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Step-by-step guide to understanding Obama’s Clean Power Plan

On Monday, President Obama and the Environmental Protection Agency (EPA) announced the Clean Power Plan, a historic and important step in reducing carbon pollution from power plants in an effort to take action on climate change.

The new policy aims to reduce US power-plant emissions by 32 percent by 2030, compared with 2005 levels, and will place significant emphasis on wind and solar power and other renewable energy sources.

• Related content: 5 Ways companies can satisfy the Clean Power Plan requirements

"We are the first generation to feel the impacts of climate change, and the last generation to be able to do something about it," President Obama said.

"If we don't do it nobody will. America leads the way forward... that's what this plan is about. This is our moment to get something right and get something right for our kids.”

State-by-state goals

In accordance with the Clean Power Plan, each state will be given individual goals for cutting CO2 emissions and it will be up to the state to decide how to get there. States will be required to submit their plans by 2016-2018 and start reducing emissions by 2022 through 2030.

The EPA is setting different targets for 47 states with Vermont and Washington DC being exempt because they don’t have any large fossil-fuel electric power plants. As of now, Hawaii and Alaska aren’t covered under the rule because the EPA is still figuring out how to deal with their unique grid situation.

Formula for state emission goals

The EPA uses a complex formula for setting the state-by-state goals. To make it easier to understand, Vox.com walks us through the steps involved.

“First, take stock of the nation's fossil-fuel power plants. The EPA started by tallying up all the coal, oil, and natural gas power plants across the United States, placed them into two broad categories, and then figured out their average emission rates in 2012 in each of the country's three main electric-grid regions.

“Second, estimate how much these power plants can reasonably cut. Before regulating air pollution under section 111(d) of the Clean Air Act, the EPA has to figure out what the "best system of emissions reductions" for these power plants is. That is, EPA has to show that power plants can cut emissions using methods that have been adequately demonstrated and can be done at a "reasonable" cost.

• Related content: How will the energy landscape change after EPAs new emissions rule?

“What EPA decided is that utilities could reduce emissions from their coal and natural gas power plants using three different methods — these methods are known as "building blocks" in the rule: operate coal plants more efficiently; run gas plants more often, coal less; and ramp up renewable power.

“Third, figure out the effects of applying these three "building blocks" to power plants. Next, the EPA calculated what would happen if these three building blocks were applied throughout the entire Eastern Interconnection.

“Fourth, apply the power-plant targets to each state. Finally, EPA applied the new power-plant targets to individual states, depending on each state's power mix.”

Clean Power Plan’s emissions targets for 2030

Flexibility for states to meet their targets

Now that goals have been set, the EPA is expected to give states a wide array of flexibility to meet their targets, including a vast array of different techniques.

According to Vox.com, states can ramp up renewable energy to hit their targets, they can reduce output from their existing coal plants and ramp up output from natural gas plants. They can even implement a carbon tax.

“The only real limitation here is the EPA. The agency will have to look over each state's implementation plan and judge whether the state is likely to meet its emissions goal — and then approve or deny the plan. This is why the next president is so crucial to how the Clean Power Plan works, since he or she will likely be overseeing that whole approval process.”

An offer you can’t refuse

In the instance a state refuses to comply to the new plan, the EPA will implement its own federal plan to regulate those state’s emissions. In addition, if a state fails to meets it interim goals, the EPA can step in with its federal plan.

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“The short version is that EPA is proposing a cap-and-trade system for recalcitrant states,” according to Vox.com. “The agency is mulling over two options: Either it would put a cap on overall power-plant emissions in a state and then allow utilities to trade pollution credits with each other. Or the EPA would impose a rate-based standard on a state's power sector and allow trading within it. As with any federal air-pollution rule, utilities would face fines and other penalties if they failed to comply.”

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