virtue of their age or other unique circumstances, may warrant special
accommodation.
---------------------------------------------------------------------------

    \304\ See ``Phosphate Fertilizer Plants; Final Guideline
Document Availability,'' 42 FR 12,022 (Mar. 1, 1977); ``Standards of
Performance for New Stationary Sources; Emission Guideline for
Sulfuric Acid Mist,'' 42 FR 55,796 (Oct. 18, 1977); ``Kraft Pulp
Mills, Notice of Availability of Final Guideline Document,'' 44 FR
29,828 (May 22, 1979); ``Primary Aluminum Plants; Availability of
Final Guideline Document,'' 45 FR 26,294 (Apr. 17, 1980);
``Standards of Performance for New Stationary Sources and Guidelines
for Control of Existing Sources: Municipal Solid Waste Landfills,
Final Rule,'' 61 FR 9905 (Mar. 12, 1996).
---------------------------------------------------------------------------

    In these proposed guidelines for state plans to limit
CO2 from affected EGUs, the agency does not take that
approach. Instead, the EPA is proposing to establish state emission
performance goals for the collective group of affected EGUs in a state,
leaving to each state the design of the specific requirements that fall
on each affected EGU. Due to the inherent flexibility in the EPA's
approach to establishing the state-specific goals, and the flexibility
provided to states in developing approvable CAA section 111(d) plans to
achieve those goals, the EPA's guidelines contain no emission standards
that the state must apply directly to a specific EGU; therefore, no
relief for individual facilities would be needed.
    Rather, because of the flexibility for states to design their own
standards, the states have the ability to address the issues involved
with ``remaining useful life'' and ``other factors'' in the initial
design of those standards, which would occur within the framework of
the CAA section 111(d) plan development process. States are free to
specify requirements for individual EGUs that are appropriate
considering remaining useful life and other facility-specific factors.
    Therefore, to the extent that a performance standard that a state
may wish to adopt for affected EGUs raises facility-specific issues,
the state is free to make adjustments to a particular facility's
requirements on facility-specific grounds, so long as any such
adjustments are reflected (along with

any necessary compensating emission reductions), as part of the state's
CAA section 111(d) plan submission. The agency requests comment on its
interpretation.
c. Relationship to State Emission Performance Goals and Timing of
Achievement
    The EPA also believes that, because of the way the state-specific
goals have been developed in these proposed guidelines, remaining
useful life and other facility-specific considerations should not
affect the determination of a state's rate-based or mass-based emission
performance goal or the state's obligation to develop and submit an
approvable CAA section 111(d) plan that achieves that goal by the
applicable deadline.
    Under the proposed guideline, states would have the flexibility to
adopt a state plan that relies on emission-reducing requirements that
do not require affected EGUs with a short remaining useful life to make
major capital expenditures \305\ or incur unreasonable costs. Indeed,
the EPA's proposal would provide states with broad flexibility
regarding ways to improve emission performance through utilizing the
emissions reduction methods represented by the four ``building
blocks.''
---------------------------------------------------------------------------

    \305\ The agency requests comment on whether there are
circumstances other than a major capital investment that could lead
to a prospective state plan imposing unreasonable costs considering
a facility's remaining useful life. Where annual costs predominate
and/or capital costs do not constitute a major expense, the EPA
believes that the remaining useful life of an affected EGU will not
significantly affect its annualized cost of control and therefore
should not be a factor in determining control requirements for the
EGU.
---------------------------------------------------------------------------

    We also note that a state is not required to achieve the same level
of emission reductions with respect to any one building block as
assumed in the EPA's BSER analysis. If a state prefers not to attempt
to achieve the level of performance estimated by the EPA for a
particular building block, it can compensate through over-achievement
in another one, or employ other compliance approaches not factored into
the state-specific goal at all. The EPA has estimated reasonable rather
than maximum possible implementation levels for each building block in
order to establish overall state goals that are achievable/while
allowing states to take advantage of the flexibility to pursue some
building blocks more aggressively, and others less aggressively, than
is reflected in the goal computations, according to each state's needs
and preferences.
    Of the four building blocks considered by the EPA in developing
state goals, only the first block, heat rate improvements, involves
capital investments at the affected EGUs which, if mandated by a state
rule, might give rise to remaining useful life considerations at a
particular facility. The other building blocks--re-dispatch among
affected sources, addition of new generating capacity, and improvement
in end-use energy efficiency--do not generally involve capital
investments by the owner/operator at an affected EGU.
    In the case of heat rate improvements at affected EGUs, states can
choose whether to require a greater or lesser degree of heat rate
improvement than the 6 percent improvement assumed in the EPA's
proposed BSER determination, either because of the remaining useful
life of one or more EGUs, other source-specific factors that the state
deemed appropriate to consider, or any other relevant reasons. The
agency also notes that any capital expenditures would be much smaller
than capital expenditures required for example, for purchase and
installation of scrubbers to remove sulfur dioxide; a fleet-wide
average cost for heat rate improvements at coal-fired generating units
is $100/kW, compared with a typical SO2 scrubber cost of
$500/kw (costs vary with unit size).\306\ In addition, the proposed
guideline allows states to regulate affected EGUs through flexible
regulatory approaches that do not require affected EGUs to incur large
capital costs (e.g., averaging and trading programs). Under the EPA's
proposed approach--establishing state goals and providing states with
flexibility in plan design--states have flexibility to make exactly the
kind of judgments necessary to avoid requirements that would result in
stranded assets.
---------------------------------------------------------------------------

    \306\ Heat rate improvement methods and related capital costs
are discussed in the GHG Abatement Measures TSD; SO2
scrubber capital costs are from the documentation for the EPA's IPM
Base Case v5.13, Chapter 5, Table 5-3, available at http://www.epa.gov/powersectormodeling/BaseCasev513.html
---------------------------------------------------------------------------

    Remaining useful life and other factors, because of their facility-
specific nature, are potentially relevant in determining requirements
that are directly applicable to affected EGUs. For all of the reasons
above, the agency believes that the issue of remaining useful life will
arise infrequently in the development of state plans to limit
CO2 emissions from affected existing EGUs. Even if relief is
due a particular facility, the state has an available toolbox of
emission reduction methods that it can use to develop a section 111(d)
plan that meets its emissions performance goal on time. The EPA
therefore proposes that the remaining useful life of affected EGUs, and
the other facility-specific factors identified in the existing
implementing regulations, should not be considered as a basis for
adjusting a state emission performance goal or for relieving a state of
its obligation to develop and submit an approvable plan that achieves
that goal on time. The agency solicits comment on this position.
10. Design, Equipment, Work Practice, or Operational standards
    In this section, we discuss whether state plans may include design,
equipment, work practice, or operational standards.
    CAA section 111(h)(1) authorizes the Administrator to promulgate
``a design, equipment, work practice, or operational standard, or
combination thereof,'' if in his or her judgment, ``it is not feasible
to prescribe or enforce a standard of performance.'' CAA section
111(h)(2) provides the circumstances under which prescribing or
enforcing a standard of performance is ``not feasible'': generally,
when the pollutant cannot be emitted through a conveyance designed to
emit or capture the pollutant, or when there is no practicable
measurement methodology for the particular class of sources. Other
provisions in section 111(h) further provide that a design, equipment,
work practice, or operational standard (i) must ``be promulgated in the
form of a standard of performance whenever it becomes feasible'' to do
so,\307\ and (ii) must ``be treated as a standard of performance'' for
purposes of, in general, the CAA.\308\
---------------------------------------------------------------------------

    \307\ CAA section 111(h)(4).
    \308\ CAA section 111(h)(5).
---------------------------------------------------------------------------

    As noted above, CAA section 111(d) requires that state plans
``establish[] standards of performance'' as well as ``provide[] for the
implementation and enforcement of such standards of performance.'' CAA
section 111(d) is silent as to whether (i) states may include design,
equipment, work practice, or operational standards, or (ii) they may
include those types of standards, but only under the limited
circumstances described in section 111(h) (i.e., when it is ``not
feasible'' to prescribe or enforce a standard of performance).
Similarly, section 111(h) applies by its terms when the Administrator
is authorized to prescribe standards of performance (which would
include rulemaking under CAA section 111(b)), but is silent as to
whether it

applies to state plans under CAA section 111(d).\309\
---------------------------------------------------------------------------

    \309\ It should be noted that section 111(b)(5), which concerns
controls promulgated by the Administrator for new and modified
sources, does refer to section 111(h).
---------------------------------------------------------------------------

    We invite consideration of the proper interpretation of CAA
sections 111(d) and (h), under either Chevron step 1 or step 2,
specifically: (i) Do the provisions of section 111(d) preclude state
plans from including ``design, equipment, work practice, or operational
standard[s]'' unless those things can be considered ``standards of
performance'' or as providing for the implementation and enforcement of
such standards? As a related matter, do the references to ``standard[s]
of performance'' in CAA section 111(h) indicate that design, equipment,
work practice, or operational standards cannot be considered
``standards of performance?'' (ii) Alternatively, are state plans
authorized to include those design, equipment, work practice, or
operational standards, but only under the limited circumstances
described in CAA section 111(h) relating to infeasibility? (iii) As
another alternative, are state plans authorized to include design,
equipment, work practice, or operational standards under all
circumstances, so that the limits of CAA section 111(h) do not apply?
Finally, to the extent there is legal uncertainty over whether, and
under what circumstances, state plans may include those standards,
should the EPA authorize state plans to include them, on the
understanding that if the Court invalidates the EPA's interpretation,
states would be required to revise their plans accordingly without
further rulemaking from the EPA?
11. Emissions Averaging and Trading
    In this section, we discuss why CAA section 111(d) plans may
include standards of performance that authorize emissions averaging and
trading.
    CAA section 111(d) authorizes state plans to include ``standards of
performance'' and measures that implement and enforce those standards
of performance. CAA section 111(a)(1) defines a ``standard of
performance'' as ``a standard for emissions of air pollutants which
reflects the degree of emission limitation achievable through the
application of the best system of emission reduction . . . adequately
demonstrated.'' CAA section 302 contains a set of definitions that
apply ``[w]hen used in [the Clean Air Act],'' including subsection (l),
which provides a separate definition of ``standard of performance'' as
``a requirement of continuous emission reduction. . .''
    The EPA proposes that the definition of ``standard of performance''
is broad enough to incorporate emissions averaging and trading
provisions, including both emission rate programs, in which sources may
average or trade those rates, and mass emission limit programs, in
which sources may buy and sell mass emission allowances (and, under
certain circumstances, offsets).\310\ The term ``standard'' in the
phrase ``standard for emissions of air pollutants'' is not defined in
the CAA. As the Supreme Court noted in a CAA case, a ``standard'' is
simply ``that which `is established by authority, custom, or general
consent, as a model or example; criterion; test.' '' \311\ A tradable
emission rate or a tradable mass limit is a ``standard for emissions of
air pollutants'' because it establishes an emissions limit for a
source's air pollutants, and as a result, qualifies as a ``criterion''
or ``test'' for those air pollutants.
---------------------------------------------------------------------------

    \310\ Typically, in a mass emission limit trading program,
sources are required to obtain an allowance for each measure (e.g.,
ton) of air pollutant they emit. The acid rain program under Title
IV of the CAA is an example of this type of trading program.
    \311\ Engine Mfrs. Ass'n v. South Coast Air Quality Mgmt. Dist.,
541 U.S. 246, 252-53 (2004) (quoting Webster's Second International
Dictionary, at 2455 (1945))
---------------------------------------------------------------------------

