	Introduction

In August 2018, the U.S. Environmental Protection Agency (EPA) proposed the "Affordable Clean Energy" (ACE) rule. ACE would also modify an applicability determination for New Source Review (NSR), which is a CAA preconstruction permitting program intended to ensure that new and modified stationary sources of air pollution do not significantly degrade air quality. The ACE Proposal

		Proposed Emission Guidelines to Replace the CPP

EPA proposed to replace the CPP with revised emission guidelines for existing fossil fuel steam generating units, which are largely coal-fired units. Specifically, EPA proposed a new BSER for these electric generating units (EGUs) based on heat rate improvement (HRI) measures, discussed below. EPA did not propose a BSER for other types of EGUs, such as stationary combustion turbines, which includes NGCC units. Under the proposal, states would establish unit-specific performance standards based on the list of candidate technologies identified by EPA and other considerations, such as the remaining useful life of the unit. EPA based the proposal on its finding that the BSER set in the CPP exceeded EPA's statutory authority by using measures that applied to the power sector rather than measures carried out within an individual facility. Instead, EPA proposed a list of "candidate technologies" of HRI measures that constitute the BSER. Proposed Revisions to Regulations That Implement Section 111(d) Emission Guidelines

The second action that EPA proposed in ACE would revise the "general implementing" regulations (40 C.F.R. In particular, EPA seeks to codify its current legal interpretation that states have "broad discretion in establishing and applying emissions standards consistent with the BSER." EPA therefore proposed changes that would, among other things, revise some definitions, lengthen the time for development and review of state plans, add a step for EPA to determine whether state plan submissions are complete, and modify a variance provision. Under ACE, NSR would not be triggered if the modification to an existing EGU does not increase emissions on an hourly basis. These EGUs would not be required to install additional pollution controls, even if the modification leads to an increase in the annual emissions. For example, EGUs that adopt HRI measures may operate more efficiently, which in turn may lower their operating costs. Projected Emission Impacts Under ACE

EPA projected that power sector emissions of CO 2 , SO 2 , and NO x would increase under the ACE proposal compared to the CPP. EPA also projected that ACE would, in most scenarios, decrease CO 2 , SO 2 , and NO x emissions compared to a baseline without the CPP. CPP . In contrast, the ACE proposal would not establish a numeric performance standard for coal-fired EGUs. The emission reduction differences between CPP and non-CPP scenarios are greater in the studies from earlier years. For example, a comparison between CPP and non-CPP scenarios from the past three EIA analyses shows the percentage difference has decreased from 16% (in 2016) to 8% (in 2018). This reflects the fact that many of the changes EPA expected to result from the CPP (e.g., natural gas and renewables replacing coal-fired units) have already happened as the result of market forces in the electric power sector. Comparisons between the projections in Table 1 should be made with caution for several reasons. Models from different organizations may include different assumptions about future economic conditions and underlying energy inputs (e.g., natural gas prices). Comparison of Monetized Benefits and Costs

Compared to the current regulation—which is the CPP—the ACE proposal would reduce compliance costs but would also yield lower emission reductions, thereby increasing the climate-related damages (forgone benefits) and human health damages (forgone benefits). EPA's analysis shows that the estimated value of the forgone benefits would outweigh the compliance cost savings when replacing the CPP with ACE, yielding net costs. Specifically, EPA estimated that the net costs of replacing the CPP with ACE range from $12.8 billion to $72.0 billion (2016 dollars) over a 15-year period (2023-2037). When EPA excludes the forgone human health co-benefits, these comparisons yield present value estimates that range from a net cost of $6.6 billion to a net benefit of $2.0 billion (2016$) over a 15-year period (2023-2037).
In August 2018, the U.S. Environmental Protection Agency (EPA) proposed three actions in the "Affordable Clean Energy Rule" (ACE). First, EPA proposed to replace the Obama Administration's 2015 Clean Power Plan (CPP) with revised emission guidelines for existing fossil fuel steam electric generating units (EGUs), which are largely coal-fired units. Second, EPA proposed revised regulations to implement emission guidelines under Clean Air Act (CAA) Section 111(d). Third, EPA proposed to modify an applicability determination for New Source Review (NSR), a CAA preconstruction permitting program for new and modified stationary sources.
The first action stems from EPA's finding that the CPP exceeded EPA's statutory authority by using measures that applied to the power sector rather than measures carried out within an individual facility. In the ACE rule, EPA proposed to base the "best system of emission reduction" (BSER) for existing coal-fired EGUs on heat rate improvement (HRI) measures. EPA did not propose a BSER for other types of EGUs, such as natural gas combined cycle units. In addition, EPA did not establish a numeric performance standard as the agency did in the CPP. Instead, EPA proposed a list of "candidate technologies" of HRI measures that constitute the BSER. States would establish unit-specific performance standards based on this list and other unit-specific considerations.
Second, EPA proposed to revise the general implementing regulations to clarify EPA's and states' roles under Section 111(d) based on the agency's current legal interpretation that states have broad discretion to establish emissions standards consistent with the BSER. The proposed changes would, among other things, revise definitions and lengthen the time for development and review of state plans.
Third, EPA proposed to revise the NSR applicability test for EGUs. According to EPA, this would prevent NSR from discouraging the installation of energy efficiency measures. EGUs that adopt HRI measures and operate more efficiently may be used for longer time periods, thereby increasing annual emissions and potentially triggering NSR. Under ACE, NSR would not be triggered if the EGU modification did not increase emissions on an hourly basis, even if the modification increases annual emissions.
EPA estimated emission changes under multiple scenarios. EPA projected that power sector emissions of carbon dioxide (CO2), sulfur dioxide (SO2), and nitrogen oxides (NOx) would increase under the ACE proposal compared to the CPP. EPA also projected that ACE would, in most scenarios, decrease CO2, SO2, and NOx emissions compared to a baseline without the CPP.
Power sector emissions projections, comparing CPP and non-CPP scenarios, provide context for evaluating the potential impacts of the ACE proposal. The CO2 emission reduction differences between CPP and non-CPP scenarios are greater in the studies from earlier years. For example, a comparison between CPP and non-CPP scenarios from the past three Energy Information Administration analyses shows that the percentage difference has decreased from 16% (in 2016) to 8% (in 2018), reflecting the fact that many of the changes EPA expected to result from the CPP (i.e., natural gas and renewables replacing coal-fired units) have happened already due to market forces and other factors. Comparisons between modeling projections of electricity sector CO2 emissions should be made with caution, however, given potential differences in modeling assumptions about future economic conditions and underlying energy inputs (e.g., natural gas prices).
EPA estimated that compared to the CPP, ACE would reduce compliance costs and yield lower emission reductions, thereby increasing climate-related damages and human health damages ("forgone benefits"). According to EPA, the estimated value of the forgone benefits would outweigh the compliance cost savings when replacing the CPP with ACE, yielding net costs. Specifically, EPA estimated that this replacement would yield net costs ranging from $12.8 billion to $72.0 billion (2016$) over a 15-year period (2023-2037). Excluding forgone human health co-benefits from these comparisons yields estimates that range from a net cost of $5.4 billion to a net benefit of $3.4 billion over a 15-year period (2023-2037).