On January 19, 2021, in a 2-1 decision, the D.C. Circuit Court vacated the Trump administration’s 2019 Affordable Clean Energy (ACE) Rule and remanded it to the U.S. Environmental Protection Agency (EPA). The decision offers a strong statement about EPA’s breadth of authority to regulate greenhouse gases (GHGs) under the Clean Air Act (CAA) and, if its position is upheld, clears the way for the Biden administration to regulate power plants.
The Affordable Clean Energy Rule
The EPA promulgated the ACE Rule in 2019 under the CAA, replacing the Obama administration’s 2015 Clean Power Plan (CPP). Both rules sought to reduce GHG emissions from the power sector; but where the CPP implemented broader industry-wide mechanisms, the ACE Rule limited reduction efforts to the actual source power plants.
The 2015 CPP offered “beyond the fenceline” tools for states to reduce emissions by replacing fossil fuels with renewable energy sources and participating in emissions credit-trading programs; however, in February 2016 the U.S. Supreme Court stayed the implementation of the CPP pending litigation in the D.C. Circuit. During the stay and subsequent freeze of litigation, the Trump administration rescinded the CPP and promulgated the ACE Rule.
In promulgating the ACE Rule, the Trump EPA took an alternative view of the CAA than the Obama EPA and reasoned that the CAA expressly limited the EPA’s power to only “at the source” emissions reduction options, such as heat rate improvement technologies. As a result, the Trump administration removed all of the CPP’s “beyond the fenceline” options and limited emissions restrictions to those applied directly to power plants.