EPA Releases Additional Information on Proposed Clean Energy Incentive Program, As Requested by States

June 20, 2016

EPA recently released the proposed design details of the Clean Energy Incentive Program (CEIP), which is an optional, voluntary program that states can participate in under the Clean Power Plan.

The CEIP provides additional compliance flexibility to states that promote certain clean energy and energy efficiency projects—including projects that benefit low-income communities—before the Clean Power Plan emissions reduction requirements go into effect in 2022.

Earlier this year, the U.S. Supreme Court stayed the implementation of the Clean Power Plan until the litigation over the carbon pollution standards concludes. In April, environmental officials from 14 states requested that EPA provide additional information on the CEIP and other guidance related to the Clean Power Plan in a manner respectful of the stay.

In their letter, the states noted that additional information on the CEIP and other guidance would better inform them in planning for a variety of state and federal obligations to protect public health and the environment. The Georgetown Climate Center supported the states in developing the letter.

States participating in the CEIP would allocate emission allowances under mass-based plans, or emission rate credits (ERCs) under rate-based plans, to eligible projects for renewable energy generation or energy savings that occur during 2020 and 2021. This would provide a financial incentive to these projects, because the allowances or ERCs could be sold to power plants seeking to comply with the carbon pollution standards. EPA would match the allocated allowances provided by states to eligible projects, up to a national limit equal to 300 million short tons of carbon emissions. This would provide some additional compliance flexibility for power plants regulated under the Clean Power Plan.

The proposed rule, released on June 16, 2016, provides significant new details about how the CEIP would function, including the following:

  • The matching pool of allowances would be evenly divided between two categories of projects: (1) qualifying renewable energy projects and (2) projects that benefit low-income communities;
    In the category of renewable energy projects, geothermal and hydropower projects would now be eligible as well as solar and wind projects;
  • In the category of projects that benefit low-income communities, distributed solar projects that benefit such communities would now be eligible, in addition to demand side-energy efficiency projects that benefit such communities;
  • Renewable energy projects would be eligible when they “commence commercial operation,” instead of when they “commence construction,” but energy efficiency projects will remain eligible when they “commence operation”; and
  • States will be allowed to use one or more pre-existing state and certain federal definitions for “low-income community” that were established prior to the publication of the Clean Power Plan on October 23, 2015.