    Moreover, although there may be doubt that the definition of
``standard of performance'' in CAA section 302(l) applies to CAA
section 111(d) in light of the fact that the definition of the same
term in CAA section 111(a)(1) is more specific, even if the CAA section
302(l) definition does apply, an averaging or trading requirement
qualifies as a ``continuous emission reduction'' because, in the case
of a tradable emission rate, the rate is applicable at all times, and,
in the case of a tradable mass limit, the source is always under the
obligation that its emissions be covered by allowances.
    It should be noted that the EPA has promulgated two other CAA
section 111(d) rulemakings that authorized state plans to include
emissions averaging or trading.\312\
---------------------------------------------------------------------------

    \312\ See ``Standards of Performance for New and Existing
Stationary Sources: Electric Utility Steam Generating Units, Final
Rule,'' 70 FR 28,606 (May 18, 2005) [also known as the Clean Air
Mercury Rule, or ``CAMR''], vacated on other grounds by New Jersey
v. EPA, 517 F.3d 574 (D.C. Cir. 2008), cert denied sub nom. Util.
Air Reg. Grp. v. New Jersey, 555 U.S. 1169 (2009); ``Standards of
Performance for New Stationary Sources and Emission Guidelines for
Existing Sources; Municipal Waste Combustors,'' 60 FR 65,387 (Dec.
19, 1995) (trading rules codified in 40 CFR 60.33b(d)(1)-(2)).
---------------------------------------------------------------------------

G. Additional Factors That Can Help State Meet Their CO2
Emission Performance Goals

    A resource available from the EPA for states pursuing market-based
approaches is the EPA's data and experience in support of state trading
programs and emissions data collection. For states needing technical
assistance with data or operation of market-based programs, existing
EPA data systems are a resource that have been used to collect
emissions data, track allowances and transfers, and determine
compliance for state programs. For example, New Hampshire was part of
the Ozone Transport Commission (OTC) trading program but was not
included in the NOx SIP Call. Because the state wanted its sources to
continue to participate in a state trading program, the EPA operated
the emissions trading program for New Hampshire sources, from
allocating allowances to compliance determination.
    Additionally, as noted elsewhere in this preamble, more than 25
states have mandatory renewable portfolio standards, and other states
have voluntary renewable programs and goals. There is considerable
diversity among the states in the scope and coverage of these
standards, in particular in how renewable resources are defined. At the
federal level, the EPA has considered the greenhouse gas implications
related to biomass use at stationary sources through several actions,
including a call for information from stakeholders and the development
and review of the ``Accounting Framework for Biogenic CO2
Emissions from Stationary Sources,'' issued in September 2011. That
study was reviewed by the EPA's Science Advisory Board in 2011 and 2012
and the agency continues to assess the framework and consider the
latest scientific analyses and technical input received from
stakeholders. The EPA expects that the framework, when finalized, will
be a resource that could help inform states in the development of their
CAA section 111(d) plans.

H. Resources for States To Consider in Developing Their Plans

    As part of the stakeholder outreach process, the EPA asked states
what the agency could do to facilitate state plan development and
implementation. Some states indicated that they wanted the EPA to
create resources to assist with state plan development, especially
resources related to accounting for end-use energy efficiency and
renewable energy (EE/RE) in state plans. They requested clear
methodologies for

measuring EE/RE policies and programs, so that these could be included
as part of their compliance strategies. Stakeholders said that these
tools and metrics should build upon the EPA's ``Roadmap for
Incorporating Energy Efficiency/Renewable Energy Policies and Programs
into State and Tribal Implementation Plans,''\313\ as well as the State
Energy Efficiency Action Network's ``Energy Efficiency Program Impact
Evaluation Guide.''\314\ The EPA also heard that states would like
examples of effective state policies and programs.
---------------------------------------------------------------------------

    \313\ http://epa.gov/airquality/eere/.
    \314\ http://www1.eere.energy.gov/seeaction/index.html.
---------------------------------------------------------------------------

    As a result of this feedback, in consultation with U.S. Department
of Energy and other federal agencies, the EPA has developed a toolbox
of decision support resources and is making that available at a
dedicated Web site: http://www2.epa.gov/ www2.epa.gov/cleanpowerplantoolbox. Current resources on the site focus on
approaches states and other entities have already taken that reduce
CO2 emissions from the electric utility sector.
    For the final rulemaking, the EPA plans to organize resources on
the Web site around the following two categories: State plan guidance
and state plan decision support. The state plan guidance section will
serve as a central repository for the final emission guidelines,
regulatory impact analysis, technical support documents, and other
supporting materials. The state plan decision support section will
include information to help states evaluate different approaches and
measures they might consider as they initiate plan development. This
section will include, for example, a summary of existing state climate
and EE/RE policies and programs,\315\ National Action Plan for Energy
Efficiency (Action Plan),\316\ information on electric utility actions
that reduce CO2, and tools and information to assist with
translating energy savings into emission reductions.
---------------------------------------------------------------------------

    \315\ Appendix, State Plan Considerations TSD.
    \316\ http://www.epa.gov/cleanenergy/energy-programs/suca/resources.html.
---------------------------------------------------------------------------

    We note that our inclusion of a measure in the toolbox does not
mean that a state plan must include that measure. In fact, inclusion of
measures provided at the Web site does not necessarily imply the
approvability of an approach or method for use in a state plan. States
will need to demonstrate that any measure included in a state plan
meets all relevant approvability criteria and adequately addresses
elements of the plan components discussed in Section VIII of this
preamble.
    The EPA solicits comment on this approach and the information
currently included, and planned for inclusion, in the Decision Support
Toolbox.

IX. Implications for Other EPA Programs and Rules

A. Implications for New Source Review Program

    The new source review (NSR) program is a preconstruction permitting
program that requires major stationary sources of air pollution to
obtain permits prior to beginning construction. The requirements of the
NSR program apply both to new construction and to modifications of
existing major sources. Generally, a source triggers these permitting
requirements as a result of a modification when it undertakes a
physical or operational change that results in a significant emission
increase and a net emissions increase. NSR regulations define what
constitutes a significant net emissions increase, and the concept is
pollutant-specific. For GHG emissions, the PSD applicability analysis
is described in the Prevention of Significant Deterioration and Title V
Greenhouse Gas Tailoring Rule (FR 75 31514, June 3, 2010). As a general
matter, a modifying major stationary source would trigger PSD
permitting requirements for GHGs if it emits GHGs in excess of 100,000
tons per year (tpy) of carbon dioxide equivalents (CO2e),
and it undergoes a change or change in the method of operation
(modification) resulting in an emissions increase of 75,000 tpy
CO2e as well as an increase on a mass basis. Once it has
been determined that a change triggers the requirements of the NSR
program, the source must obtain a permit prior to making the change.
The pollutant(s) at issue and the air quality designation of the area
where the facility is located or proposed to be built determine the
specific permitting requirements.
    As part of its CAA section 111(d) plan, a state may impose
requirements that require an affected EGU to undertake a physical or
operational change to improve the unit's efficiency that results in an
increase in the unit's dispatch and an increase in the unit's annual
emissions. If the emissions increase associated with the unit's changes
exceeds the thresholds in the NSR regulations discussed above for one
or more regulated NSR pollutants, including the netting analysis, the
changes would trigger NSR.
    While there may be instances in which an NSR permit would be
required, we expect those situations to be few. As previously discussed
in this preamble, states have considerable flexibility in selecting
varied measures as they develop their plans to meet the goals of the
emissions guidelines. One of these flexibilities is the ability of the
state to establish the standards of performance in their CAA section
111(d) plans in such a way so that their affected sources, in complying
with those standards, in fact would not have emissions increases that
trigger NSR. To achieve this, the state would need to conduct an
analysis consistent with the NSR regulatory requirements that supports
its determination that as long as affected sources comply with the
standards of performance in their CAA section 111(d) plan, the source's
emissions would not increase in a way that trigger NSR requirements.
    For example, a state could decide to adjust its demand side
measures or increase reliance on renewable energy as a way of reducing
the future emissions of an affected source initially predicted (without
such alterations) to increase its emissions as a result of a CAA
section 111(d) plan requirement. In other words, a state plan's
incorporation of expanded use of cleaner generation or demand-side
measures could yield the result that units that would otherwise be
projected to trigger NSR through a physical change that might result in
increased dispatch would not, in fact, increase their emissions, due to
reduced demand for their operation. The state could also, as part of
its CAA section 111(d) plan, develop conditions for a source expected
to trigger NSR that would limit the unit's ability to move up in the
dispatch enough to result in a significant net emissions increase that
would trigger NSR (effectively establishing a synthetic minor limit).
\317\
---------------------------------------------------------------------------

    \317\ Certain stationary sources that emit or have the potential
to emit a pollutant at a level that is equal to or greater than
specified thresholds are subject to major source requirements. See,
e.g., CAA Sec. Sec.  165(a)(1), 169(1), 501(2), 502(a). A synthetic
minor limitation is a legally and practicably enforceable
restriction that has the effect of limiting emissions below the
relevant level and that a source voluntarily obtains to avoid major
stationary source requirements, such as the PSD or title V
permitting programs. See, e.g., 40 CFR 52.21(b)(4), 51.166(b)(4),
70.2 (definition of ``potential to emit'').
---------------------------------------------------------------------------

    We request comment on whether, with adequate record support, the
state plan could include a provision, based on underlying analysis,
stating that an affected source that complies with its applicable
standard would be treated as not increasing its emissions, and if so,
whether such a provision would mean that, as a matter of law, the
source's actions to comply with its standard

would not subject the source to NSR. We also seek comment on the level
of analysis that would be required to support a state's determination
that sources will not trigger NSR when complying with the standards of
performance included in the state's CAA section 111(d) plan and the
type of plan requirements, if any, that would need to be included in
the state's plan.
    As a result of such flexibility and anticipated state involvement,
we expect that a limited number of affected sources would trigger NSR
when states implement their plans.

B. Implications for Title V Program

    The preamble to the re-proposed EGU NSPS (70 FR 1429-1519; January
8, 2014) explained that regulating GHGs for the first time under
section 111 of the CAA would make GHGs ``regulated air pollutants'' for
the first time under the operating permit regulations of 40 CFR parts
70 and 71. This would result in GHGs becoming ``fee pollutants'' in
certain state part 70 permit programs and in the EPA's part 71 permit
program, thus requiring the collection of fees for GHG emissions in
these programs. Where title V fees would be required for GHGs, they
would typically be charged at the same rate ($ per ton of pollutant) as
all other fee pollutants. This would likely result in excessive and
unnecessary fees being charged to subject sources. To avoid this
situation, we proposed to exempt GHGs from the fee rates in effect for
other fee pollutants, while proposing an alternative fee that would be
much lower than the fee charged to other fee pollutants, yet sufficient
to cover the costs of addressing GHGs in operating permits.
    This title V fee issue is a one-time occurrence resulting from the
promulgation of the first CAA section 111 standard to regulate GHGs
(the EGU NSPS for new sources) and is not an issue for any other
subsequent CAA section 111 regulations, so there is no need to address
any title V fee issues in this proposal. Thus, we are not re-visiting
these title V fee issues in this proposal, and we are not proposing any
additional revisions to any title V regulations as part of this action.
    The title V regulations require each permit to include emission
limitations and standards, including operational requirements and
limitations that assure compliance with all applicable requirements.
Requirements resulting from this rule that are imposed on affected EGUs
or any other potentially affected entities that have title V operating
permits are applicable requirements under the title V regulations and
would need to be incorporated into the source's title V permit in
accordance with the schedule established in the title V regulations.
For example, if the permit has a remaining life of three years or more,
a permit reopening to incorporate the newly applicable requirement
shall be completed no later than 18 months after promulgation of the
applicable requirement. If the permit has a remaining life of less than
three years, the newly applicable requirement must be incorporated at
permit renewal.

