Monday, September 1, 2014

A guide to Obama's new rules to cut carbon emissions from power plants

U.S. President Barack Obama wipes sweat off his face as he unveils his plan on climate change June 25, 2013 at Georgetown University in Washington, DC. Alex Wong/Getty Images

On June 2, the Obama administration announced its most sweeping policy yet to address global warming — a proposed rule that would cut carbon-dioxide emissions from the nation's power plants roughly 30 percent below 2005 levels by 2030.

How can Obama do this without Congress? He'll be working through the Environmental Protection Agency (EPA), which already has the legal authority to regulate US greenhouse gases.

Since 2009, the EPA has used that authority to ratchet up fuel-economy standards for cars and light trucks. Last year, the agency imposed strict carbon standards on anyone who wants to build a new coal or gas plant in the future.

Now the agency is going even further. The EPA's newest proposal will require every state to cut the amount of carbon-dioxide emitted by their electricity sectors. Different states will have different goals for cutting emissions, depending on their specific energy mix.

States will then have to come up with plans to meet those goals, using a wide array of different options. They can use more efficient technology, shift from coal to (somewhat cleaner) natural gas, invest in renewable energy, or even join cap-and-trade programs.

This new rule is part of the Obama administration's broader push to cut America's overall greenhouse-gas emissions 17 percent below 2005 levels by 2020. (Overall emissions have fallen about 10 percent thus far.) Officials hope that meeting this goal will help advance global climate negotiations and push countries like China to do more as well.

But there are risks. A rule that's too stringent or badly designed could impose high costs on power plants and hike con/

Give me the basics. What is the EPA doing?

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The Mitchell Power Station, a coal-fired power plant built along the Monongahela River, 20 miles southwest of Pittsburgh, on September 24, 2013 in New Eagle, Pennsylvania. Jeff Swensen/Getty Images

On June 2, the EPA proposed a new rule to regulate carbon-dioxide emissions from the nation's existing coal- and gas-fired power plants — the first-ever rule of its kind.

For now, this is only a proposal. The EPA will spend the next 120 days gathering comments from electric utilities, environmentalists, and anyone else who cares to weigh in. It will then work on a final regulation that takes effect in June 2015. States will then have one or two years to draw up plans to implement the rule.

The EPA will set different emissions goals for each state, based on its analysis of what cuts are feasible. States can propose a variety of measures to hit those targets — using more efficient technology at coal plants, boosting their use of solar or wind or nuclear power, or even joining regional cap-and-trade systems that require companies to pay to emit carbon-dioxide.

If all states meet their proposed goals, the EPA estimates that carbon-dioxide emissions from the US power sector would fall an estimated 30 percent below 2005 levels by 2030. (That's about 17 percent from 2013 levels.)

There's a lot at stake here. Coal and natural gas plants were responsible for about 38 percent of all US carbon-dioxide emissions in 2012:

Sources of US carbon dioxide emissions 2012

Epa-nsps-co2-sector

Center for Climate and Energy Solutions

Why is the EPA regulating carbon-dioxide?

Technically, the agency is required to by law. Back in 2007, the Supreme Court ruled that the EPA had to regulate carbon-dioxide under the existing Clean Air Act so long as there was evidence that the gas endangered public health. Most scientists agree that it does — and, in 2009, the EPA issued an "endangerment finding" to that effect.

That finding set in motion a complex chain of events: The EPA first began regulating carbon-dioxide emissions from cars and light trucks — ratcheting up fuel-economy standards to 54.5 miles per gallon by 2025. Next, the agency required all future coal- and gas-fired plants to meet certain carbon standards. That rule will effectively make it impossible for anyone to build a new coal plant in the United States unless the plant can capture its carbon emissions and store them underground (a technology that's still in its infancy).

Now the EPA must turn its attention to existing power plants, using section 111(d) of the Clean Air Act. This is a relatively untested section of the Clean Air Act, and the agency has a fair bit of leeway in how to apply this section to carbon-dioxide.

How will the EPA's power plant rules work, exactly?

For more detail, see this postHow the EPA's new power plant rule works — in 8 steps.

The EPA will set different emissions targets for each state — based on carbon-dioxide emissions per unit of electricity generated. (Vermont and Washington DC are exempted since they don't have fossil-fuel electric plants.) See here for how these goals are set.

Each state will then have until 2016 to come up with a plan to reach that emissions target (states can also work together on a plan, and some states will be able to apply for extensions until 2017 or 2018). The EPA will, in turn, have to review and approve these plans — if states don't comply, the EPA will impose its own regulations.

States will have a wide array of options for reducing emissions, such as:

1) Coal plant efficiency. Coal power plants could adopt more efficient technology or operate more efficiently. (The average age of a coal power plant is 42 years, so many of them are less efficient.)

