Business

09.20.13

Obama Administration Issues New Rules Capping Carbon Emissions From New Coal Plants

The Environmental Protection Agency is putting forth tough new standards for newly built electricity plants. Is this the next battle in the war on coal?

Making good on President Obama’s promise this summer to tackle climate change, on Friday the Environmental Protection Agency announced strict new limits on greenhouse-gas emissions from newly constructed power plants. Speaking at the National Press Club, EPA Administrator Gina McCarthy said newly built coal-fired power plants will have to keep carbon emissions below 1,100 pounds per megawatt hour—a level that will force the industry to develop potentially expensive new methods of capturing and storing CO2 before it is released into the atmosphere.

The EPA also issued new emissions standards for newly constructed natural-gas plants, which will be permitted to emit no more than 1,000 pounds of C02 per megawatt hour. That’s essentially the level that cleaner burning natural-gas plants perform at already. But if developers want to build new coal plants, which account for about a quarter of U.S. carbon emissions, they’ll have to develop new technology to pass the EPA’s muster.

The limits, issued as part of the agency’s authority under the Clean Air Act, “will effectively require partial carbon capture and sequestration,” McCarthy said yesterday in an interview, referring to the practice of sucking carbon out of coal exhaust and storing it underground, where it can't contribute to climate change. It will be the first time the EPA has ever regulated greenhouse gases from power plants, and with a cap only slightly higher than a proposal made last year and then withdrawn, it shows that the administration isn’t shying from a fight with the coal industry.

The coal industry says carbon-capture technology is unproven and would make building new plants uneconomical. Last year, the Congressional Budget Office projected that carbon-capturing coal plants would cost about 75 percent more than conventional coal plants. McCarthy, speaking at a House hearing earlier this week, pointed to four planned carbon-capturing coal plants as proof that the industry could adjust to new regulations. One of those plants, in Mississippi, has a deal to sell its carbon to nearby oil companies, which use it in their drilling process. That helps defray carbon-capture costs, though the plant is still proving expensive.

Even before the limits were announced, battles had been raging on Capitol Hill over the impending regulations. Industry representatives and lawmakers from coal-mining states have been decrying what they call Obama’s “war on coal,” for months, saying the new regulations are tantamount to placing a moratorium on new coal plants and will destroy jobs.

Obama anticipated these complaints in his June speech announcing his new climate policy, saying that every time new environmental regulations are proposed, industry has successfully adjusted. “The problem with all these tired excuses for inaction is that it suggests a fundamental lack of faith in American business and American ingenuity,” he said, citing fuel standards for automakers and the ban on ozone-depleting chemicals. “American workers and businesses figured out how to do it better without harming the environment as much.” At the Press Club announcement, McCarthy echoed Obama's argument, saying that far from killing coal, the regulations will encourage the adoption of new technology that will set up a "pathway forward" for the industry.

If developers want to build new coal plants, which account responsible for about a quarter of U.S. carbon emissions, they’ll have to develop new technology to pass the EPA’s muster.

As pivotal as these regulations are, they won’t have much immediate impact on either the environment or the coal industry. That’s because, thanks to cheap natural gas, building a new coal plant is already uneconomical. The U.S. Energy Information Administration projects coal consumption to remain essentially flat until 2030, and according to the Energy Information Administration, none of the plants set to open or expand this year are coal. If coal jobs are destroyed in the near future, it will more likely be the fault of natural-gas companies than EPA regulations. Put another way, the practice of liberating natural gas from shale rock through hydraulic fracturing—fracking—is waging a war on coal.  

Nevertheless, expect legal challenges to the new rules. This is actually the second time the EPA has proposed carbon limits to new plants: last year it floated a 1,000 pound per megawatt-hour for all plants, gas and coal, but then drew back, revised the plan, and separated coal and gas regulations. Legal experts say that combining both types of plants into one category was an unusual use of the Clean Air Act and risked getting struck down in court. Splitting the plants up increases EPA’s odds of overcoming a legal challenge.

And a challenge will almost certainly come. Just because new coal plants are uneconomical now doesn’t mean the stakes for these regulations aren’t high. It’s the first time the EPA has regulated greenhouse gas emissions from yet-to-be-constructed power plants, and it lays the foundation for the regulation of power plants that are already built. And that would have a profound impact both on the environment and industry. Obama has told the EPA to draft rules for existing plants by next June and issue final standards by June 2015. These regulations are a preview of that battle.