Government to propose CO2 rules this spring

Johnson said the EPA can't weigh emissions from cars and trucks - which comprise about 30 percent of the U.S. total - without considering stationary sources like power plants, oil refineries, and even schools and hospitals.

"This is not just about cars and trucks," Johnson told Reuters in a telephone interview, warning that the "potential domino effect of taking a step toward regulating one source could have significant and in fact lasting implications."

For that reason, Johnson said he widened the rulemaking scope to include stationary sources.

Coal-fired power plants emit about 40 percent of U.S. carbon dioxide emissions. Complying with new regulations could cost big utilities like American Electric Power and Southern Co billions of dollars.

The Edison Electric Institute, which represents big utilities, said it was glad the EPA realized the sweeping nature of potential carbon regulation.

"It's appropriate that the EPA fully understands the consequences of using the Clean Air Act tool to address greenhouse gases," said John Kinsman, the group's senior director for the environment.

U.S. utilities generally favor a legislative fix to carbon dioxide emissions rather than a regulatory one, which could be challenged and delayed by lawsuits.

(Reporting by Chris Baltimore; Editing by Russell Blinch and David Gregorio)