2) More natural gas. Electric utilities could switch from coal to natural gas. (Natural gas emits 50 percent less carbon-dioxide when burned for electricity than coal, so this could lead to big reductions — although extracting natural gas can lead to methane leaks, another potent greenhouse gas warming the planet.)

3) More renewables. Utilities could boost their supply of wind or solar or nuclear power.

4) Boosting efficiency. Electric utilities could work with homes and businesses to reduce demand for power — say, by helping homeowners use better insulation. If states chose this option, they'd have to commit to boosting demand-side efficiency by 1.5 percent per year.

5) Cap-and-trade. States can also join some sort of cap-and-trade program to help reduce emissions. They could link up with other states — nine states in the Northeast already have a program like this, called RGGI, and California has its own program. Or they could create their own.

Note that this is all different than the EPA's usual approach to pollution. Typically, the EPA sets emissions limits for power plants, and each power plant has to meet the goal on its own by installing control technology (or shutting down).

This time, however, the agency will allow power plants to meet the emissions limits through changes "beyond the fenceline" — that is, power companies can use wind generation or efficiency programs elsewhere (say) to meet the standard.

How much will the power-plant rules cut emissions?

If every state meets its proposed target, then the EPA estimates that overall carbon-dioxide emissions from US power plants would fall  25 percent by the 2020s and 30 percent by 2030, when compared with 2005 levels.

Note that baseline. Emissions from US power plants have already fallen roughly 15 percent between 2005 and 2013 — in part because of the recession, and in part because cheap natural gas has edged out dirtier coal power in the past decade.

So this rule would effectively aim to cut power plant emissions 17 percent between now and 2030.

That's somewhat less than environmentalists were pushing for. The Natural Resources Defense Council outlined an approach to power-plant regulation that would cut emissions at least 21 percent below current levels by 2020.

So what's Obama's endgame with these rules?

As part of ongoing international climate talks, the Obama administration has pledged to cut overall US greenhouse gas emissions 17 percent below 2005 levels by 2020. We're not quite there yet:

White_house_emissions_targets

White House

Right now, US carbon-dioxide emissions are roughly 10 percent below 2005 levels — thanks in part to the recession, to stricter fuel-economy rules, and to a glut of cheap natural gas that's pushing out dirtier coal in the power sector.

But US greenhouse-gas emissions are starting to rise again as the economy recovers, and the United States is unlikely to meet that 17 percent target without further regulations. These new power plant rules are part of an attempt to keep emissions down.

Why the obsession with this target? Administration officials hope that meeting the goal will help convince other nations to resuscitate flagging global climate talks and spur countries like China into taking further action. As Coral Davenport reported in The New York Times, China's energy experts will be watching these rules closely.

How much will these new rules cost the economy?

Depending on how they're structured, the rules could impose extra costs on power plants — and that, in turn, may mean higher electricity prices. A lot, however, depends on the details and implementation.

Costs: In its draft proposal, the EPA estimates that the power-plant rule will cost electric utilities $5.5 billion in 2020, rising to as much as $8.8 billion in 2030 (that's all in today's dollars). Those costs include everything from monitoring emissions to upgrading plants.

Benefits: On the flip side, the EPA estimates that the rule's health and climate benefits will outweigh the costs. The agency estimates net benefits of $28 billion to $49 billion in 2020, rising to $48 to $82 billion in 2030.

Most of those are health benefits to Americans — as coal plants shut down or get replaced with cleaner natural gas, there are fewer conventional pollutants in the air. Less lung-damaging particulates and less ground-level ozone, or smog. The EPA expects that the resulting cleaner air will lead to fewer asthma attacks and  2,700 to 6,600 fewer premature deaths per year by 2030.

The EPA also expects some modest benefits to the rest of the world from (slightly) lower climate change as a result of the rules.

Electricity prices: The EPA estimates that US retail electricity prices will increase roughly 4 percent to 7 percent by 2020, mainly because natural gas will get more expensive as it's more widely used. (A lot depends on what options electric utilities use to reduce emissions.)

But will Americans pay more overall? That's less clear. The EPA argues that greater energy efficiency will actually reduce the average household electricity bill by about 8 percent in 2030. In other words, electricity will be a bit more expensive, but we'll be using it more efficiently.

For context, it's worth noting that US residential electricity prices are currently near historic lows:

Bpiqv_cceaeqxid

Energy Information Administration

Jobs: The EPA estimates that the rules will lead to job losses in some industries (like coal mining), and job gains in others (like industries that specialize in energy efficiency, or renewable-energy industries).

Other estimates: It's also worth mentioning that these are just the EPA's numbers. Industry groups, for their part, are sure to argue that the costs will be even higher than environmentalists think. In part, these critics think that EPA is underestimating future growth in electricity demand.

