California Is First State to Release Draft Plan to Comply with Federal Clean Power Plan

August 3, 2016

On August 2, 2016, the California Air Resources Board (CARB) released its draft plan for complying with the Environmental Protection Agency’s Clean Power Plan to reduce carbon emissions from the power sector.

The Clean Power Plan requires states to develop and submit to EPA plans that set carbon pollution standards for existing power plants. Earlier this year, the U.S. Supreme Court stayed the implementation of the Clean Power Plan until litigation over the standards concludes. During the stay, states are under no obligation to comply with any deadlines or requirements of the Clean Power Plan. However, several states, including California, have indicated that they will voluntarily continue to plan for compliance with the federal requirements.  

California is the first of these states to release a proposed plan. In the draft standards, California proposes to use its existing economy-wide cap-and-trade program to comply with the federal program under a “state measures” approach. This approach allows states to use existing policies to comply with the federal limits, even if the policies apply to a broader group of emitting sources than just existing power plants. The state plans must, however, include a federally-enforceable backstop that guarantees compliance with federal targets if the state policy does not meet the level of required emission reduction from power plants.

Under California’s proposal, covered power plants could use any trading instruments in the state’s cap-and-trade program to comply with California’s Clean Power Plan emission standards, including offset credits and allowances from other jurisdictions with programs linked to California. In addition to the cap-and-trade program, California’s Renewables Portfolio Standard and energy efficiency standards would also drive emission reductions from power plants and help the state meets its Clean Power Plan targets. CARB’s analysis shows that through these programs, the state would more than meet the federally required level of emission reduction from existing power plants.  

Should these existing California programs fall short of driving the required emission reductions from existing power plants in practice, the CARB proposal includes a backstop trading program for power plants that would achieve the Clean Power Plan targets.

In a separate regulatory action, CARB is proposing to extend the California cap-and-trade program through 2031, which would align it with the Clean Power Plan timeline.

The draft California Clean Power Plan compliance plan will be open for comment until September 19, 2016. A public Air Resource Board meeting on the plan is scheduled for September 22, 2016.