President Joe Biden just hours after his inauguration effected an immediate freeze on several Trump-era deregulatory actions that directly affect the power sector, and revoked a long list of rules and executive actions affecting the bulk power system.
The president on Jan. 20 also kickstarted America’s return to the Paris Agreement, sending a brief letter to the United Nations (UN) that accepts every “article and clause” within the landmark international climate agreement.
Broad Regulatory Freeze
The first document made public by the Biden White House’s freshly established Briefing Room on Jan. 20 is a memorandum to the heads of federal agencies imploring a freeze on all proposed rules until they are reviewed by a Biden-appointed head or another delegate.
The memo also urges officials to immediately withdraw any unpublished rules that have been sent to the Office of the Federal Register (OFR), and to postpone—for a further 60 days—the effective dates of any rules that have been already published but have not taken effect. The OFR typically requires that major rules—those that are economically significant and require Office of Information & Regulatory Affairs review—are made effective at least 60 days after the date of publication in the Federal Register.
The White House’s action appears to affect a number of rules under review or recently finalized by the U.S. Environmental Protection Agency (EPA), including at least three rules governing coal combustion residuals, and general revisions to emissions monitoring and reporting requirements for fossil plants.
At the Department of Energy (DOE), the action pivotally halts rulemaking through which the agency would have limited procurement of bulk power system equipment sourced from adversary nations. Executive Order 13920 of May 1, 2020 (Securing the United States Bulk-Power System), is “effectively suspended for 90 days,” says one of the many executive orders issued on Wednesday. “The Secretary of Energy and the Director of [Office of Management and Budget] shall jointly consider whether to recommend that a replacement order be issued.”
And at the Labor Department, it prompts a review of a rule renewables groups have chastised as a “transparent attempt to slow the growth” of environmental, social, and governance (ESG) investing.
At the Federal Energy Regulatory Commission (FERC), Biden effected a leadership shuffle on Jan. 21, putting Richard Glick, a Democrat nominated by Trump, at the helm of the regulatory entity until the end of his term, which ends in June 2022. FERC, which garnered a full quorum for the first time in two years in December, is expected to act on pressing issues related to distributed energy, hybrid resources, and carbon pricing, as well as pivotal rules to address the effects of state clean energy rules on organized wholesale electricity markets.
Rules Marked for Revision, Rescission
Biden on Wednesday also issued an executive order that champions public health and welfare and scientific integrity for environmental policy, and explicitly outlines several Trump administration rules that the Biden administration will work to suspend, revise, or rescind within the next year. Rules directly affecting the power sector include:
Coal and Oil Generating Unit HAPs. The EPA’s May 2020-issued decision not to regulate Hazardous Air Pollutants (HAPs) from coal and oil generating units in response to the Supreme Court’s decision in Michigan v. EPA. Biden’s EPA may propose suspending, revising, or rescinding the rule, officially known as the “National Emission Standards for Hazardous Air Pollutants: Coal- and Oil-Fired Electric Utility Steam Generating Units—Reconsideration of Supplemental Finding and Residual Risk and Technology Review,” 85 Fed. Reg. 31286, by August 2021.
Clean Air Act Cost-Benefit Rulemaking. The EPA-s Dec. 23, 2020-promulgated “Increasing Consistency and Transparency in Considering Benefits and Costs in the Clean Air Act Rulemaking Process,” 85 Fed. Reg. 84130. That rule establishes a process that the EPA will be required to take for air pollution rules under the Clean Air Act “to ensure that information regarding the benefits and costs of regulatory decisions is provided and considered in a consistent and transparent manner.” Biden’s EPA will consider a revision “as soon as possible.”
Science Transparency. Also to be reviewed is the Jan. 6, 2021-issued “Strengthening Transparency in Pivotal Science Underlying Significant Regulatory Actions and Influential Scientific Information,” 86 Fed. Reg. 469.
The executive order, notably, also establishes an “Interagency Working Group on the Social Cost of Greenhouse Gases,” which will, by January 2022, publish “social cost of carbon” (SCC), “social cost of nitrous oxide” (SCN), and “social cost of methane” (SCM). The “estimates of the monetized damages associated with incremental increases in greenhouse gas emissions” will facilitate sound decision-making and better recognize the breadth of climate impacts, the order says. The working group is required to publish an interim SCC, SCN, and SCM within the next four weeks.
Rules indirectly affecting the power sector but are also in jeopardy include: The EPA’s September 2020-issued final policy on methane emissions reductions in the oil and gas sector. Action is expected by September 2021. Also at risk is the September 2019-issued Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule, with action expected by July 2021; and the February 2020-issued appliance and building efficiency standards, on which action is expected by June 2021. Finally, the order revokes the March 2019 permit granted to the Keystone XL pipeline because it “disserves the U.S. national interest.”
Revoked Trump Executive Orders
Among the lengthy list of power sector-related executive actions revoked include:
- Expediting Environmental Reviews and Approvals For High Priority Infrastructure Projects (January 2017).
