Changing economic circumstances make proposed new regulations critical.

New Regs for Power Plants on Their Way

Today Gina McCarthy, the administrator of the Environmental Protection Agency,announced that the administration is going forward with first-time ever regulations on carbon dioxide (CO2) emissions from power plants.* This development shouldn’t be too much of a surprise:

1. EPA had proposed similar regulations in March of 2012 (but withdrew them last April in order to respond to some 2.5 million comments).
2. The president promised as much last February when he told Congress that

“if Congress won’t act soon to protect future generations, I will … I will direct my cabinet to come up with executive actions we can take now and in the future to reduce pollution, prepare our communities for the consequences of climate change and speed the transition to more sustainable sources of energy.”

3. He included the regulations in a set of specific stepsto cut carbon pollution enunciated in a speech last June.

Still, I am quite sure that the environmental community is breathing collective sighs of relief (some reactions here, here, and here) that this rule has made it to the light of day, given the looming fiscal and geopolitical issues that have dominated the president’s agenda since June. Not to mention Obama’s approaching lame-duck status.

Coal-Fired Power Plants Will Have to Clean up Their Act or Get Left Behind

These regulations only apply to new power plants, and the new carbon pollution standard will effectively put an end to construction of new coal-fired power plants as we currently know them.

The primary winner is thought to be natural gas as the new regulation will surely promote continued fuel-switching from coal to natural gas in the nation’s power plants.

It should also provide a boost to renewable and nuclear energy as well as help catalyze the development of cleaner coal-fired power plants capable of meeting the new standard, for example coal plants with carbon capture and storage.**

Who Needs Those Government Regulations?

There are those who will dismiss these new regulations as irrelevant and not needed.

One argument goes something like this: U.S. carbon emissions have been inching downward since the economic downturn in 2008 and the growing supply of natural gas from the shale gas rush has lowered natural gas prices to the point that power companies are switching from coal to natural gas on their own accord.*** And so, the argument goes, who needs government regulations when the market system is addressing the problem of U.S.carbon emissions on its own?

Um … We Do?

It’s an interesting argument, but one that has some shortcomings. One of these is that the United States will have to reduce emissions a lot more rapidly than current trends if it is to meet the commitmentsmade in the Copenhagen Accord.

And perhaps more importantly, as a lot of people know who lost their shirts in 2008 and 2009 know, market trends have a way of reversing themselves. And in that regard, the most recent short-term energy outlook from the U.S. Energy Information Administration (EIA) sounds a disturbing alarm. The EIA analysis indicates that, with the U.S. economy finally building up some steam following the recent great recession, those encouraging trends in U.S. emissions and coal usage may have already reversed. The EIA’s energy sector estimates for 2013 include the following:

  • Carbon emissions will increase by two percent,
  • Coal consumption (driven in part by rising natural gas prices) will increase by 5.8 percent,
  • And natural gas? Energy sector consumption is expected to rise slightly by 0.2 percent, but within the electric power sector consumption is expected to fall by about 11 percent.

PresidentObama is still in the first year of his second term, but there is already talk of his being a lame duck. If the president is indeed a lame duck, he sounded a pretty loud environmental quack today. Should he get around to proposing regulations on emissions from carbon pollution for existing power plants in 2014, an intention he announced in June, the quack will be deafening.


End Notes

* The proposed regulations will be subject to a 60-day comment period that begins after the rule’s publication in the Federal Register. The rule is not expected to take effect until next year.

* * While many tout carbon capture and storage as the technology of the future, the technology has its doubters. See here and here.

*** Another factor in the decline of new coal power plants is that public opinion has turned against investing in coal in the face of climate change.