Fri Mar 4 12:35:12 EST 2016

RISI VIEWPOINT: Five things the forest products industry should know about the
EPA's clean power plan
BEDFORD, MA, March 4, 2016 (RISI) - by Seth Walker, Bioenergy Economist, RISI
The majority of wood biomass power comes from the forest products industry.
While much of the new development in the biomass energy arena comes from
independent power producers, the traditional forest products industry still produces
the lion's share of wood-based power. According to the US Energy Information
Administration (EIA), 64% of the electricity produced from wood and wood-derived
fuels in 2015 came from industry. Most of this production comes from pulp mills
and includes energy produced from mill residues such as bark, forest biomass
including in-woods grindings, and pulping byproducts like black liquor.

States have significant autonomy when it comes to making regulations.

Importantly, the EPA is giving states a lot of leeway in coming up with their own
plan on how to reduce emissions. This includes how states treat biogenic carbon. As
long as there is a scientific basis for their regulations, the EPA lets states determine
how to treat biomass in their individual plans. This means we could have some
states that don't allow biomass power to qualify at all, while others heavily rely on
biomass to meet their targets and say the raw material itself is carbon neutral.
The Clean Power Plan is focused on emissions reductions, not renewable
The Clean Power Plan sets emissions guidelines for states based on the so-called
best system for emission reduction (BSER) standard for existing coal and gas power
plants. In an oversimplified way of describing this, the EPA takes a look at the
qualifying power plants in each state and calculates how much carbon those plants
would emit if they were all state-of-the-art, modern facilities with the "best system
for emissions reduction." Using that information, the EPA sets targets for both the
total amount of emissions a state can produce and the emissions intensity of their
power sector (pounds of CO2 per MWh of electricity). The state can then chose
which target they will meet, emissions intensity or "mass equivalent" (total amount
of CO2 emissions).
Since the focus of the Clean Power Plan is on emissions reduction, not renewable
energy promotion, a significant amount of the targets will be met by switching from

more carbon-intense fossil fuels (i.e., coal) to less carbon-intense fossil fuels (i.e.,
natural gas). In its Analysis of the Impacts of the Clean Power Plan,[1] the EIA
projects that in 2020 generation from renewables would be just 1% higher (16% vs.
17% overall) with the Clean Power Plan than a reference scenario with no Clean
Power Plan. On the other hand, the share of natural gas in the total US energy mix
would jump to 32% compared to 26% in the reference case (Figure 2). Further
down the line, the Clean Power Plan will likely lead to additional renewable energy
generation, but at least initially, most goals will be met by offsetting coal use with
natural gas.

The Clean Power Plan doesn't start until 2022.

The actual implementation of the Clean Power Plan is still years away, and the
timeline is likely to be delayed. Currently, states have until 2018 to come up with
their own plans or the EPA will impose one. The actual compliance period doesn't

start until 2022. Changing a state's energy mix is much more difficult than just
flipping a switch, so the impacts of the Clean Power Plan will likely be felt sooner
than 2022, but given the current political climatemore on that in #5the plan is
likely to be delayed further.
The legal outlook for the Clean Power Plan is very much in flux.
The Clean Power Plan did not originate from any new legislation; rather the Clean
Power Plan is President Obama's executive order to tackle climate change by
regulating CO2 as a pollutant under the Clean Air Act (last modified in 1990). If
after Obama leaves office in just under a year, a new President is elected with a
different interpretation of the Clean Air Act and who doesn't think the EPA should
be regulating carbon under it, he or she could appoint new leadership to the EPA
and essentially dismantle the plan.
Aside from the next election, the Clean Power Plan faces an even more imminent
challenge, in the US Court of Appeals and the Supreme Court of the United States.
Twenty-seven states and several energy companies have sued the EPA, challenging
the interpretation of the Clean Air Act that provides the basis for the Clean Power
Plan.[2] The plaintiffs petitioned the US Court of Appeals for the District of Columbia
(DC Circuit) for a stay on the implementation of the Clean Power Plan until there is
a ruling on the matter, which was rejected by the court. However, on February 9,
2016, the Supreme Court stepped in and issued a stay on the planning for and
implementation of the Clean Power Plan until the DC Circuit ruled on the case.[3]

The stay, which was a 5-4 decision on party lines, was seen by many as an omen of
how the Supreme Court would likely rule on the lower court's decision after its
inevitable appeal.
Four days after issuing the stay, Associate Justice of the Supreme Court Antonin
Scalia died. From a political standpoint, Scalia's death was enormous, with farreaching implications including the potential outcome of a number of key Supreme
Court cases, including the challenge to the Clean Power Plan, and the entire tenor
of the upcoming Presidential election.
At present, the legal challenge to the Clean Power Plan still needs to be heard by
the DC Circuit. Two Harvard law professors, Jody Freeman and Richard Lazarus,
wrote on the Harvard University Environmental Law Blog that the panel of judges
hearing the case is seen by court observers to be predisposed to a favorable ruling
for the EPA; however, by no means is that assured.[4] After the DC Circuit ruling,
the decision will be appealed by whichever side loses the case and eventually
heard by the Supreme Court. If the Supreme Court hears the case before a new
justice is appointed, and there is a 4-4 split, then the lower court's decision will
stand. However, it is possible that the Supreme Court will delay hearing the case
until a new justice is appointed.
Either way, the road ahead for the Clean Power Plan has shifted from slightly turbid
and unfavorable to even more murky, yet comparatively more positive.
Seth Walker, Bioenergy Economist is the author of RISI's North American Bioenergy
5-Year Forecast and the Global Pellet Demand Outlook, can be reached at Tel:
781.734.8992 or Email: swalker@risi.com.

[1] https://www.eia.gov/analysis/requests/powerplants/cleanplan/
[2] http://www.bna.com/clean-power-plan-n57982065487/
[3] http://www.supremecourt.gov/orders/courtorders/020916zr3_hf5m.pdf
[4] http://environment.law.harvard.edu/2016/03/update-on-the-clean-power-planthe-knowns-and-unknowns/

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