In what will likely disrupt energy production and raise the price of electricity while doing very little to combat climate change, the Obama Administration recently moved forward to finalize its regulations of greenhouse gas emissions from power plants. On Aug. 3, EPA issued the final Clean Power Plan rule for new and existing plants.
New power plants are those constructed after Jan. 8, 2014 using natural gas or coal. New natural gas units must use “natural gas combined cycle” technology and meet an emission limit of 1,000 pounds of carbon dioxide (CO2) per megawatt hour (MWh). These types of units routinely meet this standard. New coal units must be “supercritical pulverized coal” (SPC) units with partial carbon capture and storage (CCS), while meeting an emission limit of 1,400 lbs. CO2/MWh. The use of CCS has been criticized as there are no units actually using it, but by requiring it EPA hopes to promote further development of CCS technologies. It is widely thought the requirement to use SPC with CCS is designed to force the construction of clean-burning natural gas units.
Existing power plants are regulated through interim and final emission performance rates and/or state-specific CO2 goals, with the states determining how to best achieve those performance rates and/or state-specific goals. Generally, EPA established emission performance rates for coal, oil and natural gas units. It then established statewide goals that may be met by the state in a variety of ways. One such method is emission trading (cap-and-trade), which EPA touts as a proven, market-based approach to address pollution. Congress rejected cap-and-trade early in the Obama Administration.
EPA estimated the cost of the Clean Power Plan in 2030 as $8.4 billion while providing health and climate benefits between $34 billion and $54 billion (at a 3-percent discount rate). The climate benefits are calculated as $20 billion using the Social Cost of Carbon, which places a dollar amount on the reduction of each ton of CO2. The health benefits (a “co-benefit”) are estimated to be between $14 billion and $34 billion based on reductions in particulate matter, sulfur dioxide and nitrogen oxide.
The overall impact on the economy will be profound. Most of America’s energy needs are met by carbon-emitting fuels. Restricting the use of one or more of these fuels will have an impact on the economy. Higher energy prices are expected as the cost to produce electric-ity will rise. Of course, higher energy prices most affect low-income and fixed-income families. Higher energy prices also cause the price of goods and services to increase, which leads to decreases in consumer demand for those goods and services, causing the manufacturers or service providers to reduce employ-ees, reduce production, close or move overseas. The estimated impact on the economy includes a loss of 300,000 jobs, $2.5 billion in gross domestic product and income cuts of $7,000 per person.
This economic pain will be wrought for absolutely no environmental or climate benefit. According to the Regulatory Impact Analysis for the rule, the amount of CO2 reductions seems modest at best. By 2030, the reduction will be around 415 million tons when compared to the base case. Using EPA’s own model, it has been estimated this will reduce warming by only 0.018 C, an amount almost impossible to measure. Meanwhile China continues to build coal-fired power plants and will increase its CO2 emissions over the next 15 years.
EPA and President Obama tout this rule as the single most important step America has taken in the fight against global climate change and one in which America leads the world by example. Unfortunately, the ill effects of this rule will be felt by ordinary Americans while doing nothing to actually reduce global temperatures.
John B. King is a partner with Breazeale, Sachse & Wilson LLP in Baton Rouge, Louisiana. His practice relates mainly to environmental regulatory per-mitting and compliance. Prior to joining the firm in 2003, he served as chief attorney for enforcement for the Louisiana Department of Environmental Quality.
For more information, contact John B. King at jbk@bswllp.com or call (225) 381-8014.
