4 Key Takeaways From EPA's New Rules for Power Plants

The emissions goals may be easier to meet than many expect, but the coal industry and several states face big challenges.

The new rules announced Monday to limit carbon emissions from U.S. power plants represent President Barack Obama's boldest effort yet to counter climate change, guidelines that supporters and critics alike cast as a turning point in U.S. environmental policy.

But what's also striking about the rules is that for all the ambition they represent—and the plan for a 30 percent reduction in carbon emissions from 2005 levels by 2030 is ambitious—they also appear designed to lock in carbon reductions that have been under way for years, as the United States has begun easing away from coal and toward natural gas and alternative energy sources.  (See related story: "One Key Question on Obama's Push Against Climate Change: Will It Matter?")

The Environmental Protection Agency's first-ever emissions regulations for existing power plants, spelled out in a 645-page document dubbed the Clean Power Plan, give states significant flexibility in meeting their emissions targets. The rules lay out a set of four "building blocks" that states can use to reduce carbon pollution: make fossil-fuel power plants more efficient; step up the use of lower-emitting power plants, such as those that run on natural gas; use more nuclear and renewable energy; and increase efficiency measures (such as utility programs that help consumers save energy), reducing demand from the power system. (See related story: "Is New Emissions Plan a Turning Point in Our Love Affair With Coal?")

Even so, those closely aligned with the coal industry will feel the squeeze from the new regulations in one way or another. They include states such as West Virginia and Kentucky, where coal mining has been a way of life for generations; businesses that rely on the industry, and the politicians (Republicans and some Democrats) who have been coal's boosters in Washington.

It could be up to 15 years before the EPA's vision is fully realized, as states will have time to hammer out implementation plans and carry them out. But crucial decisions made over the next three years will help determine how the nation's energy picture will change. For some states, the plan represents a continuation of business as usual; for others, it will mean a significant and possibly painful overhaul of the status quo.

Here are four key takeaways from the plan that the EPA announced Monday:

The United States is well on the way to meeting the goal of cutting carbon emissions by 30 percent. In setting the baseline for reductions at the 2005 emissions levels, the EPA is being less aggressive than it could have been. Emissions levels have been falling for years in the United States, thanks in part to the fracking boom that has boosted a nationwide shift to cleaner-burning natural gas, and to the 2008 recession, which depressed energy demand.

Jonathan Dorn, an associate at the research firm Abt Associates, worked on emissions data for the EPA as it assembled the plan that was announced Monday. Dorn said that the baseline he worked on used 2012 data—a level that would have required significantly more reductions in emissions by 2030 than what the EPA wound up establishing.

Dorn said that he was surprised to see the easier emissions standards in the EPA's final proposal, and noted that emissions from power plants already have dropped by 13 percent since 2005.

"We're already almost 50 percent of the way to meeting the goal" announced Monday, "so it becomes much less aggressive than initially thought," Dorn said of the new EPA standard. Dorn added, however, that the new emissions rules are a "necessary step" that he supports.

Last week, the Washington, D.C.-based independent research firm ClearView Energy Partners pointed out that in 2005 there was a big demand for coal because of high prices for natural gas after Hurricanes Katrina and Rita, which knocked out gas-processing capacity on the Gulf Coast. This, too, makes a reduction from 2005 levels a bit easier to achieve.

And coal has been on a downward trajectory in recent years, with plants shutting down in response to Mercury and Air Toxic Standards released in 2011, rules for new power plants that were proposed last fall, and competition from cheap natural gas. Power companies announced the retirement of at least 30 coal-fired units in 2012 alone, and the industry's generating capacity was already expected to drop 15 percent from 2012 and 2040. Taking that projected decline into account, the EPA's goals based on 2005 emissions levels seem less dramatic. (See related blog post: "New U.S. Limits on Power Plant Carbon Emissions: Five Points.")

It's not a great day for coal, but it’s not an immediate death knell. The EPA rules add to challenges that the coal industry has been facing for years, but they do not mandate the closure of any plant or eliminate coal from the U.S. energy picture.

That said, the rules will put pressure on the industry by making coal more expensive. The industry faces higher costs one way or another: It may meet emissions targets by upgrading equipment to reduce pollution that plants emit, or if a state decides to set a cap on carbon emissions and issue permits allowing plants to pollute up to certain levels, the plants essentially would be paying extra fees to pollute.

The EPA's plan "doesn't necessarily mean that coal is going to be immediately phased out," Dorn said, but "it's going to increase the price of coal."

For states such as Kentucky, which gets 93 percent of its electricity from coal, that's not a death knell, but it's close enough, coal advocates say.

Bill Bissett, president of the Kentucky Coal Association, said, "This is going to have a real impact on domestic use of coal ... Our concern is what it does to investor confidence, what it does to our ability to borrow money."

Research and testing are being done to develop carbon capture and storage (CCS), which harvests carbon before it escapes the smokestack of a coal plant, keeping it out of the atmosphere. But the technology is expensive and not yet proven: In Kemper County, Mississippi, delays and cost overruns have hampered progress on the first commercial U.S. coal plant to use CCS. (See related story: "Clean Coal Test: Power Plants Prepare to Capture Carbon.")

