EPA’s New Regulations to Cut Carbon Emissions Are Obamacare for the Air
Just like health care, the plan to change the energy industry relies on a complex set of rules that harnesses the power of the marketplace—and it will be as controversial.
Environmentally concerned voters will finally get what they paid for by giving their political support to President Obama when, Monday morning in Washington, Environmental Protection Agency Administrator Gina McCarthy unveils the draft of sweeping new regulations on existing power plants.
Environmentalists’ relationship with the White House during the last six years has been a swirl of big hopes and harsh disappointments. When it comes to environmental protection, the Obama administration has seemed nothing less than schizophrenic. Obama dramatically increased fuel economy standards for cars and trucks, but then White House officials bragged about presiding over the largest domestic oil boom in a generation. The administration pushed to extend an important tax credit for wind farms, yet it has also been a major booster of fracking, which is anathema to many greens. While environmentalists have been buoyed by the president’s soaring rhetoric (“Some may still deny the overwhelming judgment of science,” Obama said in his second inaugural address, “but none can avoid the devastating impact of raging fires and crippling drought”), they’ve been disappointed by his reluctance to use the bully pulpit more forcefully. It wasn’t until 2013 that the president dedicated a speech to the danger of global warming. And, despite years of protests, the president remains maddeningly coy about the fate of the Keystone XL pipeline.
Monday’s announcement, then, is a big deal: a clear and unambiguous win for the environment and public health. Carbon pollution from power plants accounts for one-third of total U.S. greenhouse gas emissions, and so by seeking to ratchet down power-plant emissions, the administration is taking a huge step to address global warming. The new power plant rules, which are scheduled to be finalized next June after a year of public comment, will likely mark the most significant environmental achievement of Obama’s presidency.
“When the president stood at Hyde Park [on election night] in 2008, and said climate change would be a top priority, this is the kind of leadership that we were expecting,” Michael Brune, executive director of the Sierra Club, told The Daily Beast in an interview Saturday. “This is why Sierra Club members knocked on doors, walked in the snow in Iowa, and spent their Saturdays and Sundays making calls. This is the kind of leadership that we’ve needed for a long time. And the impacts on clear energy will be huge. For the first time we are regulating carbon [dioxide] from arguably the largest source of carbon [dioxide] in the U.S. Unlike every single other pollutant, there has never been any limit on the amount of carbon pollution that can be dumped into the atmosphere. And on Monday that will change. And that change is profound—it’s historic.”
You can think of the power plant rules as Obamacare for the atmosphere: numbingly complex in an effort to ensure flexibility and fairness, based on a market system, and likely to transform a key sector of the economy for decades to come. Oh, and also guaranteed to be intensely polarizing.
The Obama administration has carefully guarded the details of the power plant rules that will be released at 10:30 this morning, but climate policy experts and D.C. insiders who have participated in meetings with the EPA say they have a pretty good understanding of the broad outlines of the proposed rules. According to reports Sunday in The Wall Street Journal, the new rules will slash power plant emissions 25 percent by 2020 and 30 percent by 2030. Here’s how the new power plant regulations are expected to work:
Rather than forcing each of the nation’s 1,900 existing power plants to reduce their individual carbon pollution—which would be prohibitively expensive, especially for the country’s 600-some coal plants—the emissions-reduction mandate will be pegged to states’ current carbon pollution. Such a strategy accounts for the fact that states produce their electricity in vastly different ways. While, say, Ohio and Illinois are almost entirely dependent on coal, California mostly relies on natural gas and nuclear, and Washington and Oregon enjoy the benefit of plentiful and clean hydropower. States that currently rely more on coal (the most carbon-intensive fuel) will receive a higher allowance for pollution now but will have to make larger cuts over time. States and utility companies will have a range of options for meeting the pollution reduction targets. They can shut down their coal-fired plants or run them less frequently while bringing online renewable energy sources such as solar and wind. Or they can help homeowners and businesses to reduce their electricity demands and improve energy efficiency—and in the process earn credits they can sell on carbon markets, where pollution allowances can be traded for emissions reductions someplace else. For the first time, utilities nationwide will have a financial incentive to decrease electricity usage. In energy-wonk speak this is known as “decoupling,” and it’s already been proven to work. In California, for example, the utilities earn profits even as people and businesses use less energy. Per capita electricity usage in the Golden State has been essentially flat for 30 years, even as the state’s population and economy have continued to grow.
In something of an ironic twist, the new regulations will encourage many states to participate in just the kind of cap-and-trade system that died in the Senate in 2010. Already, 10 New England and Mid-Atlantic states are participating in a carbon-trading market called the Regional Greenhouse Gas Initiative. California has a similar market in place. While states won’t be forced to join these cap-and-trade markets or create new ones, they’ll have a strong incentive to do so.
