Representation of New Environmental Rules and Regulations

In Energy Information Administration (EIA) analyses, the reference case incorporates rules and regulations in place at the time of the analysis. Rules or regulations not finalized, in early stages of implementation (without specific guidelines), or still being developed or debated are not represented. As an independent statistical and analytical agency, EIA does not take positions on how legislative or regulatory issues will be resolved or how regulations will, or should, be implemented.

The reference case for this analysis excludes several potential environmental actions, such as new regulations affecting regional haze, for which States are developing implementation plans; new National Ambient Air Quality Standards (NAAQS) for particulates, still being reviewed by the U.S. Environmental Protection Agency (EPA) and the courts; and the possible ratification of the Kyoto Protocol. In addition, no effort is made to predict the Hg emission reductions that may be required^a or the outcome of lawsuits against the owners of 32 coal-fired power plants accused of violating the Clean Air Act (CAA).^b

In 1999, the EPA issued regulations to improve visibility (reduce regional haze) in 156 national parks and wilderness areas across the United States. It is expected that these rules will have an effect on electric power plants, but the degree to which they will be affected is not known. Emissions of SO₂ and NO_x contribute to regional haze, and reductions could improve visibility in some areas. The regulations call for States to establish goals and design plans for improving visibility in affected areas; however, State implementation plans (SIPs), which are not required until 2004 or later, are not represented in this analysis.

The revised NAAQS, issued by the EPA in 1997, created a standard for fine particles smaller than 2.5 micrometers in diameter (PM_2.5). Power plant emissions of SO₂ and NO_x are also a component of fine particulate emissions. The EPA is now reviewing scientific data on fine particulate emissions to determine whether the standard should be revised. The review is expected to be completed in 2002. If the standard is not changed, States will be required to submit plans to comply by 2005; however, the NAAQS for fine particulates has been challenged in court, and the resolution of the case is uncertain.

In December 1997, 160 countries met to negotiate binding limitations on greenhouse gas emissions for the developed nations. CO₂ emissions from fossil-fired power plants are a key component of greenhouse gas emissions. The developed nations agreed to limit their greenhouse gas emissions to 5 percent below the levels emitted in 1990, on average, between 2008 and 2012. The target for the United States is 7 percent below the 1990 emission level for all greenhouse gases. Reductions would be required if the U.S. Senate ratified the protocol. At this time, while 29 countries have ratified the protocol, none of the Annex I countries (the developed countries) has ratified the agreement. Various elements of the Protocol are still under negotiation. In addition, the Bush Administration opposes ratification of the Protocol in its present form.

The Clean Air Act Amendments of 1990 (CAAA90), Section 112(n)(1)(A), required that the EPA prepare a study of hazardous air emissions from steam generating units. The report was submitted to Congress on February 24, 1998. Its key finding was that Hg emissions from coal-fired power plants posed the greatest potential for harm. The EPA is now collecting and analyzing data on Hg emissions from specific power plants. The data, together with continuing studies on the health effects of mercury, will be used to determine the extent to which emissions need to be reduced. The EPA will be developing proposed regulations for reducing Hg emissions over the next 3 years.

On November 3, 1999, the Justice Department, on behalf of the EPA, filed suit against seven electric utility companies, accusing them of violating CAAA90 by not installing state-of-the-art emissions control equipment on power plants when major modifications were made. CAAA90 requires that when major modifications are made to older power plants they must also be upgraded to comply with emissions standards for new plants. The EPA is arguing that the seven companies and the Tennessee Valley Authority made major modifications to 32 power plants but did not add required emissions control equipment. Settlements have been reached in some cases, but most are ongoing.

Readers should keep in mind that some of the projected actions and costs incurred to comply with the emissions caps analyzed in this report may also result from the other pending rules and regulations discussed above when they are finalized. Projections in the reference case in this report are not statements of what will happen but of what might happen, given the assumptions and methodologies used. The reference projections are business-as-usual trend forecasts, given known technology, technological and demographic trends, and current laws and regulations. Thus, they provide a policy-neutral reference case that can be used to analyze policy initiatives. All laws are assumed to remain as now enacted, although the impacts of emerging regulatory changes, when defined, are reflected.

aOn December 15, 2000, the EPA announced that Hg emissions need to be reduced, and that regulations will be issued by 2004.

^bSee Chapter 5 of the earlier EIA report for discussion of New Source Review issues.