- Restoring the Rule of Law, Federalism, and Economic Growth by Reviewing the “Waters of the United States” Rule (February 2017).
- Promoting Energy Independence and Economic Growth (March 2017).
- Implementing an America-First Offshore Energy Strategy (April 2017).
- Promoting Energy Infrastructure and Economic Growth (April 2019).
- Accelerating the Nation’s Economic Recovery from the COVID-19 Emergency by Expediting Infrastructure Investments and Other Activities (June 2020).
Pivotally, the order also requires the Council on Environmental Quality (CEQ) to rescind its June 2019-issued “Draft National Environmental Policy Act Guidance on Consideration of Greenhouse Gas Emissions,” 84 Fed. Reg. 30097. If finalized, that guidance would have replaced the final guidance CEQ issued on August 2016, titled “Final Guidance for Federal Departments and Agencies on Consideration of Greenhouse Gas Emissions and the Effects of Climate Change in National Environmental Policy Act Reviews.” The executive order will instead require CEQ to “review, revise, and update” the August 2016 “Final Guidance.”
Joel Johnston, an attorney at national law firm Hall Estill’s environmental and regulatory law practice, told POWER on Thursday Biden’s executive order addressing public health and the environment “will have far reaching impacts.” Most notably for the energy sector, “the EO directs the EPA to publish a proposed rule to suspend, revise, or rescind both the 2020 revisions to the methane rule applicable to the oil and gas industry, as well as the NESHAP applicable to coal and oil fired electric utility steam generating units. Under both rules, the Trump administration had relaxed emissions standards. While we don’t know what revised rules might look like, it is a certainty that emissions requirements will be more stringent,” Johnston said.
“Another significant change is the revocation of Executive Order 13766, which provided for expedited reviews and approvals for high priority infrastructure projects. For significant projects, such as interstate transmission lines or pipelines, offshore wind projects, large solar farms, or other similar projects, this will be impactful by eliminating the possible expedited process that had previously been created,” he said.
Republicans Urge Senate Review of Paris Agreement Re-entry
Meanwhile, Biden’s letter to the UN reverses course on former President Trump’s formal withdrawal from the Paris Agreement, which became official on Nov. 4, the day after the 2020 presidential election.
President Obama formally entered the U.S. into the accord through executive authority (under international law) in September 2016. Trump said he would withdraw the U.S., meaning only the U.S. and Syria had not endorsed the agreement after the UN adopted it in December 2015. So far, 189 countries have formally ratified, accepted, or approved the agreement. Biden’s letter paves the way for the U.S. to formally rejoin the accord within 30 days.
America’s formal re-entry into the Paris agreement serves to re-establish an international obligation to act concertedly to mitigate climate change in an effort to limit the global average temperature rise in this century to well below 2 degrees Celsius, while pursuing efforts to limit the temperature rise to 1.5 degrees.
The issue is already being contested by a Republican group of Western lawmakers. Minutes after Biden signed the letter, Sens. Steve Daines (R-Montana), John Barrasso (R-Wyoming), Cynthia Lummis (R-Wyoming), Jerry Moran (R-Kansas), and Mike Crapo (R-Idaho) submitted a resolution urging the newly-inaugurated president to seek the Senate’s “advice and consent” as required by the Constitution before re-joining the treaty.
The senators argue that Obama entered the Paris Agreement without congressional approval, “going directly against Article II, section 2, clause 2 of the U.S. Constitution,” which states that “the President may only enter into an international treaty provided two thirds of the senators present concur,” they said.
Even without U.S. participation in the international effort, many American cities, states, and energy companies have championed the global decarbonization movement spurred by the Paris deal.
So far, a total of 29 U.S. states and the District of Columbia have legally binding renewable or clean energy standards, and the level of ambition for state programs has accelerated dramatically in recent years. About 14 of these states and the District of Columbia have 100% renewable or carbon-free energy mandates or goals, while many more have similar non-binding commitments. On a local level, more than 100 cities and 10 counties have adopted 100% clean energy goals.
More Stringent Targets
As of December 2020, several U.S. power companies had voluntary carbon reduction goals, and at least 24 investor-owned companies are targeting carbon-free or net-zero greenhouse gas emission goals. The U.S. electric power sector’s carbon emissions at the end of 2019 were already 33% below a 2005 baseline, the lowest level since 1987. Emissions from the electric power sector have also been lower than the transportation sector since 2016.
In order to meet the Obama administration’s goals set under the Paris accord, the U.S. would need to reduce economy-wide greenhouse gas emissions 26% to 28% below 2005 levels by 2025.
Rejoining will require resubmitting a new emissions target, more stringent than the Obama administration’s pledge. Daniel Bresette, executive director of the Environmental and Energy Study Institute, noted Wednesday: “Now comes the hard part: setting ambitious climate commitments, implementing new policies, and making sure we meet our goals.”
