On October 23, 2015, the Environmental Protection Agency (EPA) released its Clean Power Plan (CPP) − the nation’s first attempt to regulate power plant carbon emissions. The plan is central to the goal of achieving a 28% reduction in economy-wide emissions by 2025 and to establishing the United States as a credible contributor to reducing global emissions. But, the CPP is being met with significant opposition, and implementation of the plan is by no means certain. What is the plan; what are the concerns; and are they justified?
The Plan
The CPP calls for a 32% nation-wide reduction in power plant emissions and assigns specific targets to each state. The targets vary according to existing conditions in each state and range from reductions of more than 40% in some states to less than 10% in others. Each state must submit a compliance plan by September, 2016, which could be a draft with up to a two-year extension granted for submitting the final plan. The EPA would develop a plan for states unwilling to comply, and the period for compliance would extend from 2022 to 2030.
An important feature of the CPP is the flexibility afforded to the states. Options for meeting the mandates include energy efficiency measures, implementing carbon capture and sequestration for coal-fired power plants, and/or replacing some of the plants with more efficient gas-fired systems or carbon-free nuclear, wind or solar energy. Market-based approaches can also be used to trade carbon credits within and between states, with credits awarded by the EPA to entities surpassing their targets sold to those unable to meet their targets.
The Opposition
Opposition to the CPP is driven by states whose economies are strongly tied to coal production and/or coal-fired power plants, members of Congress generally opposed to restrictions on the production and use of fossil fuels, and special interests and organizations that oppose restrictions on free markets and economic growth. Following release of the CPP, 27 states filed a lawsuit in the Court of Appeals for the District of Columbia Circuit, challenging its legality and requesting a stay on implementation until the suit is ultimately adjudicated by the Supreme Court, a process that could take several years. On January 21, 2016 the Circuit Court rejected the request for a stay, but did set an expedited date of June 2 for hearing arguments on the case. On January 26, the states resubmitted the request for a stay, this time to the Chief Justice of the Supreme Court, and on February 9, in an unprecedented 5 to 4 decision, the Court voted to impose a stay. It marked the first time that a stay was imposed on a regulation before a decision had not been made by a federal appeals court.
Consider some of the objections.
The CPP will destroy jobs: Yes, it will contribute to the loss of mining jobs in coal-producing states, but such losses have already been occurring as natural gas and renewables replace coal for power generation. From 2008 to 2012, nearly 50,000 coal sector jobs were lost (Mooney, 2015), and losses will continue with or without the CPP. On the plus side of the employment ledger, about 175,000 jobs were created in the natural gas and wind/solar sectors. In some coal-producing states, there was a net loss of jobs, but in others losses were negated by growth in gas, oil and/or wind energy.
The CPP will cause utility bills to rise, placing a special burden on low-income rate payers: Strongly influenced by the low cost of natural gas and declining costs in wind and solar energy, the CPP’s effect on utility rates is likely to be incremental and, with greater emphasis on energy efficiency measures, utility bills could be lower rather than higher.
The CPP threatens the reliability of the grid: Threats to the reliability of the electric grid are exaggerated (Tierney, et al., 2015; Weiss et al., 2015). Utilities and grid operators are already adapting to growth in intermittent wind and solar energy, and even with additional generating capacity enabled by the CPP, the contributions of wind and solar to total generation would remain well below those successfully managed in nations such as Denmark and Germany.
The CPP represents an unjust “war on coal” and the livelihood of those who produce it: The notion that the CPP is a “war on coal” ignores several important points. First, driven principally by market forces associated with shale gas production, coal’s contribution to U.S. power generation has been in decline for several years - from 50% in 2005 to 39% in 2014 and 34% in 2015 (Bloomberg, 2016). And the decline will continue with or without the CPP. Second, the CPP does not call for the elimination of coal, and for many years, with or without the CPP, it will continue to supply a significant fraction of the nation’s electricity. Third, with the flexibility afforded to the states for meeting their targets, the burden does not rely exclusively on reducing the use of coal. The notion that the alleged war is “unjust” might have some merit were it not for the fact that the administration’s 2016 budget includes about $10 billion for assistance to coal communities, including funds for economic development.
The CPP is yet another example of regulatory overreach by the executive branch of government. To counter this claim, the administration will argue that under a 2007 Supreme Court decision, the EPA is empowered by the Clean Air Act to set limits on GHG emissions.
A Supporting Cast
The CPP is not without significant levels of support. Eighteen states have petitioned the Circuit Court to participate in litigating defense of the plan. Sixteen states are also on a trajectory to exceed their targets (Richardson, et al., 2015). Many states have had emission reduction policies in place well before announcement of the CPP, and recognizing the momentum building for low-carbon power generation, many utilities see the CPP as adding another layer of certainty to decisions that increase the use of natural gas, wind, and solar energy (Smith, 2015).
Summary
If one accepts the premise that the U.S. should do more to mitigate global warming, the CPP should be viewed as a pragmatic approach. It is by no means draconian, and it will not trash the economy. Criticisms that it would increase electricity rates, adversely affecting businesses and families, run contrary to the five-year trend of sharp declines in the costs of gas-fired, wind and solar power generation. By increasing investments in renewable energy, the CPP would do much to further the reduction in costs and, with energy efficiency measures, create hundreds of thousands of new jobs. Renewables and energy efficiency are becoming ever more compelling investment opportunities and make good economic sense. Ignoring their growing potential does not.
The CPP also sends a strong message to the rest of the world that the U.S. is serious about providing global environmental leadership. This message should not be undermined by rejection of the plan.
References
Bloomberg (2016). Sustainable Energy in America Factbook. Bloomberg New Energy Finance (www.bcse.org).
Mooney, C. (2015). Study: Coal Industry Lost Nearly 50,000 jobs in Just Five Years. The Washington Post(http://www.washingtonpost.com/news/energy- environment/wp/2015/04/01/the-decline-in-coal-jobs-in-one-chart/).
Richardson, J., et al. (2015). States of Progress. Union of Concerned Scientists (http://www.ucsusa.org/global-warming/reduce-emissions/clean-power-plan-states-of-progress#.Vq-Zm_krJaQ).
Smith, R. (2015). With Markets on their Side, Utilities Skip Fight against Carbon Rule. The Wall Street Journal(http://www.wsj.com/articles/with-market-on-their-side-electric-utilities-skip- fight-against-carbon-rule-1444606397).
Tierney, S., Hibbard, P. and C. Aubuchon (2015). Electric System Reliability and EPA’s Clean Power Plan: Tools and Practices. Analysis Group (www.analysisgroup.com/uploadedfiles/content/insights/publishing/electric_system_reliability_a nd_epas_clean_power_plan_tools_and_practices.pdf).
Weiss, J., et al. (2015). EPA’s Clean Power Plan and Reliability: Assessing NERC’s Initial Reliability Review. The Brattle Group (http://info.aee.net/brattle-reliability-report).