C. Interactions With Other EPA Rules

    Existing fossil fuel-fired EGUs, such as those covered in this
proposal, are or will be potentially impacted by several other recently
finalized or proposed EPA rules.\318\ On February 16, 2012, the EPA
issued the mercury and air toxics standards (MATS) rule (77 FR 9304) to
reduce emissions of toxic air pollutants from new and existing coal-
and oil-fired EGUs. The MATS rule will reduce emissions of heavy
metals, including mercury (Hg), arsenic (As), chromium (Cr), and nickel
(Ni); and acid gases, including hydrochloric acid (HCl) and
hydrofluoric acid (HF). These toxic air pollutants, also known as
hazardous air pollutants or air toxics, are known or suspected of
causing damage to the nervous system, cancer, and other serious health
effects. The MATS rule will also reduce SO2 and fine
particle pollution, which will reduce particle concentrations in the
air and prevent thousands of premature deaths and tens of thousands of
heart attacks, bronchitis cases and asthma episodes.
---------------------------------------------------------------------------

    \318\ We discuss other rulemakings solely for background
purposes. The effort to coordinate rulemakings is not a defense to a
violation of the CAA. Sources cannot defer compliance with existing
requirements because of other upcoming regulations.
---------------------------------------------------------------------------

    The EPA is closely monitoring MATS compliance and finds that the
industry is making substantial progress. Plant owners are moving
proactively to install controls that will achieve the MATS performance
standards. Certain units, especially those that operate infrequently,
may be considered not worth investing in given today's electricity
market, and those are closing.
    Existing sources subject to the MATS rule are given until April 16,
2015 to comply with the rule's requirements. The final MATS rule
provided a foundation on which states and other permitting authorities
could rely in granting an additional, fourth year for compliance
provided for by the CAA. States report that these fourth year
extensions are being granted. In addition, the EPA issued an
enforcement policy that provides a clear pathway for reliability-
critical units to receive an administrative order that includes a
compliance schedule of up to an additional year, if it is needed to
ensure electricity reliability.
    On May 19, 2014, the EPA issued a final rule under section 316(b)
of the Clean Water Act (33 U.S.C. 1326(b)) (referred to hereinafter as
the 316(b) rule).\319\ This rule establishes new standards to reduce
injury and death of fish and other aquatic life caused by cooling water
intake structures at existing power plants and manufacturing
facilities.\320\ The 316(b) rule subjects existing power plants and
manufacturing facilities that withdraw in excess of 2 million gallons
per day (MGD) of cooling water, and use at least 25 percent of that
water for cooling purposes, to a national standard designed to reduce
the number of fish destroyed through impingement and a national
standard for establishing entrainment reduction requirements. All
facilities subject to the rule must submit information on their
operations for use by the permit authority in determining 316(b) permit
conditions. Certain plants that withdraw very large volumes of water
will also be required to conduct additional studies for use by the
permit authority in determining the site-specific entrainment reduction
measures for such facilities. The rule provides significant flexibility
for compliance with the impingement standards and, as a result, is not
projected to impose a substantial cost burden on affected facilities.
With respect to entrainment, the rule calls upon the permitting
authority to in establishing appropriate entrainment reduction
measures, taking into account, among other factors, compliance costs,
facility reliability and grid reliability. Existing sources subject to
the 316(b) rule are required to comply with the impingement
requirements as soon as practicable after the entrainment requirements
are determined. They must comply with applicable site-specific
entrainment reduction controls based on the schedule of requirements
established by the permitting authority.
---------------------------------------------------------------------------

    \319\ The pre-publication version of the final rule is available
at: http://water.epa.gov/lawsregs/lawsguidance/cwa/316b/#final.
    \320\ CWA section 316(b) provides that standards applicable to
point sources under sections 301 and 306 of the Act must require
that the location, design, construction and capacity of cooling
water intake structures reflect the best technology available for
minimizing adverse environmental impacts.
---------------------------------------------------------------------------

    The EPA is also reviewing public comments and working to finalize
two proposed rules which will also impact

existing fossil fuel-fired EGUs: The steam electric effluent limitation
guidelines (SE ELG) rule and the coal combustion residuals (CCR) rule.
These proposed rules are summarized below.
    On June 7, 2013 (78 FR 34432), the EPA proposed the SE ELG rule to
strengthen the controls on discharges from certain steam electric power
plants by revising technology-based effluent limitations guidelines and
standards for the steam electric power generating point source
category. The current regulations, which were last updated in 1982, do
not adequately address the toxic pollutants discharged from the
electric power industry, nor have they kept pace with process changes
that have occurred over the last three decades. Existing steam electric
power plants currently contribute 50-60 percent of all toxic pollutants
discharged to surface waters by all industrial categories regulated in
the United States under the CWA. Furthermore, power plant discharges to
surface waters are expected to increase as pollutants are increasingly
captured by air pollution controls and transferred to wastewater
discharges. This proposed regulation, which includes new requirements
for both existing and new generating units, would reduce the amount of
toxic metals and other pollutants discharged to surface waters from
power plants.
    On June 21, 2010 (75 FR 35128), the EPA proposed the CCR rule,
which co-proposed two approaches to regulating the disposal of coal
combustion residuals (CCRs) generated by electric utilities and
independent power producers. CCRs are residues from the combustion of
coal in steam electric power plants and include materials such as coal
ash (fly ash and bottom ash) and flue gas desulfurization (FGD) wastes.
Under one proposed approach, the EPA would list these residuals as
``special wastes,'' when destined for disposal in landfills or surface
impoundments, and would apply the existing regulatory requirements
established under Subtitle C of RCRA to such wastes. Under the second
proposed approach, the EPA would establish new regulations applicable
specifically to CCRs under subtitle D of RCRA, the section of the
statute applicable to solid (i.e., non-hazardous) wastes. Under both
approaches, CCRs that are beneficially used would remain exempt under
the Bevill exclusion.\321\ While the EPA still is evaluating all the
available information and comments, and while a final risk assessment
for the CCR rule has not yet been completed, reliance on data and
analyses discussed in the preamble to the recent SE ELG proposal might
have the potential to lower the CCR rule risk assessment results by as
much as an order of magnitude. If this proves to be the case, the EPA's
current thinking is that the revised risks, coupled with the ELG
requirements that the agency might promulgate, and the increased
federal oversight such requirements could achieve, could provide strong
support for a conclusion that regulation of CCR disposal under RCRA
Subtitle D would be adequate.\322\ The EPA is under a court-ordered
deadline to complete the CCR rulemaking by December 19, 2014.
---------------------------------------------------------------------------

    \321\ Beneficial use involves the reuse of CCRs in a product to
replace virgin raw materials that would otherwise be obtained
through extraction. The EPA encourages the beneficial use of CCRs in
an appropriate and protective manner, because this practice can
produce environmental, economic, and performance benefits. The
Agency recently evaluated the environmental impacts associated with
encapsulated beneficial uses of fly ash used as a direct substitute
for Portland cement in concrete, and FGD gypsum used as a
replacement for mined gypsum in wallboard. The EPA concluded that
the beneficial use of CCRs in concrete and wallboard is appropriate
because the environmental releases of constituents of potential
concern (COPC) during use by the consumer are comparable to or lower
than those from analogous non-CCR products, or are at or below
relevant regulatory and health-based benchmarks for human and
ecological receptors. See U.S. Environmental Protection Agency, Coal
Combustion Residual Beneficial Use Evaluation: Fly Ash Concrete and
FGD Gypsum Wallboard (2014).
    \322\ U.S. EPA. September 2013. Regulatory Impact Analysis for
the Proposed Standards of Performance for Greenhouse Gas Emissions
for New Stationary Sources: Electric Utility Generating Units. EPA-
452/R-13-003. Available at http://www2.epa.gov/sites/production/files/2013-09/documents/20130920proposalria.pdf.
---------------------------------------------------------------------------

    The EPA recognizes the importance of assuring that each of the
rules described above can achieve its intended environmental objectives
in a commonsense, cost-effective manner, consistent with underlying
statutory requirements, and while assuring a reliable power system.
Executive Order (EO) 13563, ``Improving Regulation and Regulatory
Review,'' issued on January 18, 2011, states that ``[i]n developing
regulatory actions and identifying appropriate approaches, each agency
shall attempt to promote . . . coordination, simplification, and
harmonization. Each agency shall also seek to identify, as appropriate,
means to achieve regulatory goals that are designed to promote
innovation.'' Within the EPA, we are paying careful attention to the
interrelatedness and potential impacts on the industry, reliability and
cost that these various rulemakings can have.
    As discussed in Sections VII and VIII of this preamble, the EPA is
proposing to give states broad flexibility in developing approvable
plans under CAA section 111(d), including the ability to adopt rate-
based or mass-based emission performance goals, and to rely on a wide
variety of CO2 emission reduction measures. The EPA is also
proposing to give states considerable flexibility with respect to the
timeframes for plan development and implementation, with up to two or
three years permitted for final plans to be submitted after the
proposed GHG emission guidelines are finalized, and up to fifteen years
for all emission reduction measures to be fully implemented. In light
of these flexibilities, we believe that states will have ample
opportunity, when developing and implementing their CAA section 111(d)
plans, to coordinate their response to this requirement with source and
state responses to any obligations that may be applicable to affected
EGUs as a result of the MATS, 316(b), SE ELG and CCR rules--all of
which are or will be final rules before this rulemaking is finalized--
and to do so in a manner that will help reduce cost and ensure
reliability, while also ensuring that all applicable environmental
requirements are met.\323\
---------------------------------------------------------------------------

    \323\ It should be noted that regulatory obligations imposed
upon states and sources operate independently under different
statutes and sections of statutes; the EPA expects that states and
sources will take advantage of available flexibilities as
appropriate, but will comply with all relevant legal requirements.
---------------------------------------------------------------------------

    The EPA is also endeavoring to enable EGUs to comply with
applicable obligations under other power sector rules as efficiently as
possible (e.g., by facilitating their ability to coordinate planning
and investment decisions with respect to those rules) and, where
possible, implement integrated compliance strategies. For example, in
the proposed SE ELG rule, the EPA describes its current thinking on how
it might effectively harmonize the potential requirements of that rule
with the requirements of the final CCR rule, to the extent that both
rules may regulate or affect the disposal of coal combustion wastes to
and from surface impoundments at power plants.\324\ The EPA's goal in
exploring how it might harmonize the SE ELG and CCR rules is to
minimize the overall complexity of the two regulatory structures and
avoid creating unnecessary burdens.\325\
---------------------------------------------------------------------------

    \324\ See: Federal Register Vol. 78, No. 110; June 7, 2013. Page
34441.
    \325\ In considering how to coordinate the potential
requirements between the SE ELG and CCR rules, the EPA stated that
it is guided by the following policy considerations: First and
foremost, the EPA intends to ensure that its statutory
responsibilities to restore and maintain water quality under the CWA
and to protect human health and the environment under RCRA are
fulfilled. At the same time, the EPA would seek to minimize the
potential for overlapping requirements to avoid imposing any
unnecessary burdens on regulated entities and to facilitate
implementation and minimize the overall complexity of the regulatory
structure under which facilities must operate. Based on these
considerations, the EPA stated that it is exploring two primary
means of integrating the two rules: (1) Through coordinating the
design of any final substantive CCR regulatory requirements, and (2)
through coordination of the timing and implementation of final rule
requirements to provide facilities with a reasonable timeline for
implementation that allows for coordinated planning and protects
electricity reliability for consumers.