More insight on how the administration will act is expected when it issues more climate-related executive orders, likely on Jan. 27, said Bresette. As Biden’s campaign documents suggest, the administration may move aggressively. Biden planned to establish a world summit to “persuade them to join the U.S. in making more ambitious national pledges,” above and beyond commitments they already have. The administration may also pursue “strong new measures” to stop other countries from “cheating” on their climate commitments, and “demand a worldwide ban on fossil fuel subsidies.”
The U.S.’s re-entry follows a string of more ambitious climate goals announced by countries that, like the U.S., rely heavily on coal and gas generation to fuel their economies.
On Sept. 17, the European Union proposed a 55% cut in GHG emissions by 2030 compared to 1990 levels, a move the European Commission said would put the EU on a “balanced pathway to reaching climate neutrality by 2050.” China’s President Xi Jinping on Sept. 22 told the UN General Assembly that his country would strive to be carbon-neutral by 2060. In October, Japan’s newly appointed Prime Minister Yoshihide Suga pledged that the island nation will be carbon-neutral in 2050. In October, South Korea’s President Moon Jae-in also announced a net-zero target, committing to “go toward carbon neutral by 2050” in a speech to the national assembly.
Power Stakeholders Generally Optimistic About Future Direction
Biden’s inauguration and his first-day blizzard of executive actions elicited an assortment of reactions from the wide array of power sector stakeholders.
Several power companies have lauded the new president’s Cabinet picks and efforts to convene expertise to lead his new White House Office of Climate Policy. “He has gathered an impressive team of environmental leaders who understand the challenges ahead, and as bipartisan support continues to grow for impactful, economy-wide change, I am confident they will drive smart choices and minimize market distortions,” Thad Hill, president and CEO of Calpine, told POWER on Wednesday.
The Edison Electric Institute (EEI), a group that represents all the nation’s investor-owned utilities, also welcomed Biden’s initial actions. “Across our nation, EEI’s member companies are leading the clean energy transformation and are committed to getting the energy they provide as clean as they can as fast as they can, without compromising the reliability and affordability that our customers and communities value,” said EEI President Tom Kuhn.
EEI, notably, highlighted several initiatives that it said it supports. Responding to Biden’s action to rejoin the Paris Agreement, Kuhn reiterated the power sector’s meaningful carbon emission reductions, noting, “That is a decade earlier than what was called for in the original U.S. commitment under the Paris Agreement. To achieve meaningful worldwide action on climate change, it is essential that we continue to engage in these global conversations and that we continue to build on the progress we already have made,” he said.
As significantly, he also hailed the EPA’s coming actions to regulate methane emissions “throughout the natural gas supply chain for new and existing sources.” He said: “Natural gas continues to play a vital role in accelerating the use of renewables, and the switch from coal to natural gas has been the single most effective tool over the past decade for reducing carbon emissions. Strong and cost-effective federal regulations on methane emissions across the value chain are essential to ensuring the continued availability of natural gas as a 24/7 on-demand energy source.”
New rules for the transportation sector would also drive electrification, Kuhn said. “By transitioning more of America’s economy—particularly the transportation sector—to clean, efficient electric energy, these regulations can help significantly reduce vehicle emissions, which currently represent the largest source of carbon emissions in the U.S. economy,” he said.
The Electric Power Supply Association (EPSA), a national trade organization representing competitive power suppliers, highlighted opportunities for bipartisan unity on decisions facing the nation’s electric grid. “Competitive power suppliers have a unique ability to balance and advance energy, economic, and environmental goals—doing so without putting investment risk on consumers. Our members have followed market signals in recent years to retire uneconomic and less efficient generation, resulting in cleaner air and customer savings,” noted EPSA President and CEO Todd Snitchler.
Maria Korsnick, president and CEO of the Nuclear Energy Institute (NEI), lauded Biden’s efforts to rejoin the Paris Agreement. She said the industry association representing the nation’s nuclear industry is “committed to working with the federal government, state and local governments and clean energy advocates to chart a course toward a cleaner, reliable, affordable energy system.”
The American Council on Renewable Energy (ACORE) also lauded Biden’s climate actions, but it urged a close look at recent actions by the Trump administration. “We commend President Biden’s commitment to move America beyond climate denial on his very first day in office, starting with rejoining the Paris Climate Agreement and initiating a wholesale review of the Trump Administration’s climate and clean energy rollbacks—including the Department of Labor’s misguided anti-ESG investing rule,” said ACORE President and CEO Gregory Wetstone.
The investment community, too, expressed optimism. “President Joe Biden’s executive order to rejoin the Paris Agreement, along with other climate-related policies, realigns U.S. policy with the energy transition strategies adopted by many U.S. states and corporations,” said James Leaton, senior vice president in Moody’s Investors Service’s ESG group. “Taken together with commitments from other countries worldwide, these developments will have significant future credit implications for rated entities in the sectors most exposed to the energy transition,” he said.
Update (Jan. 22): Adds comments received from Moody’s Investors Service, and Joel Johnston, attorney at Hall Estill.