [X] job-years in 2025 under the mass-based approach. The Agency is also offering an illustrative calculation of potential employment effects due to demand-side energy efficiency programs. Employment impacts in 2025 could be an increase of approximately [X] jobs for the final guidelines. More detail about these analyses can be found in Chapter 6 of this RIA.
ES.10	References
Bell, M.L., A. McDermott, S.L. Zeger, J.M. Sarnet, and F. Dominici. 2004. "Ozone and Short-Term Mortality in 95 U.S. Urban Communities, 1987-2000." Journal of the American Medical Association. 292(19):2372-8.
Docket ID EPA-HQ-OAR-2009-0472-114577, Technical Support Document: Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, Interagency Working Group on Social Cost of Carbon, with participation by the Council of Economic Advisers, Council on Environmental Quality, Department of Agriculture, Department of Commerce, Department of Energy, Department of Transportation, Environmental Protection Agency, National Economic Council, Office of Energy and Climate Change, Office of Management and Budget, Office of Science and Technology Policy, and Department of Treasury (February 2010). Available at: <http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf>.
Docket ID EPA-HQ-OAR-2013-0495, Technical Support Document: Technical Update of the Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866, Interagency Working Group on Social Cost of Carbon, with Participation by Council of Economic Advisers, Council on Environmental Quality, Department of Agriculture, Department of Commerce, Department of Energy, Department of Transportation, Domestic Policy Council, Environmental Protection Agency, National Economic Council, Office of Management and Budget, Office of Science and Technology Policy, and Department of Treasury (May 2013, Revised November 2013). Also available at: <http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf>.
Fann, N., K.R. Baker, and C.M. Fulcher. 2012. "Characterizing the PM2.5-Related Health Benefits of Emission Reductions for 17 Industrial, Area and Mobile Emission Sectors Across the U.S." Environment International. 49:41 - 151.
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Chapter 1: Introduction and Background for the Clean Power Plan
1.1	Introduction
This document presents estimates of potential benefits, costs, and economic impacts of illustrative approaches states may implement to comply with the Final Carbon Pollution Emission Guidelines for Existing Stationary Sources: Electric Utility Generating Units (herein referred to as "final emission guidelines" or the "Clean Power Plan Final Rule"). This chapter contains background information on these rules and an outline of the chapters in the report.
1.2	Legal, Scientific and Economic Basis for this Rulemaking
1.2.1	Statutory Requirement
Clean Air Act section 111, which Congress enacted as part of the 1970 Clean Air Act Amendments, establishes mechanisms for controlling emissions of air pollutants from stationary sources. This provision requires the EPA to promulgate a list of categories of stationary sources that the Administrator, in his or her judgment, finds "causes, or contributes significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare." The EPA has listed more than 60 stationary source categories under this provision. Once the EPA lists a source category, the EPA must, under CAA section 111(b)(1)(B), establish "standards of performance" for emissions of air pollutants from new sources in the source categories. These standards are known as new source performance standards (NSPS), and they are national requirements that apply directly to the sources subject to them.
When the EPA establishes NSPS for new sources in a particular source category, the EPA is also required, under CAA section 111(d)(1), to prescribe regulations for states to submit plans regulating existing sources in that source category for any air pollutant that, in general, is not regulated under the CAA section 109 requirements for the NAAQS or regulated under the CAA section 112 requirements for hazardous air pollutants (HAP). CAA section 111(d)'s mechanism for regulating existing sources differs from the one that CAA section 111(b) provides for new sources because CAA section 111(d) contemplates states submitting plans that establish "standards of performance" for the affected sources and that contain other measures to implement and enforce those standards.
"Standards of performance" are defined under CAA section 111(a)(1) as standards for emissions that reflect the emission limitation achievable from the "best system of emission reduction," considering costs and other factors, that "the Administrator determines has been adequately demonstrated." CAA section 111(d)(1) grants states the authority, in applying a standard of performance to a particular source, to take into account the source's remaining useful life or other factors.