---------------------------------------------------------------------------

    In addition to the power sector rules discussed above, the
development of SIPs for criteria pollutants (PM2.5, ozone
and SO2) and regional haze may also have implications for
existing fossil-fired EGUs.
    On June 6, 2013, the EPA proposed an implementation rule for the
2008 ozone National Ambient Air Quality Standards (NAAQS), to provide
rules and guidance to states on the development of approvable state
implementation plans (SIPs), including SIPs under CAA section 110
(infrastructure SIPs) and section 182 (ozone nonattainment SIPs). This
rule addresses the statutory requirements for areas that the EPA has
designated as nonattainment for the 2008 ozone standard. The agency is
currently working to finalize that rule. The EPA is also working on a
proposed transport rule that would identify the obligations of upwind
states that contribute to those downwind state ozone nonattainment
areas. This rule is scheduled for proposal in 2014 and to be finalized
by 2015.
    The EPA is developing a proposed implementation rule to provide
guidance to states on the development of SIPs for the 2012
PM2.5 NAAQS.
    The SO2 NAAQS was revised in June 2010 to protect public
health from the short-term effects of SO2 exposure. In July
2013, the EPA designated 29 areas in 16 states as nonattainment for the
SO2 NAAQS. The EPA based these nonattainment designations on
the most recent set of certified air quality monitoring data as well as
an assessment of nearby emission sources and weather patterns that
contribute to the monitored levels. The EPA intends to address the
designations for all other areas in separate actions in the future
\326\. The EPA has proposed the data requirements rule for the 1-hour
SO2 NAAQS to require states to characterize air quality more
extensively using ambient monitoring or air quality modeling
approaches.
---------------------------------------------------------------------------

    \326\ The EPA has developed a comprehensive implementation
strategy for these future actions that focuses resources on
identifying and addressing unhealthy levels of SO2 in
areas where people are most likely to be exposed to violations of
the standard. The strategy is available at: http://www.epa.gov/airquality/sulfurdioxide/implement.html.
---------------------------------------------------------------------------

    The EPA requires SIP updates every 10 years for regional haze, as
required by the EPA's Regional Haze Rule which was promulgated in 1999.
The next 10-year SIP revision for regional haze, covering the time
period through 2028, is due from each state by July 2018. Each SIP must
provide for reasonable progress towards visibility improvement in
protected scenic areas.
    The development of these SIPs may, where applicable, have
significant implications for existing fossil fuel-fired EGUs, as well
as for the states that are responsible for developing them. The
timeframes for submittal of SIPs for the various programs and the
timeframes we are proposing for submittal of the CAA section 111(d)
state plans will allow considerable time for coordination by states in
the development of their respective plans. The EPA is willing to work
with states to assist them in coordinating their efforts across these
planning processes. The EPA believes that CAA section 111(d) efforts
and actions will tend to contribute to overall air quality improvements
and thus should be complementary to criteria pollutant and regional
haze SIP efforts.
    In light of the broad flexibilities we are proposing in this
action, we believe that states will have ample opportunity to design
CAA section 111(d) plans that use innovative, cost-effective regulatory
strategies and that spark investment and innovation across a wide
variety of clean energy technologies. We also believe that the broad
flexibilities we are proposing in this action will enable states and
affected EGUs to build on their longstanding, successful records of
complying with multiple CAA, CWA, and other environmental requirements,
while assuring an adequate, affordable, and reliable supply of
electricity.

X. Impacts of the Proposed Action \327\
---------------------------------------------------------------------------

    \327\ The impacts presented in this section of the preamble
represent an illustrative implementation of the guidelines. As
states implement the proposed guidelines, they have sufficient
flexibility to adopt different state-level or regional approaches
that may yield different costs, benefits, and environmental impacts.
For example, states may use the flexibilities described in these
guidelines to find approaches that are more cost effective for their
particular state or choose approaches that shift the balance of co-
benefits and impacts to match broader state priorities.
---------------------------------------------------------------------------

A. What are the air impacts?

    The EPA anticipates significant emission reductions under the
proposed guidelines for the power sector. CO2 emissions are
projected to be reduced when compared to 2005 emissions, by 26 percent
to 27 percent in 2020 and about 30 percent in 2030 under Option 1.
Option 2 reflects reductions of about 23 percent in 2020 and 23 percent
to 24 percent in 2025 when compared to CO2 emissions in
2005. The guidelines are projected to result in substantial co-benefits
through reductions of SO2, PM2.5 and NOx that
will have direct public health benefits by lowering ambient levels of
these pollutants and ozone. Tables 10 and 11 show expected
CO2 and other air pollutant emission reductions in the base
case, with the proposed Option 1 for 2020, 2025, and 2030 and
regulatory alternative Option 2, for 2020 and 2025.

               Table 10--Summary of CO2 and Other Air Pollutant Emission Reductions with Option 1
----------------------------------------------------------------------------------------------------------------
                                                                                PM2.5
                                                   CO2 (million   SO2 (thousands  NOX (thousands   (thousands of
                                                   metric tons)      of tons)        of tons)          tons)
----------------------------------------------------------------------------------------------------------------
2020 Regional Compliance Approach:
----------------------------------------------------------------------------------------------------------------
    Base Case Proposed..........................           2,161           1,476           1,559             212
Guidelines:                                                1,790           1,184           1,213             156
    Emission Reductions.........................             371             292             345              56
----------------------------------------------------------------------------------------------------------------
2025 Regional Compliance Approach:
----------------------------------------------------------------------------------------------------------------
    Base Case Proposed..........................           2,231           1,515           1,587             209
 Guidelines:                                               1,730           1,120           1,166             150

    Emission Reductions.........................             501             395             421              59
----------------------------------------------------------------------------------------------------------------
2030 Regional Compliance Approach:
----------------------------------------------------------------------------------------------------------------
    Base Case Proposed..........................           2,256           1,530           1,537             198
Guidelines:                                                1,711           1,106           1,131             144
    Emission Reductions.........................             545             424             407              54
----------------------------------------------------------------------------------------------------------------
2020 State Compliance Approach:
----------------------------------------------------------------------------------------------------------------
    Base Case Proposed..........................           2,161           1,476           1,559             212
Guidelines:                                                1,777           1,140           1,191             154
    Emission Reductions.........................             383             335             367              58
----------------------------------------------------------------------------------------------------------------
2025 State Compliance Approach:
----------------------------------------------------------------------------------------------------------------
    Base Case Proposed..........................           2,231           1,515           1,587             209
Guidelines:                                                1,724           1,090           1,151             145
    Emission Reductions.........................             506             425             436              63
----------------------------------------------------------------------------------------------------------------
2030 State Compliance Approach:
----------------------------------------------------------------------------------------------------------------
    Base Case Proposed..........................           2,256           1,530           1,537             198
Guidelines:                                                1,701           1,059           1,109             142
    Emission Reductions.........................             555             471             428              56
----------------------------------------------------------------------------------------------------------------
Source: Integrated Planning Model, 2014.

                  Table 11--Summary of CO2 and Air Pollutant Emission Reductions with Option 2
----------------------------------------------------------------------------------------------------------------
                                                                                PM2.5
                                                   CO2 (million   SO2 (thousands  NOX (thousands   (thousands of
                                                   metric tons)      of tons)        of tons)          tons)
----------------------------------------------------------------------------------------------------------------
2020 Regional Compliance Approach:
----------------------------------------------------------------------------------------------------------------
    Base Case...................................           2,161           1,476           1,559             212
    Option 2....................................           1,878           1,231           1,290             166
    Emission Reductions.........................             283             244             268              46
----------------------------------------------------------------------------------------------------------------
2025 Regional Compliance Approach:
----------------------------------------------------------------------------------------------------------------
    Base Case...................................           2,231           1,515           1,587             209
    Option 2....................................           1,862           1,218           1,279             165
    Emission Reductions.........................             368             297             309              44
----------------------------------------------------------------------------------------------------------------
2020 State Compliance Approach:
----------------------------------------------------------------------------------------------------------------
    Base Case...................................           2,161           1,476           1,559             212
    Option 2....................................           1,866           1,208           1,277             163
    Emission Reductions.........................             295             267             281              49
----------------------------------------------------------------------------------------------------------------
2025 State Compliance Approach:
----------------------------------------------------------------------------------------------------------------
    Base Case...................................           2,231           1,515           1,587             209
    Option 2....................................           1,855           1,188           1,271             161
    Emission Reductions.........................             376             327             317              48
----------------------------------------------------------------------------------------------------------------
Source: Integrated Planning Model, 2014.

    The reductions in these tables do not account for reductions in
hazardous air pollutants (HAPs) that may occur as a result of this
rule. For instance, the fine particulate reductions presented above do
not reflect all of the reductions in many heavy metal particulates.

B. Comparison of Building Block Approaches

    Though the EPA has determined that the 4-building block approach is
the BSER, we did analyze the impacts of both a combination of building
blocks 1 and 2 and the combination of all four building blocks. The
analysis indicates that the combined strategies of heat rate
improvements (building block 1) and re-dispatch (building block 2)
would result in overall CO2 emission reductions of
approximately 22 percent in 2020 (compared to 2005 emissions and

assuming state-level compliance). This compares to expected
CO2 emission reductions of approximately 27 percent for the
four-block BSER approach discussed below. The EPA analysis also
estimates 24-32 GW of additional coal-fired EGU retirements in 2020
(compared to 46-49 GW for the four-block approach) and an additional 3-
5 GW of oil/gas steam EGUs (compared to 16 GW for the four-block
approach). For both the two-block and the four-block approach, a
decrease in coal production and price is predicted in 2020. The
decrease in production is predicted at 20-23 percent for the two-block
approach, compared to a decrease of 25-27 percent for the four-block
approach. A 12 percent decrease in coal prices is predicted for the
two-block approach; while the four-block approach results in a 16 to 18
percent decrease. Under both approaches, the shifting in generation
from higher-emitting steam EGUs to lower-emitting NGCC units results in
an increase in natural gas production and price. The two-block approach
results in a production increase of 19-22 percent and a price increase
of 10-11 percent. The four-block approach results in a production
increase of 12-14 percent and a price increase of 9-12 percent. Both
the two-block and the four-block approaches result in construction of
additional NGCC capacity by 2020, with 11-18 GW of new NGCC for the
two-block approach and 20-22 GW of new NGCC capacity for the four-block
approach. However, while the two-block approach results in 5-17 GW of
new NGCC capacity in 2030, the four-block approach results in 32-35 GW
less NGCC capacity in 2030 relative to the base case (due to increased
use of renewable energy sources and decreased demand from
implementation of demand side energy efficiency measures). Also,
significantly, the two-block approach results in less than 500 MW of
new renewable energy capacity; while the four-block option results in
approximately 12 GW of new renewable generating capacity.
    The EPA projects that the annual incremental compliance cost for
the building block 1 and 2 approach is estimated to be $3.2 to $4.4
billion in 2020 and $6.8 to $9.8 billion (2011$) in 2030, excluding the
costs associated with monitoring, reporting, and recordkeeping (MRR).
This compares to costs excluding MRR of $5.4 to $7.4 billion in 2020
and $7.3 to $8.8 billion in 2030 for the proposed Option 1 (2011$) as
discussed in Section X.E of this preamble.
    The total combined climate benefits and health co-benefits for the
building block 1 and 2 approach are estimated to be $21 to $40 billion
in 2020 and $32 to $63 billion in 2030 (2011$ at a 3-percent discount
rate [model average]). The net benefits are estimated to be $18 to $36
billion in 2020 and $25 to $53 billion in 2030 (2011$ at a 3-percent
discount rate [model average]). For the purposes of this summary, we
list the climate benefits associated with the marginal value of the
model average at 3% discount rate, however we emphasize the importance
and value of considering the full range of SCC values. These building
block 1 and 2 benefit estimates compare to combined climate benefits
and health co-benefits of $33 to $57 billion in 2020 and $55 to $93
billion in 2030 (2011$ at a 3-percent discount rate [model average])
for the proposed Option 1. Net benefits are estimated to be $27 to $50
billion in 2020 and $48 to $84 billion in 2030 (2011$ at a 3-percent
discount rate [model average]) as discussed in Section X.G. and XI.A of
this preamble.\328\
---------------------------------------------------------------------------

