07/26/2021 - Environmental Governance - Guest Author Series

Considerations For Congress in Designing A Clean Electricity Standard

by Cynthia Giles

Congress is currently exploring how a Clean Electricity Standard (CES)—the foundation of the Biden Administration’s climate strategy—can drive ambitious carbon reductions from the power sector. The success of that strategy depends on two things: the target set by Congress and effective execution by the implementing agencies.

Successful implementation isn’t something that can be thought about later; the critical decisions that determine real-world effectiveness will be made now, in the legislation. My Guest Author Series for Harvard’s Environmental and Energy Law Program focuses on just this topic: how to design environmental programs for reliable results in the real world. As Congress considers CES legislation, here’s what should be included to achieve its carbon reduction goals.

Clear compliance obligations. Consistent compliance is the foundation on which any environmental program rests. Clear and uniform requirements ensure companies understand the rules of the road and bolster confidence that the target will be achieved. There are many ways to design a compliance requirement, including technology-based performance standards or market-based programs, but having a clear compliance requirement that applies equally to all parties is critical. A program that uses financial incentives, including those implemented through a rebate, a grant program, or a fee, can influence power sector decisions and lead to emissions reductions. But, without well-defined compliance obligations, financial incentives alone can result in companies using strategic workarounds rather than making quantifiable progress toward the desired reductions. A program that leverages financial incentives will also need a well-defined emissions reduction requirement that regulated entities are obligated to fulfill.

Effective enforcement. Enforcement is the backbone of regulatory standards. A compliance program cannot succeed without it. Enforcement holds violators accountable and reassures the companies who meet their obligations that everyone has to play by the same rules. Robust enforcement ensures that the program is credible and effective and deters would-be violators, while reassuring the public that the outcomes will be achieved.

Transparent regulatory architecture. Successful implementation requires savvy regulatory design that includes:

  • a reliable and uniform measurement system that ensures all participants are gauged by a common metric,
  • electronic reporting to track performance in real time, and
  • transparency so that all the players have confidence in the program and are consistently held accountable.

Robust and resilient implementation infrastructure. Fast, reliable, and predictable outcomes require implementing agencies that have proven regulatory infrastructure, including:

  • rule writers who have a regulatory track record with the power sector and have the expertise and established legal support for writing defensible regulations with tested pathways for legal challenge;
  • experienced staff who can use existing and well-established processes to make the many decisions required to apply the regulatory standards to individual situations;
  • well-established administrative appeals procedures and expert staff to implement them; and
  • enforcement pros and the supporting legal and technical structure needed to conduct compliance investigations and hold violators accountable.

The Environmental Protection Agency (EPA) and the Department of Energy (DOE) have complementary strengths to successfully implement a CES. EPA has extensive experience writing regulations for the power sector, established administrative processes to implement facility specific decision-making, and robust enforcement. DOE has deep expertise deploying investments and grants for energy innovation and a well-deserved reputation for harnessing the motivating power of research and development. Congress can leverage these agencies’ knowledge and capability to ensure that implementing regulations achieve the critical carbon reduction goals.