FACTSHEET
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• State plans will be developed and implemented in a future that is changing so quickly that it
is already projected to be cleaner than we anticipated at proposal. Utilities are rapidly
moving toward a cleaner future, so the amount of work states have left to do is less than
before, with the Clean Power Plan securing the progress already being made and adding to
it in the years to come.
EMISSIONS TRADING
• One cost-effective way that states can meet their goals is emissions trading, through which
affected power plants may meet their emission standards via emission rate credits (for a
rate-based standard) or allowances (for a mass-based standard).
• Trading is a proven approach to address pollution and provides states and affected plants
with another mechanism to achieve their emission standards. Emission trading is a market-
based policy tool that creates a financial incentive to reduce emissions where the costs of
doing so are the lowest and clean energy investment enjoys the highest leverage.
• Market-based approaches are generally recognized as having the following benefits:
o Reduce the cost of compliance
o Create incentives for early reduction
o Create incentives for emission reductions beyond those required
o Promote innovation, and
o Increase flexibility and maintain reliability
• In addition to including mass-based state goals to clear the path for mass-based trading
plans, the final rule gives states the opportunity to design state rate-based or mass-based
plans that will make their units "trading ready," allowing individual power plants to use out-
of-state reductions - in the form of credits or allowances, depending on the plan type - to
achieve required CO2 reductions, without the need for up-front interstate agreements.
• EPA is committed to supporting states in the tracking of emissions, as well as tracking
allowances and credits, to help implement multi-state trading or other approaches.
STATE PLANS
• States must develop and implement plans that ensure the power plants in their state -
either individually, together, or in combination with other measures - achieve the
equivalent, in terms of either rate or mass, of the interim CO2 performance rates between
2022 and 2029 and the final CO2 emission performance rates for their state by 2030.
• States may choose between two plan types, expressed as emission rate or mass, to meet
their goals:
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o Emission standards plan - includes source-specific requirements ensuring all
affected power plants within the state meet their required emission performance
rate-or a mass-based equivalent.
o State measures plan - includes a mixture of measures implemented by the state,
such as renewable energy standards and programs to improve residential energy
efficiency that are not included as federally enforceable components of the plan.
The plan would include a backstop of federally enforceable standards on affected
power plants that fully meet the emission guidelines and that would be triggered if
the state measures fail to result in the affected plants achieving the required
emissions reductions on schedule. States may use the proposed model rule also
issued on August 3 for their backstop.
• In developing its plan, each state will have the flexibility to select the measures it prefers in
order to achieve the CO2 emission performance rates for its affected plants, or meet the
equivalent statewide rate- or mass-based CO2 goal.
• States will also have the ability to shape their own emissions reduction pathways over the
2022-29 period since their affected sources together must only meet the states' interim
goals "on average" over the eight-year span.
• States, through various state plan types, can utilize the reduction methods outlined in the
Best System of Emission Reduction (BSER) (i.e., increasing coal plant efficiency, shifting coal
generation to natural gas generation, and increasing renewable power generation) or they
can choose to rely upon other measures such as demand-side energy efficiency programs or
increased nuclear generation.
• EPA is providing a Clean Energy Incentive Program to reward early investments in certain
renewable energy (RE) and demand-side energy efficiency (EE) projects that generate
carbon-free MWh or reduce end-use energy demand during 2020 and 2021.
o State participation in the program is optional.
o Recognizing that low-income communities are often under-represented in RE and EE
investment, EPA is providing additional incentives to encourage such investments
that are implemented in low-income communities.
• The final rule also gives states the option to work with other states on multi-state
approaches that allow their power plants to integrate their interconnected operations
within their operating systems and their opportunities to address carbon pollution.
• The flexibility of the rule allows states to reduce costs to consumers, minimize stranded
assets and spur private investments in renewable energy and energy efficiency technologies
and businesses.
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• States can tailor their plans to meet their respective energy, environmental and economic
needs and goals, and those of their local communities by:
o relying on a diverse set of energy resources;
o protecting electric system reliability;
o providing affordable electricity; and
o recognizing investments that states and power companies are already making.
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