    \328\ Note that the health co-benefits and net benefits for the
proposed Option 1 include PM co-benefits associated with directly
emitted PM2.5. In contrast, the building block 1 and 2
analysis does not include co-benefits related to directly emitted
PM2.5.
---------------------------------------------------------------------------

C. Endangered Species Act

    Consistent with the requirements of section 7(a)(2) of the
Endangered Species Act (ESA), the EPA has also considered the effects
of this proposed rule and has reviewed applicable ESA regulations, case
law, and guidance to determine what, if any, impact there may be to
listed endangered or threatened species or designated critical habitat.
Section 7(a)(2) of the ESA requires federal agencies, in consultation
with the U.S. Fish and Wildlife Service (FWS) and/or the National
Marine Fisheries Service, to ensure that actions they authorize, fund,
or carry out are not likely to jeopardize the continued existence of
federally listed endangered or threatened species or result in the
destruction or adverse modification of designated critical habitat of
such species. 16 U.S.C. 1536(a)(2). Under relevant implementing
regulations, section 7(a)(2) applies only to actions where there is
discretionary federal involvement or control. 50 CFR 402.03. Further,
under the regulations consultation is required only for actions that
``may affect'' listed species or designated critical habitat. 50 CFR
Sec.  402.14. Consultation is not required where the action has no
effect on such species or habitat. Under this standard, it is the
federal agency taking the action that evaluates the action and
determines whether consultation is required. See 51 FR 19926, 19949
(June 3, 1986). Effects of an action include both the direct and
indirect effects that will be added to the environmental baseline. 50
CFR 402.02. Indirect effects are those that are caused by the action,
later in time, and are reasonably certain to occur. Id. To trigger a
consultation requirement, there must thus be a causal connection
between the federal action, the effect in question, and the listed
species, and the effect must be reasonably certain to occur.
    The EPA has considered the effects of this proposed rule and has
reviewed applicable ESA regulations, case law, and guidance to
determine what, if any, impact there may be to listed species or
designated critical habitat for purposes of section 7(a)(2)
consultation. The EPA notes that the projected environmental effects of
this proposal are positive: reductions in overall GHG emissions, and
reductions in PM and ozone-precursor emissions (SOX and
NOX). With respect to the projected GHG emission reductions,
the EPA does not believe that such reductions trigger ESA consultation
requirements under section 7(a)(2). In reaching this conclusion, the
EPA is mindful of significant legal and technical analysis undertaken
by FWS and the U.S. Department of the Interior in the context of
listing the polar bear as a threatened species under the ESA. In that
context, in 2008, FWS and DOI expressed the view that the best
scientific data available were insufficient to draw a causal connection
between GHG emissions and effects on the species in its habitat.\329\
The DOI Solicitor concluded that where the effect at issue is climate
change, proposed actions involving GHG emissions cannot pass the ``may
affect'' test of the section 7 regulations and thus are not subject to
ESA consultation. The EPA has also previously considered issues
relating to GHG emissions in connection with the requirements of ESA
section 7(a)(2). Although the GHG emission reductions projected for
this proposal are large (the highest estimate is reductions of 555 MMT
of CO2 in 2030--see Table 10 above), the EPA evaluated
larger reductions in assessing this same issue in the context of the
light duty vehicle GHG emission standards for model years 2012-2016 and
2017-2025. There the agency projected emission reductions roughly
double and four times those projected

here over the lifetimes of the model years in question \330\ and, based
on air quality modeling of potential environmental effects, concluded
that ``EPA knows of no modeling tool which can link these small, time-
attenuated changes in global metrics to particular effects on listed
species in particular areas. Extrapolating from global metric to local
effect with such small numbers, and accounting for further links in a
causative chain, remain beyond current modeling capabilities.'' EPA,
Light Duty Vehicle Greenhouse Gas Standards and Corporate Average Fuel
Economy Standards, Response to Comment Document for Joint Rulemaking at
4-102 (Docket EPA-OAR-HQ-2009-4782). The EPA reached this conclusion
after evaluating issues relating to potential improvements relevant to
both temperature and oceanographic pH outputs. The EPA's ultimate
finding was that ``any potential for a specific impact on listed
species in their habitats associated with these very small changes in
average global temperature and ocean pH is too remote to trigger the
threshold for ESA section 7 (a)(2).'' Id. The EPA believes that the
same conclusions apply to the present proposal, given that the
projected CO2 emission reductions are less than those
projected for either of the light duty vehicle rules. See, e.g., Ground
Zero Center for Non-Violent Action v. U.S. Dept. of Navy, 383 F. 3d
1082, 1091-92 (9th Cir. 2004) (where the likelihood of jeopardy to a
species from a federal action is extremely remote, ESA does not require
consultation).
---------------------------------------------------------------------------

    \329\ See, e.g., 73 FR 28212, 28300 (May 15, 2008); Memorandum
from David Longly Bernhardt, Solicitor, U.S. Department of the
Interior re: ``Guidance on the Applicability of the Endangered
Species Act's Consultation Requirements to Proposed Actions
Involving the Emission of Greenhouse Gases'' (Oct. 3, 2008).
    \330\ See 75 FR at 25438 Table I.C 2-4 (May 7, 2010); 77 FR at
62894 Table III-68 (Oct. 15, 2012).
---------------------------------------------------------------------------

    With regard to non-GHG air emissions, the EPA is also projecting
substantial reductions of SOX and NOX as a
collateral consequence of this proposal. However, CAA section 111(d)(1)
standards cannot directly control emissions of criteria pollutants.
Consequently, CAA section 111(d) provides no discretion to adjust the
standard based on potential impacts to endangered species of reduced
criteria pollutant emissions. Section 7(a)(2) consultation thus is not
required with respect to the projected reductions of criteria pollutant
emissions. See 50 CFR 402.03; see also, National Lime Ass'n v. EPA, 233
F. 3d 625, 638-39 (D.C. Cir. 2000) (although CAA section 112(b)(2)
prohibits the EPA from listing criteria pollutants as hazardous air
pollutants, the EPA may use PM as a surrogate for metal hazardous air
pollutants and reductions in PM do not constitute impermissible
regulation of a criteria pollutant).
    Moreover, there are substantial questions as to whether any
potential for relevant effects results from any element of the proposed
rule or would result instead from the separate actions of States
establishing standards of performance for existing sources and
implementing and enforcing those standards. Cf. American Trucking
Assn's v. EPA, 175 F. 3d 1027, 1043-45 (D.C. Cir. 1999), rev'd on
different grounds sub nom., Whitman v. American Trucking Assn's, 531
U.S. 457 (2000) (National Ambient Air Quality Standards have no
economic impact, for purposes of Regulatory Flexibility Act, because
impacts result from the actions of States through their development,
implementation and enforcement of state implementation plans). Thus,
for example, although questions may exist whether actions such as
increased utilization of solar or wind power could have effects on
listed species, the EPA believes that such effects (if any) would
result from decisions and actions by states in developing, implementing
and enforcing their plans. The precise steps States choose to take in
that regard cannot be determined or ordered by this federal action, and
they are not sufficiently certain to be attributable to this proposed
rule for ESA purposes. Consequently, for this additional reason, the
EPA does not believe that this proposed rule (if enacted) would have
effects on listed species that would trigger the section 7 (a)(2)
consultation requirement.

D. What are the energy impacts?

    The proposed guidelines have important energy market implications.
Under Option 1, average nationwide retail electricity prices are
projected to increase by roughly 6 to 7 percent in 2020 relative to the
base case, and by roughly 3 percent in 2030 (contiguous U.S.). Average
monthly electricity bills are anticipated to increase by roughly 3
percent in 2020, but decline by approximately 9 percent by 2030. This
is a result of the increasing penetration of demand-side programs that
more than offset increased prices to end users by their expected
savings from reduced electricity use.
    The average delivered coal price to the power sector is projected
to decrease by 16 to 17 percent in 2020 and roughly 18 percent in 2030,
relative to the base case for Option 1. The EPA also projects that
electric power sector-delivered natural gas prices will increase by 9
to 12 percent in 2020, with negligible changes in 2030. Natural gas use
for electricity generation will increase by as much as 1.2 trillion
cubic feet (TCF) in 2020 relative to the base case, and then begin to
decline over time.
    These figures reflect the EPA's illustrative modeling that presumes
policies that lead to dispatch changes in 2020 and growing use of
energy efficiency and renewable electricity generation out to 2029. If
states make different policy choices, impacts could be different. For
instance, if states implement renewable and/or energy efficiency
policies on a more aggressive time-frame, impacts on natural gas and
electricity prices would likely be less. Implementation of other
measures not included in the EPA's BSER calculation or compliance
modeling, such as nuclear uprates, transmission system improvements,
use of energy storage technologies or retrofit CCS, could also mitigate
gas price and/or electricity price impacts.
    The EPA projects coal production for use by the power sector, a
large component of total coal production, will decline by roughly 25 to
27 percent in 2020 from base case levels. The use of coal by the power
sector will decrease roughly 30 to 32 percent in 2030. Renewable energy
capacity is anticipated to increase by roughly 12 GW in 2020 and by 9
GW in 2030 under Option 1. Energy market impacts from the guidelines
are discussed more extensively in the RIA found in the docket for this
rulemaking.

E. What are the compliance costs?

    The compliance costs of this proposed action are represented in
this analysis as the change in electric power generation costs between
the base case and the proposed rule in which states pursue a distinct
set of strategies beyond the strategies taken in the base case to meet
the terms of the EGU GHG emission guidelines, and include cost
estimates for demand-side energy efficiency. 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.
These illustrative compliance scenarios are designed to reflect, to the
extent possible, the scope and the nature of the proposed guidelines.
However, there is considerable uncertainty with regards to the precise
measures that states will adopt to meet the proposed requirements,
because there are considerable flexibilities afforded to the states in
developing their state plans.
    The EPA projects that the annual incremental compliance cost of
Option 1 is estimated to be between $5.5 and $7.5 billion in 2020 and
between $7.3

and $8.8 billion (2011$) in 2030, including the costs associated with
monitoring, reporting, and recordkeeping (MRR). The incremental
compliance cost of Option 2 is estimated to be between $4.3 and $5.5
billion in 2020, including MRR costs. In 2025, the estimated compliance
cost of Option 2 is estimated to be between $4.5 and $5.5 billion (with
the assumed levels of end-use energy efficiency). These important
dynamics are discussed in more detail in the RIA in the rulemaking
docket. The annualized incremental cost is the projected additional
cost of complying with the guidelines in the year analyzed, and
includes the amortized cost of capital investment, needed new capacity,
shifts between or amongst various fuels, deployment of energy
efficiency programs, and other actions associated with compliance. MRR
costs are estimated to be $68.3 million (2011$) in 2020 and $8.9
million in 2025 and 2030 for Option 1 and $68.3 million in 2020 and
$8.9 million in 2025 for Option 2. More detailed cost estimates are
available in the RIA included in the rulemaking docket.