Under CAA section 111(d), a state must submit its plan to the EPA for approval, and the EPA must approve the state plan if it is "satisfactory." If a state does not submit a plan, or if the EPA does not approve a state's plan, then the EPA must establish a plan for that state. Once a state receives the EPA's approval of its plan, the provisions in the plan become federally enforceable against the entity responsible for noncompliance, in the same manner as the provisions of an approved State Implementation Plan (SIP) under the Act.
1.2.2	Health and Welfare Impacts from Climate Change
According to the National Research Council, "Emissions of CO2 from the burning of fossil fuels have ushered in a new epoch where human activities will largely determine the evolution of Earth's climate. Because CO2 in the atmosphere is long lived, it can effectively lock Earth and future generations into a range of impacts, some of which could become very severe. Therefore, emission reduction choices made today matter in determining impacts experienced not just over the next few decades, but in the coming centuries and millennia."
In 2009, based on a large body of robust and compelling scientific evidence, the EPA Administrator issued the Endangerment Finding under CAA section 202(a)(1). In the Endangerment Finding, the Administrator found that the current, elevated concentrations of GHGs in the atmosphere -- already at levels unprecedented in human history -- may reasonably be anticipated to endanger public health and welfare of current and future generations in the United States.
Since the administrative record concerning the Endangerment Finding closed following the EPA's 2010 Reconsideration Denial, the climate has continued to change, with new records being set for a number of climate indicators such as global average surface temperatures, Arctic sea ice retreat, CO2 concentrations, and sea level rise. Additionally, a number of major scientific assessments have been released that improve understanding of the climate system and strengthen the case that GHGs endanger public health and welfare both for current and future generations. These assessments are from the Intergovernmental Panel on Climate Change (IPCC), the U.S. Global Change Research Program (USGCRP), and the National Research Council (NRC). These and other assessments are discussed in more detail in the preamble and in Chapter 4 of this Regulatory Impact Assessment (RIA).
1.2.3	Market Failure
Many regulations are promulgated to correct market failures, which lead to a suboptimal allocation of resources within the free market. Air quality and pollution control regulations address "negative externalities" whereby the market does not internalize the full opportunity cost of production borne by society as public goods such as air quality are unpriced.
GHG emissions impose costs on society, such as negative health and welfare impacts, that are not reflected in the market price of the goods produced through the polluting process. For this regulatory action the good produced is electricity. These social costs associated with the health and welfare impacts are referred to as negative externalities. If a fossil fuel-fired electricity producer pollutes the atmosphere when it generates electricity, this cost will be borne not by the polluting firm but by society as a whole. The equilibrium market price of electricity may fail to incorporate the full opportunity cost to society of generating electricity. All else equal, given this externality, the composition of EGUs used to generate electricity in a free market will not be socially optimal, and the quantity of electricity generated may not be at the socially optimal level. More electricity may be produced from fossil fuel-fired EGUs than would occur if they had to account for the full opportunity cost of production including the negative externality. Consequently, absent a regulation on emissions, the composition of the fleet of EGUs used to generate electricity may not be socially optimal, and the marginal social cost of the last unit of electricity produced will exceed its marginal social benefit. This regulation will address this market failure by beginning to internalize the negative externality by reducing CO2 emissions from existing EGUs which increases social welfare.
1.3	Summary of Regulatory Analysis
In accordance with Executive Order 12866, Executive Order 13563, OMB Circular A-4, and the EPA's "Guidelines for Preparing Economic Analyses," the EPA prepared this RIA for this "significant regulatory action." This action is an economically significant regulatory action because it is expected to have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities.
This RIA addresses the potential costs, emission reductions, and benefits of the final emission guidelines that are the focus of this action. Additionally, this RIA includes information about potential impacts on electricity markets, employment, and markets outside the electricity sector.
In evaluating the impacts of the final guidelines, we analyzed a number of uncertainties. For example, the analysis includes an evaluation of two approaches to formulate state emission performance goals, a rate-based and a mass-based approach. The RIA also examines key uncertainties in the estimated benefits of reducing carbon dioxide and other air pollutants. For a further discussion of key evaluations of uncertainty in the regulatory analyses for this rulemaking, see Chapter 8 of this RIA.
