Regional Energy Governance and U.S. Carbon Emissions

Abstract

The U.S. Environmental Protection Agency’s final rule that limits carbon dioxide emissions from existing power plants — the Clean Power Plan — is an environmental regulation that powerfully influences energy law and forms a key part of the U.S. plan to meet its voluntary international commitments under the December 2015 Paris Agreement on climate change. Even if portions of the Plan are ultimately struck down, almost any viable pathway to lower carbon emissions will require greater integration of these two areas of law to address the large percentage of U.S. emissions from the energy sector. This integration produces both challenges and opportunities for governance. The Clean Power Plan (or similar regulations likely to be promulgated under the Clean Air Act in the future) must rely on an environmental-law cooperative federalist implementation structure in which states implement federal standards. However, electricity markets and governance are highly regional, and numerous studies show the economic benefits of interstate coordination, whether through governmental cooperation or trading among utilities. The project of energy-environment integration will benefit from existing regional energy-based institutions that already integrate electricity sources from different states. But it will require enhancement of existing regional approaches to generation capacity planning and transmission expansion, the interconnection of generators to lines, and energy markets. It also will require more interstate, state-regional-federal, and interregional cooperation.

This Article systematically explores the opportunities for implementation of U.S. carbon emissions regulation presented by regional energy governance, using the Clean Power Plan as a case study. The Plan is not only the most ambitious effort at energy-environment integration to date, but also illustrates the need for enhanced regional governance. The Plan’s many options for interstate coordination — from multistate plans to utility trading — do not ensure alignment with existing regional markets because coordination will be difficult for states that choose different approaches to emissions accounting. The Article provides a timely analysis of (1) why enhanced regional governance of carbon emissions is needed, (2) what barriers it faces and opportunities it presents, and (3) how states could build from existing regional approaches in other contexts to create new mechanisms for cooperation and enhance regional governance structures. Addressing these governance issues effectively in the transition to a lower carbon economy will reduce the implementation costs of carbon emissions reduction and improve the reliability of the electricity system.

Keywords: Clean Power Plan, climate, climate change, carbon, GHGs, greenhouse gas, Clean Air Act, regional, regional governance, trading, carbon trading, best system of emission reduction, BSER, federalism, Environmental Protection Agency, regional transmission operators, balancing authorities