“You need to do several things at once,” says David Doniger, a former EPA staffer who now directs the climate and clean air program at the Natural Resources Defense Council. The EPA rules issued Monday are largely modeled on a March 2013 blueprint from the NRDC, which Doniger helped to write. “You need to improve the efficiency of the coal plants. That’s the smallest chunk. You need to switch from coal to gas and renewables, which has been happening anyway over the past six to eight years as the price of gas and renewables comes down. And you need to reduce the total amount of energy needed by increasing the efficiency of lights and cooling structures and buildings.”
Industrial interests are already making their usual claims that the EPA regulations will crush the American economy. In a kind of pre-emptive strike against the power plant rules, the Chamber of Commerce last Wednesday released a report stating that the draft rules will cause the loss of 224,000 jobs and cost the economy $50 billion a year. Nonsense, says the NRDC. To the contrary, the environmental group says, by 2020 Americans will end up saving more than $37 billion on lower energy bills due to reduced demand, even as emission-reduction schemes create some 274,000 jobs through programs like retrofitting and weatherization. White House consiglieri John Podesta, referring to the Chamber’s decades of Chicken Little warnings on the cost of environmental regulations, quickly fired back on Twitter: “I’m old enough to know what a broken record actually sounds like. @USChamber wrong before, wrong again on pollution.”
In the coming days you’re also likely to hear that the EPA rules represent an executive overreach from the Obama White House. But the EPA has an undefeated record when it comes to legal challenges to its ability to regulate carbon dioxide under the Clean Air Act. In a landmark 2007 case, the Supreme Court ruled 5-4 that “greenhouse gases fit will within the [Clean Air Act’s] capacious definition of an air pollutant.” It’s all but certain that, once the final power plant rules are issued next year, some conservative legal organization or business group will sue. But, until the Supreme Court changes its mind, the EPA’s actions are well within the bounds of the law.
“The president is acting with the authority of a law already on the books,” NRDC’s Doniger says. “That’s his job, to execute the law of the land.”
If the “job-killing EPA regs” and “Obama overreach” soundbites seems to echo the political script from the Obamacare battle, there are some key differences. For starters, Republican-controlled states won’t have the ability to opt out of the system, as many have with the Affordable Care Act’s extension of Medicaid. If a state fails to submit a plan for lowering emissions from its power plants, the EPA has the authority to impose one—a scenario most states will choose to avoid.
More importantly, corporate opposition to the new rules isn’t as unanimous as it may appear. Several major electric utilities —including Dynergy, American Electric Power, and First Energy — have expressed cautious optimism about being able to thrive within the new regulations. Electricity generation is a capital-intensive industry that works on planning horizons of 30 to 50 years, and the utilities would prefer certainty and clarity as opposed to the policy purgatory they’ve been in the for the last decade.
“The utilities have been part of the conversation from the beginning,” says Vicki Arroyo, executive director of the Climate Center at Georgetown Law School and a veteran climate policy analyst. “The message we are hearing loud and clear from a variety of power companies is, ‘As long as you’re allowing us to take some credits from the investments we have already made, we can do this.’ I think many of them will embrace the standard.”
The EPA’s announcement is just the beginning of what will be a long political battle. The power plant rules are likely to be a major issue in the upcoming midterm elections, especially in coal-producing states such as Kentucky and West Virginia. Anti-regulatory and environmental groups will keep trading shots during the 12-month comment period. The inevitable litigation means that the rules might not even be in force by the time Obama leaves office in January 2017.
But at least the president is engaging in the fight environmentalists have long hoped for—and in the process beginning to change the political conservation on global warming. In the last month, Podesta has steered an adroit public information campaign to soften up the ground in preparation for today’s announcement. First, there was the release of the National Climate Assessment, which declared that the danger of global warming had “moved firmly into the present.” Then, during his commencement address at West Point, the president told cadets that climate change is “a creeping national security crisis that will help shape your time in uniform.” And in Saturday’s weekly radio address, Obama underscored the health risks of carbon pollution, saying: “We limit the amount of toxic chemicals like mercury, sulfur, and arsenic that power plants put in our air and water. But they can dump unlimited amounts of carbon pollution into the air. It’s not smart, it’s not safe, and it doesn’t make sense.”
In an interview back in March, I asked Senator Sheldon Whitehouse—a Rhode Island Democrat who has become one of the most stalwart environmental champions in Congress—how he would rate the White House’s action in this second term. Whitehouse told me then: “I think they get an A on their administrative effort, which is a very significant improvement from not too long ago. And I give them an Incomplete on their effort to move the political needle on this.”
It looks like the White House’s grade will be improving. With this announcement of new power plant rules, the president earns high marks.