One of the thorniest challenges EPA faces in crafting the Clean Power Plan is how to credit states for early action emissions reductions and the use of renewable energy sources. States are not in agreement as to how the EPA should proceed, because each state has a unique energy profile. Depending how EPA ultimately counts early action and “green” power, states will find it much easier, or much harder, to meet the agency’s aggressive emissions reduction targets.

For example, states are divided as to whether or not the buyer or the generator of “green” power, such as wind or solar, should receive credit. States that are “green” energy exporters, such as Montana, want the EPA to credit generators with “green power.” States that are energy importers, like California, want EPA to credit buyers for “green power.” Who gets the credit goes a long way toward helping the respective states reduce greenhouse gas emissions in the eyes of the Clean Power Plan. The EPA, through the regulation, will pick which states are winners and which states are losers.  Losing states will face economic and grid reliability consequences if they strive to achieve full compliance with the Clean Power Plan.

States are rightly upset about the ramifications from what is, at best, an arbitrary choice by EPA. This regulatory conundrum, which can only lead to an unfair outcome in either case, underscores the need for the US to consider alternatives to command-and-control regulation of greenhouse gasses. A market based solution would allow consumers and the market – by far more fair arbiters – to choose outcomes, instead of the government.