F. What are the economic and employment impacts?

    The proposed standards are projected to result in certain changes
to power system operation as a result of the application of state
emission rate goals. Overall, we project dispatch changes, changes to
fossil fuel and retail electricity prices, and some additional coal
retirements. Average electric power sector-delivered natural gas prices
are projected to increase by roughly 9 to 12 percent in 2020 in Option
1, with negligible changes by 2030. Under Option 2, electric power
sector natural gas prices are projected to increase by roughly 8
percent in 2020, on an average nationwide basis, and increase by 1
percent or less in 2025. The average delivered coal price to the power
sector is projected to decrease by 16 to 17 percent in 2020 under
Option 1, and decrease by roughly 14 percent under Option 2, on a
nationwide average basis. Retail electricity prices are projected to
increase 6 to 7 percent under Option 1 and increase by roughly 4
percent under Option 2, both in 2020 and on an average basis across the
contiguous U.S. By 2030 under Option 1, electricity prices are
projected to increase by about 3 percent. Under Option 1, the EPA
projects 46 to 50 GW of additional coal-fired generation may be
uneconomic to maintain and may be removed from operation by 2030. The
EPA projects that under Option 2, 30 to 33 GW of additional coal-fired
generation may be uneconomic to maintain and may be removed from
operation by 2025.
    It is important to note that the EPA's modeling does not
necessarily account for all of the factors that may influence business
decisions regarding future coal fired capacity. By 2025, the average
age of the coal-fired fleet will be 49 years old and twenty percent of
the fleet will be more than 60 years old. Many power companies already
factor a carbon price into their long term capacity planning that would
further influence business decisions to replace these aging assets with
modern, and significantly cleaner generation.
    The compliance modeling done to support the proposal assumes that
overall electric demand will decrease significantly, as states ramp up
programs that result in lower overall demand. End-use energy efficiency
levels increase such that they achieve about an 11 percent reduction on
overall electricity demand levels in 2030 for Option 1, and a reduction
in overall electricity demand of approximately 6 percent reduction in
2025 for Option 2. In response, there are anticipated to be notable
changes to costs, prices, and electricity generation in the power
sector as more end-use efficiency is realized.
    Changes in price or demand for electricity, natural gas, coal, can
impact markets for goods and services produced by sectors that use
these energy inputs in the production process or supply those sectors.
Changes in cost of production may result in changes in price, changes
in quantity produced, and changes in profitability of firms affected.
The EPA recognizes that these guidelines provide significant
flexibilities 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 can result in shifts in
production and profitability for firms that supply those goods and
services, and the guidelines provide flexibility for states that may
want to enhance demand for goods and services from those sectors.
    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 periods of sustained high unemployment,
employment impacts are of particular concern and questions may arise
about their existence and magnitude.
    States have the responsibility and flexibility to implement
policies and practices for compliance with Proposed Electric Generating
Unit Greenhouse Gas Existing Source Guidelines. Quantifying the
associated employment impacts is complicated by the wide range of
approaches that States may use. As such, the EPA's employment analysis
includes projected employment impacts associated with illustrative
compliance scenarios for these guidelines for the electric power
industry, coal and natural gas production, and demand-side energy
efficiency activities. These projections are derived, in part, from a
detailed model of the electricity production 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 have an employment impact of
roughly 25,900 to 28,000 job-years increase in 2020 for Option 1, state
to regional compliance approach, respectively. For Option 2, the state
and regional compliance approach estimates are 26,700 to 29,800 job-
years increase in 2020. Demand-side energy efficiency employment
impacts are approximately an increase of 78,800 jobs in 2020 for Option
1 and of 57,000 jobs for Option 2. By its nature, energy efficiency
reduces overall demand for electric power. The EPA recognizes as more
efficiency is built into the U.S. power system over time, lower fuel
requirements may lead to fewer jobs in the coal and natural gas
extraction sectors, as well as in EGU construction and operation than
would otherwise have been expected. The EPA also recognizes the fact
that, in many cases, employment gains and losses that might be
attributable to this rule would be expected to affect different sets of
people. Moreover, workers who lose jobs in these sectors may find
employment elsewhere just as workers employed in new jobs in these
sectors may have been previously employed elsewhere. Therefore, the
employment estimates reported in these sectors may include workers
previously employed elsewhere. This analysis also does not capture
potential economy-wide impacts due to changes in prices (of fuel,
electricity, labor, etc.). For these reasons, the numbers reported here

should not be interpreted as a net national employment impact.

G. What are the benefits of the proposed goals?

    Implementing the proposed standards will generate benefits by
reducing emissions of CO2 as well as criteria pollutants and
their precursors, including SO2, NOX and directly
emitted particles. SO2 and NOX are precursors to
PM2.5 (particles smaller than 2.5 microns), and
NOX is a precursor to ozone. The estimated benefits
associated with these emission reductions are beyond those achieved by
previous EPA rulemakings including the Mercury and Air Toxics Standards
rule. The health and welfare benefits from reducing air pollution are
considered co-benefits for these standards. For this rulemaking, we
were only able to quantify the climate benefits from reduced emissions
of CO2 and the health co-benefits associated with reduced
exposure to PM2.5 and ozone. In summary, we estimate the
total combined climate benefits and health co-benefits for Option 1 to
be $33 billion to $54 billion in 2020 and $55 billion to $89 billion in
2030 assuming a regional compliance approach (2011 dollars at a 3-
percent discount rate [model average]). If states comply using a state-
specific compliance approach, these climate and health co-benefits
estimates are estimated to be $35 to $57 billion in 2020 and $57 to $93
billion in 2030 (2011 dollars at a 3-percent discount rate [model
average]). We also estimate the total combined climate benefits and
health co-benefits for Option 2 to be $26 billion to $44 billion in
2020 and $36 billion to $59 billion in 2025 (regional compliance
approach, 2011 dollars at a 3-percent discount rate [model average]).
Assuming a state compliance approach, the total combined climate
benefits and health co-benefits for Option 2 are estimated to be $27
billion to $45 billion in 2020 and $36 billion to $60 billion in 2025
(2011 dollars at a 3-percent discount rate [model average]). A summary
of the emission reductions and monetized benefits estimated for this
rule at all discount rates and additional analysis years is provided in
Tables 12 through 17 of this preamble.

              Table 12--Summary of the Monetized Global Climate Benefits for the Proposed Option 1
                                         [Billions of 2011 dollars] \a\
----------------------------------------------------------------------------------------------------------------
                                                                                Monetized climate benefits
                                                                             -----------------------------------
                  2020                        Discount rate (statistic)           Regional
                                                                                compliance     State compliance
----------------------------------------------------------------------------------------------------------------
CO2 Reductions (million metric tons)...  ...................................               371               383
                                         5 percent (average SCC)............              $4.7              $4.9
                                         3 percent (average SCC)............               $17               $18
                                         2.5 percent (average SCC)..........               $25               $26
                                         3 percent (95th percentile SCC)....               $51               $52
----------------------------------------------------------------------------------------------------------------
2025
----------------------------------------------------------------------------------------------------------------
CO2 Reductions (million metric tons)...  ...................................               501               506
                                         5 percent (average SCC)............              $7.5              $7.6
                                         3 percent (average SCC)............               $25               $25
                                         2.5 percent (average SCC)..........               $37               $37
                                         3 percent (95th percentile SCC)....               $76               $77
----------------------------------------------------------------------------------------------------------------
2030
----------------------------------------------------------------------------------------------------------------
CO2 Reductions (million metric tons)...  ...................................               545               555
                                         5 percent (average SCC)............              $9.3              $9.5
                                         3 percent (average SCC)............               $30               $31
                                         2.5 percent (average SCC)..........               $44               $44
                                         3 percent (95th percentile SCC)....               $92               $94
----------------------------------------------------------------------------------------------------------------
\a\ Climate benefit estimates reflect impacts from CO2 emission changes in the analysis years presented in the
  table and do not account for changes in non-CO2 GHG emissions. These estimates are based on the global social
  cost of carbon (SCC) estimates for the analysis years (2020, 2025, and 2030) and are rounded to two
  significant figures.

                   Table 13--Summary of the Monetized Global Climate Benefits for the Option 2
                                         [Billions of 2011 dollars] \a\
----------------------------------------------------------------------------------------------------------------
                                                                                Monetized climate benefits
                                                                             -----------------------------------
                  2020                        Discount rate (statistic)           Regional            State
                                                                                compliance        compliance
----------------------------------------------------------------------------------------------------------------
CO2 Reductions (million metric tons)...  ...................................               283               295
                                         5 percent (average SCC)............              $3.6              $3.8
                                         3 percent (average SCC)............               $13               $14
                                         2.5 percent (average SCC)..........               $19               $20
                                         3 percent (95th percentile SCC)....               $39               $40
----------------------------------------------------------------------------------------------------------------
2025
----------------------------------------------------------------------------------------------------------------
CO2 Reductions (million metric tons)...  ...................................               368               376
                                         5 percent (average SCC)............              $5.5              $5.6
                                         3 percent (average SCC)............               $18               $19

                                         2.5 percent (average SCC)..........               $27               $28
                                         3 percent (95th percentile SCC)....               $56               $57
----------------------------------------------------------------------------------------------------------------
\a\ Climate benefit estimates reflect impacts from CO2 emission changes in the analysis years presented in the
  table and do not account for changes in non-CO2 GHG emissions. These estimates are based on the global SCC
  estimates for the analysis years (2020, 2025, and 2030) and are rounded to two significant figures.

