The plan, which the EPA says will cost power utilities US$8.4 billion ($12.8 billion), but give US$34 bilion to $54 billion in environmental payoffs, will take effect in 2022.
Obama's scheme is underpinned by the 1970 Clean Air Act, which allows the Government to curb pollution harmful to public health. The Supreme Court ruled last year that the EPA could regulate carbon dioxide [CO2] emissions.
This week, in a video posted on Facebook, the President warned that science shows "our climate is changing in ways that threaten our economy, our security and our health".
He promised his plan would cut pollution, improve health and create jobs. Unregulated power plants were America's worse source of carbon pollution, he said, and the Clean Power Plan was "the biggest, most important step we've ever taken to combat climate change".
The plan, which obliges utilities to generate at least 28 per cent of their power from renewables, is the latest sign the US is getting serious about climate change, after sending mixed signals by issuing offshore oil and gas drilling permits and equivocating about the Keystone XL pipeline to import crude oil from Canadian tar sands.
Obama has already raised CAFE standards, which regulate emissions from cars and trucks. Last November, he pledged, in a joint announcement with Chinese leader Xi Jinping, to cut US emissions.
The US, the world's single largest carbon polluter after China (although US per capita emission are more than double China's), pledged to cut its overall emissions by 26 to 28 per cent on 2005 levels by 2025.
Targeting power plants is crucial if the US is to fulfil its promise and coax others to follow.
The Clean Power Plan was greeted as a "game changer" by the Natural Resources Defence Council, a US advocacy group, although others cautioned it was merely a first step in fighting climate change.
"We think it's a major step forward in US climate policy," said director of programmes Susan Casey-Lefkowitz.
"The power plant sector is the largest single source - about 40 per cent - of carbon emissions in the US. About a third of existing plants use coal and we're not seeing new coal-fired plants being proposed or built."
Obama's plan torpedoes coal. More electricity is expected to come from natural gas, supplied by a hydraulic fracturing (fracking) boom, plus solar and wind.
King Coal is becoming a sunset industry, its end hastened by the Sierra Club's Beyond Coal campaign, funded by media tycoon and philanthropist Michael Bloomberg. Since 2010, 190 coal-fired plants, out of 523, have closed. Once cheap, coal is now expensive, crippled by pollution costs and undercut by renewables.
The Administration has also taken a dogged approach, reviewing more than eight million submissions to build its case. To comply, states can switch to renewables, adopt more efficient technologies, create carbon taxes or adopt cap-and-trade systems, under which states that cut CO2 early will be able to sell carbon credits.
After the bruising struggle to pass the Affordable Health Care Act, Obama has chosen to fight this battle outside Congress. He has said he will veto any bills that try to strike down his plan, and the Administration is confident it can withstand any legal challenge.
One challenge is securing support from coal states, such as Ohio, Michigan and Pennsylvania, seen as a key to winning the 2016 presidential race. The risk is that a Republican president will strike the Clean Power Plan down. To succeed, Obama needs a Democratic successor.
Meanwhile, a coalition led by Senate Majority Leader Mitch McConnell hopes to torpedo Obama's plan by encouraging states to file legal challenges and refuse to submit compliance plans. The strategy is backed by the American Legislative Exchange Council, a lobby group that crafts conservative laws, and Americans for Prosperity, a climate change denial advocacy group funded by the fossil-fuel billionaire Koch brothers.
In June, a federal court dismissed a suit brought by 14 coal-producing states against the EPA in what was probably the first skirmish in an intensifying conflict. An energy umbrella, the Electric Reliability Co-ordinating Council, says 20 to 30 states could file suit against the EPA. Yet at the same time, electricity utilities are already striving for efficiencies, cutting emissions 13 per cent since 2005.
Either way, the plan has dumped climate change squarely into the middle of the 2016 presidential election campaign. Hillary Clinton, still the presumptive Democratic candidate, backs Obama's plan.
"It will need defending," she said. "Republican doubters and defeatists - including every Republican candidate for president - won't offer any credible solution. The truth is, they don't want one."
Republican candidate Jeb Bush, who accepts climate change is a reality, blasted the plan as "irresponsible and over-reaching", saying it would kill jobs and drive up energy prices.
Marco Rubio agreed, warning the plan would be "catastrophic". On the party's right wing, climate-change denier Ted Cruz claimed it was a "Trojan horse" for a Washington power grab.
But, as with many other issues this political season, Republicans risk losing touch with public opinion.
After years of denial Americans are growing fearful of climate change, linked to extreme weather such as the epic drought that grips the West and the much expanded wildfire season.
Tellingly, a recent study in Global Environmental Change ranked the US fourth in the list of climate change denial nations, after Australia, Norway and New Zealand.
A 2014 Pew Research Centre poll found a "solid majority" of Americans - 61 per cent - accept the world is warming. A recent Pew poll found 42 per cent of Americans worried about climate change. And a January New York Times-Stanford University poll found an "overwhelming majority" of Americans, including "half of Republicans", favoured tackling climate change. Two-thirds said they would back presidential candidates who did so.
It is this constituency Obama will appeal to as the US pumps up the pressure before the United Nations Climate Change Conference - begins in Paris next November.
While the Clean Power Plan will not stop runaway climate change on its own, it gives the US leverage in Paris, as Obama asks heavy emitters such as India and Brazil to cut back.
As a worldwide "leave it in the ground" divestment campaign urges investors to dump fossil fuels, amid apocalyptic warnings about the cost of worsening climate, Obama has framed his legacy fight as a moral imperative, throwing down the gauntlet to us all.
"Climate change is not a problem for another generation," he said. "Not any more."