The Chamber of Commerce, for instance, already put out estimates that Obama's climate rules could cost as much as $50 billion each year between now and 2030. (Although the Chamber was analyzing a different, more stringent plan than the EPA actually released, so those numbers will have to be updated.)

How will this rule affect the coal industry?

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Mike Kasavich, a lifelong coal miner, exits 'the hole' after a 10 hour morning shift August 26, 2001 at the Mathies coal mine in western, PA. Spencer Platt/Getty Images

Coal power plants are one of the largest sources of carbon-dioxide emissions — and, as such, they'll likely be hit hardest by the new rule. The EPA is predicting that the use of coal to generate electricity will fall roughly 30 percent between now and 2030.

To put that in context: Coal has already been declining in recent years. Since 2011, roughly one-quarter of the nation's coal plants have been slated for retirement, under pressure from cheap natural gas and a variety of other EPA rules on pollution.

But these newest proposed carbon rules are expected to accelerate that process, forcing an additional 30 to 50 gigawatts of coal capacity to retire between now and 2030. Many of these will be aging plants that aren't worth the cost of upgrading to comply with the new rules.

Coal currently provides about 41 percent of the nation's electricity. By 2030, under these rules, the EPA expects that will drop to 30 percent. Coal and natural gas would still be the leading sources of electricity in the United States — each providing about 30 percent of power.

This is likely to hurt the coal-mining industry, although we don't yet know exactly how much (the EPA offers one forecast of a loss of 16,600 mining jobs by 2030). One big variable here: more and more US coal may instead get exported abroad to Europe or Asia, an increasingly lucrative market for coal companies.

How do these EPA rules compare to other possible climate policies?

Michael Levi of the Council on Foreign Relations has a great breakdown here. These new EPA rules are expected to reduce carbon-dioxide emissions in the electric sector by about as much as would a modest carbon tax that started at $10 per ton and started rising over time.

On the other hand, these EPA rules only affect the power sector — whereas a broad-based carbon tax would affect emissions in a wide variety of industries.

Meanwhile, Jonathan Adler of Case Western University argues that the EPA rules will have a relatively small impact on global emissions. The only way to bring about truly massive reductions, he notes, is to develop "technologies that will enable people around the world to have access to affordable electricity without increasing [greenhouse-gas] emissions." And that, he notes, will require a heavier focus on policies that spur innovation — like incentives for R&D.

Is there any way to stop these power-plant rules?

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A sign against US President Barack Obama's alleged position against the coal mining industry is seen on November 5, 2012 in Quaker City, Ohio. Brendan Smialowski/AFP/Getty Images

Yes. Congress has the ability to repeal (or modify) the EPA's authority to regulate carbon-dioxide emissions under the Clean Air Act.

Most Republicans would like to do so, but so far they've only attracted a few Democratic votes. They would need 67 votes in the Senate — every Republican plus 22 Democrats — to override an Obama veto and nix this program.

That seems unlikely, though Democrats in conservative red states are likely to face heavy political pressure over these rules.

Alternatively, the regulations could get knocked down in court. Industry groups and conservative states are sure to challenge the power-plant rule as soon as humanly possible. Environmentalists, for their part, have argue that the EPA's flexible approach to regulation is defensible. Other legal experts think it's a closer call. But it would all come down to whatever the DC Circuit Court or the Supreme Court decided.

If the EPA's power-plant rule did get struck down in court, the agency might have to start all over again — raising the possibility that it wouldn't be able to craft a new rule until Obama left office in 2017.

Will this rule solve global warming once and for all?

Of course not. The United States is only responsible for about 17 percent of the world's annual greenhouse gas emissions. So even if Americans stopped polluting altogether, that wouldn't be enough to stop climate change altogether.

One way to see this is through coal exports. Right now, the United States is using less and less coal over time — thanks to an abundance of cheap natural gas and pollution regulations that are forcing coal-plant closures. But that coal isn't just sitting in the ground. Instead, mining companies are shipping it off to Asia, where it's getting burned in Chinese power plants.

That's why US negotiators are trying to revive international climate talks with countries like China and India, which have been flagging of late. After all, it's impossible to solve climate change unless two of the world's fastest-growing emitters sign on.

White House officials have suggested that hitting their 17 percent target by 2020 will help push global talks forward — and they're optimistic about further progress, citing a recent breakthrough with China to curtail hydrofluorocarbons (HFCs), a potent greenhouse-gas.

But, for now, these rules are only one step in a much larger process.

Further reading:

  • How the EPA's new climate rule actually works — in 8 steps
  • Here are six charts laying out the US energy landscape that help add extra context to this rule
  • The EPA rules could breathe new life into US cap-and-trade programs. Here's more on what that would mean.
  • Over at Grist, Ben Adler notes that the rule fell short of what environmentalists were hoping for. Some green groups, he reports, will try to push for deeper emissions cuts during the year-long comment period.
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