  Table 14--Summary of the Monetized Health Co-Benefits for the Proposed Standards Option 1 Regional Compliance
                                              Approach in the U.S.
                                         [Billions of 2011 dollars] \a\
----------------------------------------------------------------------------------------------------------------
                                                                National
                                                                emission      Monetized health  Monetized health
                         Pollutant                             reductions      co- benefits (3   co- benefits (7
                                                              (thousands of        percent           percent
                                                               short tons)        discount)         discount)
----------------------------------------------------------------------------------------------------------------
                                   Option 1 Regional Compliance Approach 2020
----------------------------------------------------------------------------------------------------------------
PM2.5 precursors: \b\
    SO2...................................................               292        $12 to $26        $11 to $24
    Directly emitted PM2.5 (Elemental Carbon and Organic                   6     $0.75 to $1.7     $0.67 to $1.5
     Carbon)..............................................
    Directly emitted PM2.5 (crustal)......................                44     $0.77 to $1.7     $0.69 to $1.6
    NOX...................................................               345      $2.2 to $5.0      $2.0 to $4.5
Ozone precursor: \c\                                        ................  ................  ................
    NOX (ozone season only)...............................               146     $0.63 to $2.7     $0.63 to $2.7
----------------------------------------------------------------------------------------------------------------
Total Monetized Health Co-benefits..........................................        $16 to $37        $15 to $34
Total Monetized Health Co-benefits combined with Monetized Climate Benefits         $33 to $54        $32 to $51
 \d\........................................................................
----------------------------------------------------------------------------------------------------------------
                                   Option 1 Regional Compliance Approach 2025
----------------------------------------------------------------------------------------------------------------
PM2.5 precursors \b\                                        ................  ................  ................
    SO2...................................................               395        $17 to $38        $15 to $35
    Directly emitted PM2.5 (Elemental Carbon and Organic                   6     $0.85 to $1.9     $0.76 to $1.7
     Carbon)..............................................
    Directly emitted PM2.5 (crustal)......................                46     $0.78 to $1.8     $0.70 to $1.6
    NOX...................................................               421      $3.0 to $6.8      $2.7 to $6.1
Ozone precursor: \c\                                        ................  ................  ................
NOX (ozone season only)...................................               180      $1.0 to $4.3      $1.0 to $4.3
----------------------------------------------------------------------------------------------------------------
Total Monetized Health Co-benefits..........................................        $23 to $53        $21 to $48
----------------------------------------------------------------------------------------------------------------
Total Monetized Health Co-benefits combined with Monetized Climate Benefits         $48 to $78        $46 to $74
 \d\........................................................................
----------------------------------------------------------------------------------------------------------------
                                   Option 1 Regional Compliance Approach 2030
----------------------------------------------------------------------------------------------------------------
PM2.5 precursors: \b\
    SO2...................................................               424        $20 to $44        $18 to $40
    Directly emitted PM2.5 (Elemental Carbon and Organic                   5     $0.84 to $1.9     $0.76 to $1.7
     Carbon)..............................................
    Directly emitted PM2.5 (crustal)......................                42     $0.77 to $1.7     $0.70 to $1.6
    NOX...................................................               407      $3.0 to $6.7      $2.7 to $6.1
Ozone precursor: \c\
NOX(ozone season only)....................................               176      $1.1 to $4.5      $1.1 to $4.5
----------------------------------------------------------------------------------------------------------------
    Total Monetized Health Co-benefits......................................        $25 to $59        $23 to $54
    Total Monetized Health Co-benefits combined with Monetized Climate              $55 to $89        $53 to $84
     Benefits \d\...........................................................
----------------------------------------------------------------------------------------------------------------
\a\ All estimates are for the analysis years (2020, 2025, 2030) and are rounded to two significant figures, so
  estimates may not sum. It is important to note that the monetized co-benefits do not include reduced health
  effects from direct exposure to SO2, direct exposure to NO2, ecosystem effects or visibility impairment. Air
  pollution health co-benefits are estimated using regional benefit-per-ton estimates for the contiguous U.S.
\b\ The monetized PM2.5 co-benefits reflect the human health benefits associated with reducing exposure to PM2.5
  through reductions of PM2.5 precursors, such as SO2, NOX and directly emitted PM2.5. PM co-benefits are shown
  as a range reflecting the use of two concentration-response functions, with the lower end of the range based
  on a function from Krewski et al. (2009) and the upper end based on a function from Lepeule et al. (2012).
  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.
\c\ The monetized ozone co-benefits reflect the human health benefits associated with reducing exposure to ozone
  through reductions of NOX during the ozone season. Ozone co-benefits are shown as a range reflecting the use
  of several different concentration-response functions, with the lower end of the range based on a function
  from Bell, et al. (2004) and the upper end based on a function from Levy, et al. (2005). Ozone co-benefits
  occur in the analysis year, so they are the same for all discount rates.
\d\ We estimate climate benefits associated with four different values of a one ton CO2 reduction (model average
  at 2.5 percent discount rate, 3 percent, and 5 percent; 95th percentile at 3 percent), which each increase
  over time. For the purposes of this table, we show the benefits associated with the model average at 3%
  discount rate, however we emphasize the importance and value of considering the full range of SCC values. We
  provide combined climate and health estimates based on additional discount rates in the RIA.

  Table 15--Summary of the Monetized Health Co-Benefits in the U.S. for the Proposed Guidelines Option 1 State
                                               Compliance Approach
                                         [Billions of 2011 dollars] \a\
----------------------------------------------------------------------------------------------------------------
                                             National
                                             emission        Monetized health co-        Monetized health co-
                Pollutant                   reductions        benefits (3 percent         benefits (7 percent
                                           (thousands of           discount)                   discount)
                                            short tons)
----------------------------------------------------------------------------------------------------------------
                                   Option 1 State Compliance Approach in 2020
----------------------------------------------------------------------------------------------------------------
PM2.5 precursors: \ b\
SO2.....................................             335  $13 to $29................  $11 to $26
Directly emitted PM2.5 (Elemental Carbon               6  $0.76 to $1.7.............  $0.69 to $1.6
 and Organic Carbon).
Directly emitted PM2.5 (crustal)........              45  $0.79 to $1.8.............  $0.71 to $1.6
NOX.....................................             367  $2.2 to $4.9..............  $2.0 to $4.4
Ozone precursor: \c\
NOX (ozone season only).................             157  $0.64 to $2.7.............  $0.64 to $2.7
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits..................  $17 to $40................  $15 to $36
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits combined with      $35 to $57................  $33 to $54
     Monetized Climate Benefits \d\.
----------------------------------------------------------------------------------------------------------------
                                   Option 1 State Compliance Approach in 2025
----------------------------------------------------------------------------------------------------------------
PM2.5 precursors: \b\
SO2.....................................             425  $18 to $40................  $16 to $36
Directly emitted PM2.5 (Elemental Carbon               6  $0.90 to $2.0.............  $0.81 to $1.8
 and Organic Carbon).
Directly emitted PM2.5 (crustal)........              49  $0.83 to $1.9.............  $0.75 to $1.7
NOX.....................................             436  $2.9 to $6.5..............  $2.6 to $5.8
Ozone precursor: \c\
NOX (ozone season only).................             190  $1.0 to $4.4..............  $1.0 to $4.4
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits..................  $23 to $54................  $21 to $49
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits combined with      $49 to $80................  $46 to $75
     Monetized Climate Benefits \d\.
----------------------------------------------------------------------------------------------------------------
                                   Option 1 State Compliance Approach in 2030
----------------------------------------------------------------------------------------------------------------
PM2.5 precursors: \b\
SO2.....................................             471  $21 to $47................  $19 to $43
Directly emitted PM2.5 (Elemental Carbon               6  $0.87 to $2.0.............  $0.78 to $1.8
 and Organic Carbon).
Directly emitted PM2.5 (crustal)........              44  $0.80 to $1.8.............  $0.72 to $1.6
NOX.....................................             428  $2.9 to $6.6..............  $2.6 to $6.0
Ozone precursor: \c\
NOX (ozone season only).................             187  $1.1 to $4.6..............  $1.1 to $4.6
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits..................  $27 to $62................  $24 to $57
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits combined with      $57 to $93................  $55 to $87
     Monetized Climate Benefits \d\.
----------------------------------------------------------------------------------------------------------------
\a\ All estimates are for the analysis years (2020, 2025, 2030) and are rounded to two significant figures, so
  estimates may not sum. It is important to note that the monetized co-benefits do not include reduced health
  effects from direct exposure to SO2, direct exposure to NO2, ecosystem effects or visibility impairment. Air
  pollution health co-benefits are estimated using regional benefit-per-ton estimates for the contiguous U.S.
\b\ The monetized PM2.5 co-benefits reflect the human health benefits associated with reducing exposure to PM2.5
  through reductions of PM2.5 precursors, such as SO2, NOX and directly emitted PM2.5. PM co-benefits are shown
  as a range reflecting the use of two concentration-response functions, with the lower end of the range based
  on a function from Krewski et al. (2009) and the upper end based on a function from Lepeule et al. (2012).
  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.
\c\ The monetized ozone co-benefits reflect the human health benefits associated with reducing exposure to ozone
  through reductions of NOX during the ozone season. Ozone co-benefits are shown as a range reflecting the use
  of several different concentration-response functions, with the lower end of the range based on a function
  from Bell, et al. (2004) and the upper end based on a function from Levy, et al. (2005). Ozone co-benefits
  occur in the analysis year, so they are the same for all discount rates.
\d\ We estimate climate benefits associated with four different values of a one ton CO2 reduction (model average
  at 2.5 percent discount rate, 3 percent, and 5 percent; 95th percentile at 3 percent), which each increase
  over time. For the purposes of this table, we show the benefits associated with the model average at 3%
  discount rate, however we emphasize the importance and value of considering the full range of SCC values. We
  provide combined climate and health estimates based on additional discount rates in the RIA.

 Table 16--Summary of the Monetized Health Co-Benefits in the U.S. for the Option 2 Regional Compliance Approach
                                         [Billions of 2011 dollars] \a\
----------------------------------------------------------------------------------------------------------------
                                             National
                                             emission        Monetized health co-        Monetized health co-
                Pollutant                   reductions        benefits (3 percent         benefits (7 percent
                                           (thousands of           discount)                   discount)
                                            short tons)
----------------------------------------------------------------------------------------------------------------
                                   Option 2 Regional Compliance Approach 2020
----------------------------------------------------------------------------------------------------------------
PM2.5 precursors: \b\
SO2.....................................             244  $9.8 to $22...............  $8.9 to $20
Directly emitted PM2.5 (Elemental Carbon               5  $0.61 to $1.4.............  $0.55 to $1.2
 and Organic Carbon).
Directly emitted PM2.5 (crustal)........              36  $0.63 to $1.4.............  $0.57 to $1.3
NOX.....................................             268  $1.7 to $3.9..............  $1.6 to $3.5
Ozone precursor: \c\

NOX (ozone season only).................             111  $0.47 to $2.0.............  $0.47 to $2.0
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits..................  $13 to $31................  $12 to $28
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits combined with      $26 to $44................  $25 to $41
     Monetized Climate Benefits \d\.
----------------------------------------------------------------------------------------------------------------
                                  Option 2 Regional Compliance Approach in 2025
----------------------------------------------------------------------------------------------------------------
PM2.5 precursors: \b\
SO2.....................................             297  $13 to $29................  $12 to $26
Directly emitted PM2.5 (Elemental Carbon               4  $0.64 to $1.4.............  $0.58 to $1.3
 and Organic Carbon).
Directly emitted PM2.5 (crustal)........              34  $0.59 to $1.3.............  $0.53 to $1.2
NOX.....................................             309  $2.2 to $5.0..............  $2.0 to $4.5
Ozone precursor: \c\
NOX (ozone season only).................             129  $0.73 to $3.1.............  $0.73 to $3.1
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits..................  $17 to $40................  $16 to $36
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits combined with      $36 to $59................  $34 to $55
     Monetized Climate Benefits \d\.
----------------------------------------------------------------------------------------------------------------
\a\ All estimates are for the analysis years (2020, 2025) and are rounded to two significant figures, so
  estimates may not sum. It is important to note that the monetized co-benefits do not include reduced health
  effects from direct exposure to SO2, direct exposure to NO2, ecosystem effects or visibility impairment. Air
  pollution health co-benefits are estimated using regional benefit-per-ton estimates for the contiguous U.S.
\b\ The monetized PM2.5 co-benefits reflect the human health benefits associated with reducing exposure to PM2.5
  through reductions of PM2.5 precursors, such as SO2, NOX and directly emitted PM2.5. PM co-benefits are shown
  as a range reflecting the use of two concentration-response functions, with the lower end of the range based
  on a function from Krewski et al. (2009) and the upper end based on a function from Lepeule et al. (2012).
  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.
\c\ The monetized ozone co-benefits reflect the human health benefits associated with reducing exposure to ozone
  through reductions of NOX during the ozone season. Ozone co-benefits are shown as a range reflecting the use
  of several different concentration-response functions, with the lower end of the range based on a function
  from Bell, et al. (2004) and the upper end based on a function from Levy, et al. (2005). Ozone co-benefits
  occur in the analysis year, so they are the same for all discount rates.
\d\ We estimate climate benefits associated with four different values of a one ton CO2 reduction (model average
  at 2.5 percent discount rate, 3 percent, and 5 percent; 95th percentile at 3 percent), which each increase
  over time. For the purposes of this table, we show the benefits associated with the model average at 3%
  discount rate, however we emphasize the importance and value of considering the full range of SCC values. We
  provide combined climate and health estimates based on additional discount rates in the RIA.

