The fight over new CO₂ limits for power plants is coalescing around a debate over carbon capture, with the US Environmental Protection Agency defending the technology's readiness despite industry groups' arguments to the contrary.

The EPA finalized a rule on April 24 that sets a carbon emissions standard for coal- and new gas-fired generation, effectively mandating carbon capture technology for many power plants. The standards prompted criticism from trade groups questioning the feasibility of capturing and storing power plants' CO₂ emissions, echoing similar feedback after the EPA's initial proposal in May 2023.

Carbon capture and storage (CCS) "is not yet ready for full-scale, economy-wide deployment, nor is there sufficient time to permit, finance and build the CCS infrastructure needed for compliance by 2032," Dan Brouillette, president and CEO of the Edison Electric Institute (EEI), said in an April 25 statement.

CCS refers to scrubbing CO₂ from emissions sources, such as power plants, for permanent storage about a mile underground. Carbon capture technology is currently operating at one utility-scale US power plant, W.A. Parish 5-8, but owner JX Nippon Oil & Gas Exploration Corp. uses the captured gas for oil extraction. Another carbon capture project in Kemper County, Miss., was abandoned before ever coming online, forcing Southern Co. to write off billions in project costs and spurring skepticism over CCS.

Technological advancements and federal incentives have since made CCS more economical, the EPA said in its final rule. The federal agency noted the US Inflation Reduction Act's expansion in 2022 of tax credits for carbon capture, now worth up to $85 per metric ton of CO₂ stored. Process improvements learned from earlier deployments of CCS have also helped lower the cost.

"Some companies have already made plans to install CCS on their units independent of the EPA's regulations," the agency noted in its final rule.

Financial, climate impact of rule

The EPA estimated the rule could cost the industry between $7.5 billion and $19 billion through 2047 to comply. But the agency also estimated that the carbon limits will provide up to $370 billion in climate and public health net benefits over the next two decades. The rule is also expected to prevent 38 million metric tons of CO₂ emissions in 2028 and 123 million metric tons in 2035.

The rule sends "an unequivocal signal to American power plant operators that the era of unlimited carbon pollution is over," said Mona Dajani, global co-chair of energy, infrastructure and hydrogen and co-chair of the energy sector at Baker Botts.

While carbon capture technology will contribute to some of those emissions reductions, the greatest impact will come from the coal plant retirements spurred by the rule, the EPA projected. By 2035, the federal agency expects US coal-fired capacity to fall to about 20 GW — consisting of 19 GW with carbon capture and 1 GW with natural gas co-firing — compared to 11 GW with carbon capture and 41 GW of unabated coal plants if the regulations were never implemented.

As for gas-fired generation, the EPA expects 1 GW of capacity with carbon capture and 484 GW without carbon capture by 2035. In February, the EPA said it would set carbon limits for existing gas-fired power plants in a later rulemaking.

Legality

The Clean Air Act requires the EPA to show that CCS is both technically sound and economically feasible, Carrie Jenks, executive director of Harvard Law School's Environmental & Energy Law Program, said in an interview.

"And technically, I think the record is strong," Jenks said. "We know how to capture and store CO₂ and there's projects that have done this."

Meanwhile, the Inflation Reduction Act's expansion of the 45Q tax credit program has improved the economics of CCS, Jenks added. Jenks also noted that carbon capture installation is not a requirement of the rule but merely an option for compliance.

Nevertheless, some industry groups challenged the rule's legality.

"The path outlined by the EPA today is unlawful, unrealistic and unachievable," National Rural Electric Cooperative Association (NRECA) CEO Jim Matheson said in a statement. "It undermines electric reliability and poses grave consequences for an already stressed electric grid."

The NRECA argued that the standards are an EPA overreach and dependent on technology that is "promising, but not ready for prime time."

"I think we can expect some fierce legal challenges by industry opponents who've already indicated that this new rule is in violation of the 'major questions doctrine,'" Dajani, who represents energy and utility companies, said in an interview.

The doctrine refers to the US Supreme Court's ruling in West Virginia v. EPA, where, for the first time, it found that Congress must explicitly authorize agency actions of "vast political or economic significance."

Reliability provisions

Addressing concerns from grid operators and utilities, Biden administration officials said the EPA has added provisions to the final rule intended to ensure grid reliability.

The first is a short-term mechanism allowing units to respond to declared grid emergencies without being held accountable for their CO₂ emissions. The second permits US states to postpone compliance measures for certain units due to unanticipated grid reliability issues. States may include both reliability exceptions in the plans they submit to the EPA for implementing the new rule, the EPA noted.

EEI praised the reliability considerations, despite the trade group's criticism of the rule's reliance on carbon capture. "We appreciate EPA's efforts to include additional compliance flexibilities that will help EEI's members address reliability concerns in the years ahead," Brouillette said.

During an April 25 news briefing, Federal Energy Regulatory Commission Chairman Willie Phillips noted that FERC staff coordinated with EPA staff through the interagency review process of the new rule. FERC also held a grid reliability technical conference in November 2023 where the EPA's proposed rule on power plants was the focus of discussion.

Speaking with reporters after the FERC open meeting, Phillips said he had not had a chance to review the new EPA rule but saw reports that the EPA narrowed the scope of the proposed rule to provide more flexibility to generation owners and address grid reliability concerns.