Will Greener EPA Rules Leave Less Green in Your Pocket?

On June 2, the EPA unveiled one of its most significant environmental rules ever. Known as the Clean Power Plan, this proposal strives to reduce carbon dioxide emissions from the power sector by approximately 30 percent nationwide by 2030, compared with 2005 levels. This target builds on progress already underway to curb pollution and boost energy efficiency. Carbon emissions have fallen by about 10 percent from the 2005 baseline level, partly due to retirement of coal plants in favor of cleaner-burning natural gas. But more work will need to be done to achieve the EPA’s amped-up goal.

State-Specific Implementation Plans

Under the plan, each state will have its own target, some more or less than 30 percent, and can customize a program that reflects its unique circumstances. Options to achieve emissions targets include:

• Improve power plant heat rates,
• Replace aging coal plants with newer natural gas plants,
• Ramp up zero-carbon energy (such as solar or nuclear),
• Increase demand-side energy efficiency, and
• Use carbon cap-and-trade systems.

States can go it alone or collaborate with other states on multi-state plans that may provide additional opportunities for cost savings and flexibility. But states that fail to come up with an effective implementation plan risk having a federal plan imposed upon them by the EPA.

Work in Progress, Delays Possible

Many states already have programs in place to reduce pollution, such as California’s Global Warming Solutions Act and Colorado’s Clean Air, Clean Jobs Act. The EPA reports that 10 states currently have market-based greenhouse gas emission programs, 38 states have renewable portfolio standards or goals, and utilities in 47 states run demand-side energy efficiency programs.

What makes the Clean Power Plan groundbreaking is that it’s the first time the agency has set federal limits on carbonpollution. The EPA currently regulates emissions of toxic chemicals like mercury, sulfur and arsenic, but not carbon.

Over the next four months, the EPA will accept comments on its 645-page proposal and will hold four public hearings on the Clean Power Plan during the week of July 28 in Denver, Atlanta, Pittsburgh, and Washington, D.C. The final version of the proposal is expected to be published next June.

States will submit initial implementation plans by June 30, 2015. The EPA will grant one-or two-year extensions for each state’s final implementation plan, depending on factors such as its emissions reduction opportunities, utility regulatory structure, power-generation mix and electricity demand.

Major hurdles threaten this timeline, however. The plan is expected to stir legal challenges and energy is expected to be a major issue in the November elections, especially in coal-producing states.

Costs and Benefits

The Clean Power Plan pits environmentalists and renewable energy providers against manufacturers and coal-fired power plants. But the bottom line is: How much will it cost you? The answer depends on who you believe.

Environmental groups, like the Natural Resources Defense Council, estimate that the plan would save businesses and households money by encouraging innovation in energy production and consumption. The EPA asserts that benefits of its plan would outweigh the costs, either by avoiding climate change costs or because of the public health benefits that come from shutting down coal plants.

Overall, the EPA projects net climate and health benefits of $48 billion to $82 billion by 2030. The agency also claims that for every $1 invested in the plan, Americans would reap $7 in health benefits by reducing respiratory and cardiovascular disease. Besides these potential cost savings, proponents say the plan positions the U.S. as a leader on energy reform, providing leverage during global climate change negotiations with emerging economies, such as China and India.

Opponents of the plan forecast a much different outcome, calling the plan “prohibitively expensive.” The U.S. Chamber of Commerce predicts the Clean Power Plan would cost consumers $289 billion more for electricity through 2030 and crimp the economy by $50 billion a year. The National Association of Manufacturers calls the plan “a direct threat” to American competitiveness.

What Are You Waiting For? Steps to Take Now

While policymakers and special interest groups wrestle over the EPA proposal, many companies are voluntarily implementing their own energy reduction programs. Here are some steps to take to improve your efficiency. (Note: Many of these common-sense energy-saving tips can also be applied at home.)

1. Start by reviewing your water, electric, gas and solid waste billsover the last three years to calculate your baseline consumption. If usage has recently increased over time, find the source of the problem, be it a running toilet, a leaky air conditioning unit or an exhaust fan that won’t shut off. Then, obtain building specs, including square footage, maintenance records and blueprints, and a fixed asset register, including date of purchase and remaining useful life. This will help you identify key areas for improvement or items to replace.
2. Create a maintenance schedule. Annual maintenance of building systems and equipment keeps everything running at optimal performance. This includes cleaning and replacing filters regularly. Sometimes, it makes more sense to replace assets in poor working condition with newer, more energy-efficient models, rather than to repair them. For example, if your HVAC system is more than 25 years old, installing a new one can cut energy costs by 30 percent or more.
3. Work with your employees. The people who work in a facility often have ideas on how to improve energy efficiency. For example, office workers often complain that work spaces are too cold in the summer and too hot in the winter.

Put out a “green” suggestion box. Train staff to turn off lights and computer monitors when they go to lunch and leave at night. Offer telecommuting options or flexible work hours, such as working four 10-hour days instead of five 8-hour days per week. This reduces employees’ fuel consumption and may allow your company to take advantage of less lighting, heating and cooling requirements.

4. Walk your facilities from an energy-efficiency perspective. Owners and managers typically are so busy operating the business that they might overlook simple energy-saving opportunities. You don’t have to be a building inspector to discover inefficiencies, such as cracks in the foundation, walls, or windows, or faulty electrical outlets. It’s also relatively easy to check the insulation in your exterior walls, ceilings, floors and crawl spaces. Installing solar film or blinds on southern-and western-facing windows is a simple way to reduce the need for air conditioning during peak hours.
5. Automate energy usage.Most modern equipment has automated settings that can be programmed to reduce consumption. For example, set computers to power down automatically after 15 to 20 minutes of idle time. Install occupancy sensors in areas that don’t require continual lighting, such as storerooms and restrooms. Program thermostats to cool or heat as needed during the day. Also, use lock boxes on thermostats to discourage employees from tampering with automated settings. Consider replacing conventional sprinkler timing systems with “smart” irrigation control systems. These products regulate watering based on weather conditions and atmospheric moisture, rather than a fixed schedule.
6. Evaluate how you interact with customers.Extend your green practices beyond the four walls of your property. For example, limit direct mailings and opt for less costly email marketing campaigns instead.

Not only are many of the savings from an energy audit sustainable, they are typically well received by employees and customers. So, market your green efforts as much as possible — via packaging, social media posts and press releases. It projects an image of social responsibility to the community.

Even better, your company may qualify for tax breaks for making energy-saving changes. Consult your tax adviser for details.

Professional-Grade Energy Audits

The tips provided in this brief article provide the groundwork for a preliminary do-it-yourself energy audit. After seeing the cost savings from minor improvements, many businesses decide to undergo a professional energy audit to fully understand the company’s systems and usage. Professional-grade audits can take months to complete, but they often reap substantial returns on investment. Your accounting professional can guide you through this process.