of initial or final state plans. The Clean Power Plan was repealed by the Federal EPA in 2019 and replaced by the Affordable Clean Energy (ACE) Rule, which changed the Federal EPA’s approach to regulating CO emissions from existing coal-fired generating units. In January 2021, the ACE Rule was vacated by the U.S. Court of Appeals for the District of Columbia Circuit and remanded to the Federal EPA for further proceedings. It is too soon to predict how the Federal EPA will respond to the court’s remand. Management expects emissions to continue to decline over time as AEP diversifies generating sources and operates fewer coal units. The projected decline in coal-fired generation is due to a number of factors, including the ongoing cost of operating older units, the relative cost of coal and natural gas as fuel sources, increasing environmental regulations requiring significant capital investments and changing commodity market fundamentals. 2 The electric utility industry is in the midst of an historic transformation, driven by changing customer needs, policy demands, demographics, competitive offerings, technologies and commodity prices. AEP is also transforming to be more agile and customer-focused as a valued provider of energy solutions. AEP’s long-term commitment to reduce CO emissions reflects the current direction of the company’s resource plans to meet those needs as well a new climate change scenario analysis to be published in 2021. AEP’s exposure to carbon regulation has been greatly reduced over the last several years. From 2000 to 2020, AEP’s CO emissions declined 73%. In 2020, coal represented 44% of AEP’s generating capacity compared with 70% in 2005. Management expects the percentage of AEP’s generating resources fueled by coal will continue to decline and to represent only 24% of generating capacity by 2030. The long-term goal is net-zero CO emissions from AEP generating facilities by 2050.  Transforming AEP’s generation portfolio to include, where there is regulatory support, more renewable energy and focusing on the efficient use of energy, demand response, distributed resources and technology solutions to more efficiently manage the grid over time is part of this strategy. 2 2 2 The graph below summarizes AEP’s generation capacity by resource type for the years 1999, 2005 and 2020: Transforming AEP’s Generation Fleet (a) Energy Efficiency/Demand Response represents avoided capacity rather than physical assets. 11