But CCS is not the only option coal plants have to make improvements. The EPA proposes an average improvement of 6 percent in the "heat rate"—the amount of energy that a plant can squeeze out of each unit of fuel—as a way of reducing coal use. Coal undoubtedly will decline from its current 40 percent share of U.S. electricity generation, but it still is expected to retain a share of 25 percent or more by 2020, even if states hit the EPA's emissions targets.

"To me, it's another hit, and we've received several in a row," Bissett said, adding that EPA rules for new power plants that previously were proposed amount to a "de facto ban" on burning coal for energy. The CCS technology, he said, is "not currently commercially viable."

For that reason, it's not surprising that lawmakers from coal-reliant states have been speaking out strongly against the new EPA rules, including Democrats who are distancing themselves from the president.

Alison Lundergan Grimes, a Democrat who is challenging Senate Republican Leader Mitch McConnell of Kentucky in this year's election, said in a statement Monday, that coal provides "a way for thousands of Kentuckians to put food on their tables. When I'm in the U.S. Senate, I will fiercely oppose the president's attack on Kentucky's coal industry because protecting our jobs will be my number one priority."

McConnell called the EPA plan "catastrophic," and other opponents have said the rule would kill jobs and lead to higher electricity bills for consumers. (See related story: "Ahead of Proposed U.S. Power Plant Rules, the Spin Scramble Begins.")

"Critics claim that your energy bills will skyrocket. They're wrong. Should I say that again? They're wrong," EPA Administrator Gina McCarthy countered in announcing the plan Monday. "Any small short-term change in electricity prices would be within normal fluctuations the power sector has already dealt with for years."

McCarthy said any price increase that might be seen would be equivalent to that of a gallon of milk per month; the proposal predicts a drop of "roughly 8 percent" to electricity bills in 2030.

A few states will have tough choices ahead. Many states, such as the nine Northeastern states participating in the Regional Greenhouse Gas Initiative, and those such as California that have been moving forward with clean energy alternatives, will need to forge ahead in the same direction they are already moving. But for coal-dependent states such as Kentucky and West Virginia, and for those that have not put any kind of targets for clean energy in place, meeting the standard will be a heavier lift.

Dorn and others said that the EPA standard will encourage states to evaluate and invest in renewables.

"We will see very quickly innovation happening, and basically the greening of the grid," Dorn said, noting that the standard would lock in previous gains and create stability for cleaner energy going forward. "Uncertainty in the marketplace really kills innovation. [This] will put something certain in place to make sure that we don't backtrack on the gains that we've had since 2005."

The EPA noted in its plan that 47 states already have energy efficiency programs run by utilities, and 38 states have "renewable portfolio standards," or explicit targets for boosting the share of solar and wind on the grid. The 12 states that do not have such standards likely face a longer road ahead.

"There are states like Florida, or Indiana or Arkansas, where there's maybe a fair amount of coal in the mix and they haven't been spurred to take a look at that before and actually make a big change," said Mary Anne Hitt, director of the Sierra Club's Beyond Coal campaign. "This is going to create the platform for that conversation. I think what this can do is it can lift up the floor ... for all the states to really take a deliberate look at their energy mix and get more clean energy onto the wires."

On the other hand, Vermont, which relies largely on emissions-free nuclear and hydropower for its electricity, will not have to change anything under the EPA's plan. The EPA did not set targets for that state or for Washington, D.C., which gets its power exclusively from outside its boundaries.

On their own, the new EPA rules won't be enough to reduce climate change. However momentous Monday's plan might be in the context of domestic U.S. policy to curb climate change, worldwide the plan has more symbolic value than real impact on greenhouse gas emissions.

If implemented, the rules stand to keep 500 million metric tons of carbon dioxide out of the atmosphere: a drop in the bucket compared with the 35.4 billion metric tons of carbon dioxide being emitted worldwide as of 2012.

Even so, analysts say that the United States must take the lead on reducing emissions given upcoming international negotiations on climate that will look to developing nations, including China, the world's largest carbon emitter, to make its own commitments toward reducing pollution. China, which has said it is exploring ways to reduce emissions, did not appear to have a reaction to the EPA plan.

A joint statement Monday from Food & Water Watch and the Institute for Policy Studies, two groups that advocate for sustainability, took a dim view of the U.S. proposal. The statement noted that the Intergovernmental Panel on Climate Change (IPCC)—the United Nations body that assesses climate change internationally—has held developing countries to a stricter standard. (Take the quiz: "What You Don't Know About Climate Change Science.")

"The targets don't make the U.S. a leader in seeking emissions reduction. Because this rule applies to only one segment of our economy, existing coal-fired power plants, the reduction targets fall far short of the IPCC's goals for developed countries," the groups' statement said. "With these targets, U.S. economy-wide emissions would still be above 1990 levels in 2030."

Analysts will spend the coming months studying the regulations and trying to project their impact. Sarah Ladislaw, a director and senior fellow of the energy program at the Center for Strategic and International Studies, said her organization plans to release an analysis in July predicting the plan's impact on emissions, consumer electricity prices, the coal industry, and the energy system at large. Ladislaw said she knew of at least nine other studies that are planned.

Ladislaw said last week before the rules were released that whatever the United States does may not be ambitious enough but that its global leadership on the issue is important.

"Which follows first: the ambition, or incremental building up of capability to shore up [political] support?" she asked. "I think that's what we'll learn over the next year."

This story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

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