EPA Signals Reconsideration of the Good Neighbor Plan

Published February 9, 2026

The US Environmental Protection Agency’s decision to reconsider elements of the Good Neighbor Plan marks a critical moment for air quality regulation and the power sector. The move comes after legal challenges and mounting concerns from states and industry about implementation timelines and operational impacts. While the rule remains in effect, the prospect of revisions introduces uncertainty for power plant operators, grid planners, and large energy users who must account for emissions compliance alongside reliability and cost pressures. The Good Neighbor Plan sits at the intersection of environmental protection and interstate energy systems, making its future direction highly consequential.

Background of the Good Neighbor Plan

The Good Neighbor Plan is rooted in the Clean Air Act requirement that states prevent emissions that significantly contribute to air pollution problems in downwind states. In practice, this principle has focused heavily on nitrogen oxides emissions from fossil fuel power plants, which are a key precursor to ground level ozone. Ozone pollution is linked to respiratory illness and has been a persistent challenge for metropolitan regions that struggle to meet federal air quality standards despite local controls.

To address this issue, the EPA updated its cross state air pollution framework to tighten emissions limits during the ozone season, typically running from May through September. The updated plan expanded the number of covered states and set more stringent expectations for existing power plants to operate pollution control equipment more consistently. The goal was to ensure that upwind emissions reductions occur at a pace and scale sufficient to help downwind states achieve compliance with national ambient air quality standards.

Compliance Requirements for Power Plants

Under the current version of the Good Neighbor Plan, affected power plants are subject to seasonal emissions limits that require careful operational planning. Covered states were selected based on air quality modeling that showed their emissions contributed to ozone nonattainment in other states. Within those states, coal and natural gas fired power plants are expected to optimize the use of existing control technologies such as selective catalytic reduction systems.

The rule also relies on emissions trading mechanisms that allow some flexibility in how compliance is achieved, provided overall emissions targets are met. However, these mechanisms are constrained by tighter caps and reduced allowances compared with previous programs. For many generators, especially older or less efficient units, compliance can translate into higher operating costs, changes in dispatch patterns, or decisions to limit output during peak ozone months.

Why EPA Is Reconsidering the Rule

The EPA’s reconsideration follows a series of legal challenges that questioned whether the rule could be implemented within the required timeframes. Several states and industry groups argued that the plan underestimated the complexity of installing or upgrading control equipment and did not adequately account for potential impacts on grid reliability. Recent court actions, including emergency stays affecting certain states, added further pressure on the agency to revisit its approach.

Political dynamics have also played a role. Concerns about electricity prices, summer peak demand, and the rapid growth of electricity consumption from data centers and electrification have sharpened scrutiny of any rule perceived as constraining generation availability. The EPA has emphasized that reconsideration does not automatically mean withdrawal, but it does open the door to adjustments that could alter compliance expectations.

Implications for the Power Sector and Energy Managers

For power producers, regulatory uncertainty complicates both short term operations and long term investment planning. Changes to emissions limits or enforcement timelines could affect decisions about when to run certain units, how aggressively to invest in controls, and whether to retire marginal assets. For energy managers at large commercial and industrial facilities, shifts in power plant operations can influence wholesale power prices and emissions profiles tied to purchased electricity.

The situation underscores the growing importance of real time emissions tracking, scenario analysis, and flexible energy strategies. Even if specific requirements are modified, the broader trajectory toward tighter air quality standards and greater accountability remains intact. Organizations that integrate emissions data into operational decision making are better positioned to manage risk amid evolving federal policy.

Conclusion

The EPA’s reconsideration of the Good Neighbor Plan highlights the delicate balance between improving air quality and maintaining a reliable, affordable power system. Interstate pollution rules will continue to shape how power plants operate, particularly during high demand summer months when ozone formation is most acute. While the near term regulatory picture is uncertain, expectations around emissions reductions and transparency are unlikely to ease. For the power sector and energy intensive organizations, proactive planning and robust emissions management remain essential tools for navigating the next phase of federal air quality regulation.