1.4	Background for the Final Emission Guidelines
1.4.1	Base Case and Years of Analysis
The rule analyzed in this RIA finalizes emission guidelines for states to limit CO2 emissions from certain existing EGUs. The base case for this analysis, which uses the Integrated Planning Model (IPM), includes state rules that have been finalized and/or approved by a state's legislature or environmental agencies, as well as final federal rules. The IPM Base Case v.5.15 includes the Cross-State Air Pollution Rule (CSAPR), the Mercury and Air Toxics Rule (MATS), the proposed Carbon Pollution Standards for New Power Plants, the Cooling Water Intakes (316(b)) Rule, the Combustion Residuals from Electric Utilities (CCR), and other state and Federal regulations to the extent that they contain measures, permits, or other air-related limitations or requirements. Additional legally binding and enforceable commitments for GHG reductions considered in the base case are discussed in the documentation for IPM.
Costs and benefits are presented for illustrative plan approaches for the analysis years of 2020, 2025, and 2030. These years were selected because they represent initial build up, interim, and full implementation years for the two illustrative approaches analyzed. Analyses of energy, economic, and employment impacts are presented for illustrative plan approaches in 2020, 2025, and 2030. All dollar estimates are presented in 2011 dollars.
1.4.2	Definition of Affected Sources
For the emission guidelines, an affected EGU is any steam generating unit, integrated gasification combined cycle (IGCC), or stationary combustion turbine that was in operation or had commenced construction as of January 8, 2014, and that meets the following criteria, which differ depending on the type of unit. To be an affected source, such a unit, if it is a steam generating unit or IGCC, must serve a generator capable of selling greater than 25 MW to a utility power distribution system and have a base load rating greater than 260 GJ/h (250 MMBtu/h) heat input of fossil fuel (either alone or in combination with any other fuel). If such a unit is a stationary combustion turbine, the unit must meet the definition of a combined cycle or combined heat and power combustion turbine, serve a generator capable of selling greater than 25 MW to a utility power distribution system, and have a base load rating of greater than 260 GJ/h (250 MMBtu/h). Certain EGUs are exempt from inclusion in a state plan. For specifics on these criteria see section IV of the preamble.
When considering and understanding applicability, the following definitions may be helpful. Simple cycle combustion turbine means any stationary combustion turbine which does not recover heat from the combustion turbine engine exhaust gases for purposes other than enhancing the performance of the stationary combustion turbine itself. Combined cycle combustion turbine means any stationary combustion turbine which recovers heat from the combustion turbine engine exhaust gases to generate steam that is used to create additional electric power output in a steam turbine. Combined heat and power (CHP) combustion turbine means any stationary combustion turbine which recovers heat from the combustion turbine engine exhaust gases to heat water or another medium, generate steam for useful purposes other than exclusively for additional electric generation, or directly uses the heat in the exhaust gases for a useful purpose.
1.4.3	Regulated Pollutant
The purpose of this CAA section 111(d) rule is to address CO2 emissions from fossil fuel-fired power plants in the U.S. because they are the largest domestic stationary source of emissions of carbon dioxide (CO2), the most prevalent of the greenhouse gases (GHG), which are air pollutants that the EPA has determined endangers public health and welfare through their contribution to climate change. This rule establishes for the first time federal emission guidelines for existing power plants that will lead to significant reductions in CO2 emissions.
1.4.4	Emission Guidelines
In this action, the Environmental Protection Agency (EPA) is establishing final emission guidelines for states, U.S. territories, and tribes to follow in developing plans to reduce greenhouse gas emissions from existing fossil fuel-fired electric generating units (EGUs). Specifically, the EPA is establishing: 1) carbon dioxide (CO2) emission performance rates for two source categories of existing fossil fuel-fired EGUs, fossil fuel-fired electric utility steam generating units and stationary combustion turbines, and 2) guidelines for the development, submittal and implementation of state plans that implement the CO2 emission performance rates. This final rule will continue progress already underway in the U.S. to reduce CO2 emissions from the utility power sector.
1.5	Organization of the Regulatory Impact Analysis