    Table 17--Summary of the Monetized Health Co-Benefits in the U.S. for Option 2 State Compliance Approach
                                         [Billions of 2011 dollars] \a\
----------------------------------------------------------------------------------------------------------------
                                             National
                                             emission        Monetized health co-        Monetized health co-
                Pollutant                   reductions        benefits (3 percent         benefits (7 percent
                                           (thousands of           discount)                   discount)
                                            short tons)
----------------------------------------------------------------------------------------------------------------
                                   Option 2 State Compliance Approach in 2020
----------------------------------------------------------------------------------------------------------------
PM2.5 precursors:\b\
SO2.....................................             267  $10 to $23................  $9.1 to $21
Directly emitted PM2.5 (Elemental Carbon               5  $0.64 to $1.5.............  $0.58 to $1.3
 and Organic Carbon).
Directly emitted PM2.5 (crustal)........              38  $0.66 to $1.5.............  $0.60 to $1.4
NOX.....................................             281  $1.7 to $3.8..............  $1.5 to $3.4
Ozone precursor:\c\
NOX (ozone season only).................             119  $0.48 to $2.1.............  $0.48 to $2.1
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits..................  $14 to $32................  $12 to $29
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits combined with      $27 to $45................  $26 to $42
     Monetized Climate Benefits \d\.
----------------------------------------------------------------------------------------------------------------
                                   Option 2 State Compliance Approach in 2025
----------------------------------------------------------------------------------------------------------------
PM2.5 precursors:\ b\
SO2.....................................             327  $14 to $30................  $12 to $27
Directly emitted PM2.5 (Elemental Carbon               5  $0.69 to $1.6.............  $0.63 to $1.4
 and Organic Carbon).
Directly emitted PM2.5 (crustal)........              38  $0.64 to $1.4.............  $0.58 to $1.3
NOX.....................................             317  $2.1 to $4.7..............  $1.9 to $4.2
Ozone precursor:\c\

NOX (ozone season only).................             136  $0.72 to $3.1.............  $0.72 to $3.1
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits..................  $18 to $41................  $16 to $16
                                         -----------------------------------------------------------------------
    Total Monetized Health Co-benefits combined with      $36 to $60................  $35 to $56
     Monetized Climate Benefits \d\.
----------------------------------------------------------------------------------------------------------------
\a\ All estimates are for the analysis years (2020, 2025) and are rounded to two significant figures, so
  estimates may not sum. It is important to note that the monetized co-benefits do not include reduced health
  effects from direct exposure to SO2, direct exposure to NO2, ecosystem effects or visibility impairment. Air
  pollution health co-benefits are estimated using regional benefit-per-ton estimates for the contiguous U.S.
\b\ The monetized PM2.5 co-benefits reflect the human health benefits associated with reducing exposure to PM2.5
  through reductions of PM2.5 precursors, such as SO2, NOX and directly emitted PM2.5. PM co-benefits are shown
  as a range reflecting the use of two concentration-response functions, with the lower end of the range based
  on a function from Krewski et al. (2009) and the upper end based on a function from Lepeule et al. (2012).
  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.
\c\ The monetized ozone co-benefits reflect the human health benefits associated with reducing exposure to ozone
  through reductions of NOX during the ozone season. Ozone co-benefits are shown as a range reflecting the use
  of several different concentration-response functions, with the lower end of the range based on a function
  from Bell, et al. (2004) and the upper end based on a function from Levy, et al. (2005). Ozone co-benefits
  occur in the analysis year, so they are the same for all discount rates.
\d\ We estimate climate benefits associated with four different values of a one ton CO2 reduction (model average
  at 2.5 percent discount rate, 3 percent, and 5 percent; 95th percentile at 3 percent), which each increase
  over time. For the purposes of this table, we show the benefits associated with the model average at 3%
  discount rate; however, we emphasize the importance and value of considering the full range of SCC values. We
  provide combined climate and health estimates based on additional discount rates in the RIA.

    The EPA has used the social cost of carbon (SCC) estimates
presented in the 2013 Technical Support Document: Technical Update of
the Social Cost of Carbon for Regulatory Impact Analysis Under
Executive Order 12866 (2013 SCC TSD) to analyze CO2 climate
impacts of this rulemaking.\331\ We refer to these estimates, which
were developed by the U.S. government, as ``SCC estimates.'' The U.S.
government first published the SCC estimates in 2010 following an
interagency process that included the EPA and other executive branch
entities; the process used three integrated assessment models (IAM) to
develop SCC estimates and selected four global values for use in
regulatory analyses. The U.S. government recently updated these
estimates using new versions of each integrated assessment model and
published them in 2013. The 2013 update did not revisit the 2010
modeling decisions (e.g., with regard to the discount rate, reference
case socioeconomic and emission scenarios or equilibrium climate
sensitivity). Rather, improvements in the way damages are modeled are
confined to those that have been incorporated into the latest versions
of the models by the developers themselves and published in the peer-
reviewed literature. The 2010 SCC Technical Support Document (2010 SCC
TSD) provides a complete discussion of the methods used to develop
these estimates and the 2013 SCC TSD presents and discusses the updated
estimates.\332\
---------------------------------------------------------------------------

    \331\ 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, 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 (May 2013, Revised
November 2013). Available at: http://www.whitehouse.gov/sites/default/files/omb/assets/inforeg/technical-update-social-cost-of-carbon-for-regulator-impact-analysis.pdf.
    \332\ 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). Also available at: http://www.whitehouse.gov/sites/default/files/omb/inforeg/for-agencies/Social-Cost-of-Carbon-for-RIA.pdf>.
---------------------------------------------------------------------------

    The EPA and other agencies have sought public comment on the SCC
estimates as part of various rulemakings. In addition, OMB's Office of
Information and Regulatory Affairs recently sought public comment on
the approach used to develop the estimates. The comment period ended on
February 26, 2014, and OMB is reviewing the comments received.
    The four SCC estimates, updated in 2013, are as follows: $13, $46,
$68, and $137 per metric ton of CO2 emissions in the year
2020 (2011 dollars).\333\ The first three values are based on the
average SCC from the three IAMs, at discount rates of 5, 3, and 2.5
percent, respectively. SCCs at several discount rates are included
because the literature shows that the SCC is quite sensitive to
assumptions about the discount rate, and because no consensus exists on
the appropriate rate to use in an intergenerational context (where
costs and benefits are incurred by different generations). The fourth
value is the 95th percentile of the SCC from all three models at a 3
percent discount rate. It is included to represent higher-than-expected
impacts from temperature change further out in the tails of the SCC
distribution (representing less likely, but potentially catastrophic,
outcomes).
---------------------------------------------------------------------------

    \333\ The 2010 and 2013 TSDs present SCC in $2007. The estimates
were adjusted to 2011$ using the GDP Implicit Price Deflator. Also
available at: http://www.gpo.gov/fdsys/pkg/ECONI-2013-02/pdf/ECONI-2013-02-Pg3.pdf.
---------------------------------------------------------------------------

    The 2010 SCC TSD noted a number of limitations to the SCC analysis,
including the incomplete way in which the integrated assessment models
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. Current
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 for various reasons,
including the inherent difficulties in valuing non-market impacts and
the fact that the science incorporated into these models understandably
lags behind the most recent research. 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. Model developers
continually update the models to incorporate recent research. The new
versions of the models used to estimate the values presented in this
rulemaking offer some improvements in these areas identified above,
although further work is warranted. Accordingly, the EPA and other
parties continue to conduct research on modeling and valuation of
climate impacts with the goal of improving these estimates. Additional
details are provided in the SCC TSDs.
    The health co-benefits estimates represent the total monetized
human health benefits for populations exposed to reduced
PM2.5 and ozone resulting from emission reductions under
illustrative compliance options for the proposed standards. Unlike the
global SCC estimates, the air pollution health co-benefits are
estimated for the contiguous U.S. only. We used a ``benefit-per-ton''
approach to estimate the benefits of this rulemaking. To create the
PM2.5 benefit-per-ton estimates, this approach uses a model
to convert emissions of PM2.5 precursors into changes in
ambient PM2.5 levels and another model to estimate the
changes in human health effects associated with that change in air
quality, which are then divided by the emissions in specific sectors.
We derived national average benefit-per-ton estimates for the EGU
sector using the approach published in Fann et al. (2012),\334\ and
updated those estimates to reflect the studies and population data in
the 2012 PM NAAQS RIA. We further separated the national estimates into
regional estimates to provide greater spatial resolution.\335\ In
addition, we generated regional benefit-per-ton estimates for changes
in ozone exposure. The ozone estimates used the ozone information from
the sector modeling for the EGU sector described in Fann et al. (2012)
and the health impact assumptions used in the Ozone NAAQS
RIAs.336 337 To calculate the co-benefits for the proposed
standards, we multiplied the regional benefit-per-ton estimates for the
EGU sector by the corresponding emission reductions.\338\ 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. More
information regarding the derivation of the benefit-per-ton estimates
is available in the RIA.
---------------------------------------------------------------------------

    \334\ 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.
    \335\ U.S. Environmental Protection Agency (U.S. EPA). 2012.
Regulatory Impact Analysis for the Final Revisions to the National
Ambient Air Quality Standards for Particulate Matter. Research
Triangle Park, NC: Office of Air Quality Planning and Standards,
Health and Environmental Impacts Division. (EPA document number EPA-
452/R-12-003, December). Available at: <http://www.epa.gov/pm/2012/finalria.pdf>.
    \336\ U.S. Environmental Protection Agency (U.S. EPA). 2008b.
Final Ozone NAAQS Regulatory Impact Analysis. Research Triangle
Park, NC: Office of Air Quality Planning and Standards, Health and
Environmental Impacts Division, Air Benefit and Cost Group Research.
(EPA document number EPA-452/R-08-003, March). Available at: <http://cfpub.epa.gov/ncea/cfm/recordisplay.cfm?deid=194645>.
    \337\ U.S. Environmental Protection Agency (U.S. EPA). 2010.
Section 3: Re-analysis of the Benefits of Attaining Alternative
Ozone Standards to Incorporate Current Methods. Available at <http://www.epa.gov/ttnecas1/regdata/RIAs/s3-supplemental_analysis-updated_benefits11-5.09.pdf>.
    \338\ U.S. Environmental Protection Agency. 2013. Technical
support document: Estimating the benefit per ton of reducing PM2.5
precursors from 17 sectors. Research Triangle Park, NC: Office of
Air and Radiation, Office of Air Quality Planning and Standards,
January. Available at: <http://www.epa.gov/airquality/benmap/models/Source_Apportionment_BPT_TSD_1_31_13.pdf>.
---------------------------------------------------------------------------

    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. Even though we
assume that all fine particles have equivalent health effects, the
benefit-per-ton estimates vary between precursors depending on the
location and magnitude of their impact on PM2.5 levels,
which drive population exposure.
    It is important to note that the magnitude of the PM2.5
and ozone co-benefits is largely driven by the concentration response
functions for premature mortality and the value of a statistical life
used to value reductions in premature mortality. For PM2.5,
we cite two key empirical studies, one based on the American Cancer
Society cohort study \339\ and the extended Six Cities cohort
study.\340\ We present the PM2.5 co-benefits results as a
range based on the concentration-response functions from these two
epidemiology studies, but this range does not capture the full range of
uncertainty inherent in the co-benefits estimates. In the RIA for this
rule, which is available in the docket, we also include
PM2.5 co-benefits estimates derived from expert judgments