Background for the Proposed EGU Existing Source GHG Guidelines 1 Base Case and Years of Analysis

benefits, costs and economic impacts of proposed emission limits for reconstructed and modified EGU sources.

In evaluating the impacts of the proposed guidelines, we analyzed a number of uncertainties. For example, the analysis includes an evaluation of different potential spatial approaches to state compliance (i.e., state and regional) and in the estimated benefits of reducing carbon dioxide and other air pollutants. For a further discussion of key evaluations of uncertainty in the regulatory analyses for this proposed rulemaking, see Chapter 8 of this RIA.

1.4 Background for the Proposed EGU Existing Source GHG Guidelines 1.4.1 Base Case and Years of Analysis

The rule on which the majority of the analysis in this RIA is based proposes GHG emission guidelines for states to limit CO2 emissions from certain existing EGUs. The base case

for this analysis, which uses the Integrated Planning Model (IPM), includes state rules that have been finalized and/or approved by a state’s legislature or environmental agencies, as well as final federal rules. The IPM Base Case v.5.13 includes the Clean Air Interstate Rule (CAIR),9 the Mercury and Air Toxics Rule (MATS), and other state and Federal regulations to the extent that they contain measures, permits, or other air-related limitations or requirements. Additional legally binding and enforceable commitments for GHG reductions considered in the base case are discussed in the documentation for IPM.10

Costs and benefits are presented for compliance in 2020, 2025, and 2030 for Option 1 and 2020 and 2025 for Option 2. These years were selected because they represent partial and

9 _{EPA Base Case v.5.13 includes the Clean Air Interstate Rule (CAIR), a Federal regulatory measure for achieving}

the 1997 National Ambient Air Quality Standards (NAAQS) for ozone (8-hour average of 0.08 ppm) and fine particles (24-hour average of 65 μg/m3 _{or less and annual average of 15 μg/m}3 _{for particles of diameter 2.5}

micrometers or less, i.e., PM2.5). Originally issued on March 10, 2005, CAIR was remanded back to EPA by the U.S. Court of Appeals for the District of Columbia Circuit in December 2008 and EPA was required to correct legal flaws in the regulations that had been cited in a ruling by the Court in July 2008. CAIR remains in effect until replaced by EPA pursuant to the Court’s ruling. CAIR’s provisions were still in effect when EPA Base Case v.5.13 was released.

10 _{See Chapter 3 of EPA’s Base Case using IPM (v5.13) documentation, available}

1-5

full implementation dates for the two policy options analyzed. Analysis of employment impacts is presented for compliance in 2020, 2025, and 2030 for Option 1 and 2020 and 2025 for Option 2. All estimates are presented in 2011 dollars.

1.4.2 Definition of Affected Sources

This proposed rule under CAA section 111(d) will set emission guidelines for states to limit CO2 emissions from certain existing EGUs. This rulemaking does not address GHG

emissions from newly constructed sources or sources modifying or reconstructing. Section 111(b) emission limits for reconstructed and modified sources are being proposed in a separate action and are discussed in Chapter 9 of this RIA.

For the purposes of this proposed rule, an affected EGU is any fossil fuel-fired EGU that was in operation or had commenced construction as of January 8, 2014, and is therefore an “existing source” for purposes of CAA section 111, but in all other respects would meet the applicability criteria for coverage under the proposed GHG standards for newly constructed fossil fuel-fired EGUs published in the Federal Register on that date. The proposed GHG standards for newly constructed EGUs generally define an affected EGU as any boiler, IGCC, or combustion turbine (in either simple cycle or combined cycle configuration) that (1) is capable of combusting at least 250 million British thermal units (Btu) per hour; (2) combusts fossil fuel for more than 10 percent of its total annual heat input; (3) sells the greater of 219,000 MWh per year or one-third of its potential electrical output to a utility distribution system; and (4) was not in operation or under construction as of January 8, 2014 (the date the proposed GHG standards of performance for newly constructed EGUs were published in the Federal Register). The minimum fossil fuel consumption condition applies over any consecutive three-year period (or as long as the unit has been in operation, if less). The minimum electricity sales condition applies over rolling three-year periods (or as long as the unit has been in operation, if less).

1.4.3 Regulated Pollutant

This rule sets emission guidelines for CO2 emissions from affected sources. The EPA is

1-6

country’s largest stationary source emitters of GHGs. In 2009, the EPA found that by causing or contributing to climate change, GHGs endanger both the public health and the public welfare of current and future generations.11

The EPA is aware that other GHGs such as nitrous oxide (N2O) (and to a lesser extent,

methane [CH4]) may be emitted from fossil-fuel-fired EGUs, especially from coal-fired

circulating fluidized bed combustors and from units with selective catalytic reduction and selective non-catalytic reduction systems installed for nitrogen oxide (NOX) control. The EPA is

not proposing separate N2O or CH4 guidelines or an equivalent CO2 emission limit because of a

lack of available data for these affected sources. Additional information on the quantity and significance of emissions and on the availability of controls of reasonable cost would be needed before proposing standards for these pollutants.

1.4.4 Emission Guidelines

The EPA is proposing emission guidelines for states to use in developing plans to address greenhouse gas emissions from existing fossil fuel-fired electric generating units. Specifically, the EPA is proposing state-specific rate-based goals for CO2 emissions from the power sector, as

well as guidelines for states to follow in developing plans to attain the state-specific goals. (These state-based goals can be found in the preamble and Chapter 3 of this RIA.) The proposed emission guidelines provide states with options for establishing standards of performance in a manner that accommodates a diverse range of state approaches. The proposed guidelines would also allow states to collaborate and to demonstrate compliance on a multi-state basis, in

recognition of the fact that electricity is transmitted across state lines, and measures often impact regional EGU CO2 emissions. The illustrative compliance strategies presented in this RIA

include both regional and state-level compliance scenarios for each of the regulatory options presented.

11 _{Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air}

1-7