EPA Repeals Biden Administration’s Carbon Emission Rule for Power Plants
On Monday, the U.S. Environmental Protection Agency (EPA) announced its decision to overturn the carbon emission regulation on coal- and gas-fired power plants that was put in place during the Biden administration. If left intact, this regulation would have potentially phased out reliable coal plants and hindered their natural gas counterparts, especially as electricity demand continues to rise after years of stagnation.
The rule, finalized in 2024, would have required both coal and new natural gas plants to adopt expensive and largely untested carbon capture technology, aimed at capturing 90% of their emissions. If they failed to comply by 2039, these plants would have to shut down. Given the tight timeline, most coal plants would likely close their doors rather than take on such enormous costs. The remaining plants, along with new natural gas facilities, would face increased expenses that would ultimately be passed on to American families and businesses already struggling with rising electricity prices.
The Biden administration’s EPA seemingly miscalculated the compliance costs associated with the rule. Research conducted on the Southwest Power Pool, which serves around 6% of the U.S. population across 13 states, revealed that transitioning to renewable energy sources like wind and solar, along with battery storage, would cost an additional $65.6 billion compared to maintaining the existing grid. This figure is significantly higher—approximately three-and-a-half times—than the Biden EPA’s estimates for the entire nation through 2047.
Notably, the EPA did not even assess whether the proposed energy mix could consistently provide electricity. In our tests based on historical data from 2021, we identified 13 distinct blackout events over just 12 days in February 2040, including one that lasted a staggering 41 hours. Our analysis suggested that the Biden EPA’s original models underestimated the necessary number of power plants to ensure reliability, resulting in potential blackouts that could cost hundreds of billions.
While the Biden EPA was diligent in estimating emissions-related externalities, it did not factor in the potential economic, health, and environmental impacts caused by power outages stemming from its regulations. By estimating the social cost of blackouts using federal data, we found that outages in the Southwest Power Pool alone could incur costs between $106 billion and $402 billion, which starkly contrasts the $370 billion in net benefits the EPA claimed for the entire country.
When the Biden EPA released the rule in 2024, few anticipated the surge in data center demands. Revoking the regulation is crucial not only for keeping existing coal plants operational but also for enabling the construction of new natural gas facilities needed to meet the burgeoning need for electricity.
Demand forecasts are often uncertain. A report from McKinsey & Company in 2023 predicted that U.S. data centers would require 35 gigawatts (GW) of capacity by 2030, up from 17 GW in 2022. However, McKinsey recently updated its forecast to project a staggering 121 GW of demand by 2030.
The Biden administration likely could not have foreseen this rapid growth in data center requirements, but the Trump administration is responding by nullifying the power plant rule. Under the previous Biden regulation, new gas turbines operating over 40% of the time would have to capture 90% of their emissions, possibly introducing new costs and impacting their efficiency in meeting electricity demands. Almost two-thirds of data center developers intending to generate their own power are expected to rely on natural gas, with projections indicating that grid capacity will increase by 55% to 81% in the coming years.
Repealing the rule is just a first step but a necessary one. It’s now important for the administration to address the foundational issues in how these environmental regulations are developed, which led to significant underestimations of compliance costs. Regulators have focused heavily on the benefits of reduced carbon emissions without adequately considering the real costs associated with blackouts.
The risk of rolling blackouts looms over half the country as demand rises and plants close down. Consequently, the federal government needs to make decisions that accurately reflect all associated costs.
