The Clean Power Plan, announced by President Obama in August 2015, set the first-ever limits on carbon pollution from U.S. power plants, the largest source of the pollution in the country that’s driving dangerous climate change. We are already seeing the impacts of climate change in extreme weather, droughts, wildfires, floods, and other disruptions around the world. Limiting carbon pollution from the nation’s power plants is the single-biggest step we can take to fight climate chaos.

Protecting Our Health and Our Climate

The U.S. Environmental Protection Agency issued the final Clean Power Plan under the Clean Air Act, the nation’s fundamental air pollution law. The plan sets flexible and achievable standards that give each state the opportunity to design its own most cost-effective path toward cleaner energy sources. This historic step to rein in power plant pollution would speed America’s transition away from fossil fuels, protect our health, prevent future generations from experiencing the worst effects of climate change, and position the United States as a global climate leader.

Enforceable carbon pollution limits would kick in starting in 2022 and ramp up into full effect by 2030. Of course, power companies would have to act sooner than 2022 to prepare and to respond to additional clean energy incentives in the plan.

According to EPA projections, by 2030, the Clean Power Plan would cut the electric sector’s carbon pollution by 32 percent nationally, relative to 2005 levels. In 2030 alone, there would be 870 million fewer tons of carbon pollution. This is like canceling out the annual carbon emissions from 70 percent of the nation’s cars or avoiding the pollution from the yearly electricity use of every home in America.

Economists believe that in 2030, the Clean Power Plan could save the country $20 billion in climate-related costs and deliver $14 billion to $34 billion in health benefits. The shift to energy efficiency and cleaner power will also save the average American family $85 on its electricity bills in 2030.

How the Clean Power Plan Works: Federal and State Responsibilities

The EPA adopted the Clean Power Plan under the Clean Air Act, which, according to a 2011 Supreme Court ruling, provides the legal authority to control carbon pollution from America’s fleet of fossil-fueled power plants. Under this authority, the Clean Power Plan establishes a federal–state process for controlling power plant pollution.

First, the Clean Power Plan establishes national carbon dioxide emissions performance rates for existing coal- and gas-fired power plants. Each state then has an opportunity to adopt its own plan―including enforceable emissions limits―for its coal and gas plants. The Clean Power Plan describes multiple ways that states can structure their plans and emissions limits.

The Clean Air Act does not require any state to adopt a plan to curb its power plant pollution. If a state chooses not to adopt a satisfactory plan, however, our national air pollution law provides a federal guarantee for our health and well-being. In that case, it is the EPA’s responsibility to regulate the power plants in that state directly.

Incentives Will Encourage Investments in Renewables and Energy Efficiency

Early investments in renewables and energy efficiency will help power plants meet their enforceable limits. Projects begun after 2012 can earn credits or allowances for emissions reductions they achieve in 2022 and beyond; those reductions can count toward compliance with plants’ enforceable limits.

In addition, the final Clean Power Plan creates a new voluntary Clean Energy Incentive Program (CEIP) that will generate additional early compliance credits. The CEIP allows states to award credits or allowances to qualifying renewable electricity generation, and to qualifying energy efficiency savings in low-income communities, for emissions reductions achieved in 2020 and 2021, before the compliance period begins. Projects are eligible if they are initiated after the state submits its final state plan. Entities that earn credits or allowances in 2020 and 2021 can sell them to fossil power plants for use in 2022 or later to help meet their emissions limits.

The CEIP program description states that projects can earn credits or allowances up to a nationwide total of 600 million tons. Wind or solar projects will receive a half-credit from the state and a half-credit from the EPA. Low-income energy efficiency projects will generate two credits, one from the EPA and one from the state.

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Flexibility Ensures Reliable Electricity

The power grid would remain strong as states implement the Clean Power Plan, thanks to the many layers of flexibility in the design of state and federal plans, plus the flexibilities provided by emissions trading and early incentives. The plan also requires states to consider grid reliability when designing their plans. And grid operators, states, and federal agencies (the EPA, the Federal Energy Regulatory Commission, and the U.S. Department of Energy) would be working together, planning to meet power needs with pollution-control obligations in mind and watching closely to ensure reliability.

As an extra safeguard, the final Clean Power Plan includes a backstop reliability provision to protect the grid in case of unpredictable emergency events, while keeping the states on track to meet their final targets. States can grant a power plant an alternative, more lenient emissions limit for up to 90 days if extraordinary circumstances require a plant to operate in excess of otherwise applicable pollution limits in order to maintain reliable electricity service. If such operations are needed for a longer period, then the state must make up for the plant’s excess emissions through additional reductions elsewhere or revise its plan to stay in compliance.

The Federal Plan Would Guarantee Pollution Reductions If States Do Not Act

The Clean Air Act, as noted above, creates fundamental national air pollution safeguards. In this program, the Clean Air Act invites states to take the lead by crafting individual plans to regulate their polluters in a way that suits state and local conditions. For 45 years, states have almost always chosen to develop and carry out plans to implement Clean Air Act protections.

In the rare cases where states choose not to act, the Clean Air Act provides a critical guarantee that the national government will regulate polluters directly if necessary. The federal plan proposal lays out both rate- and mass-based options consistent with the Clean Power Plan provisions described above. It also includes corresponding “model plan” provisions that states can choose to adopt, simplifying the plan development process.