The EPA Puts the Nation on a CO2 Diet

On Monday, the Environmental Protection Agency (EPA) Administrator Gina McCarthy announced new regulations that the EPA is proposing to put in place under the Clean Air Act to cut carbon emissions from existing power plants under President Barak Obama’s Climate Action Plan. The details described in the news release summaries were not an entirely accurate reflection of what I read in the proposed regulation.

Power plants are the largest single source of greenhouse gas emissions in the United States accounting for about 33% of greenhouse gas release (and slightly more of carbon dioxide). Greenhouse gases are: carbon dioxide (CO2), fluorinated gases, nitrous oxide and methane (CH4). According to the EPA CO2 represents 84% of mass of greenhouse gas emissions and that the climate models indicate to be the cause of climate change. The proposed regulations will require power plants to cut their CO2 emissions by 30% from 2005 levels or 18% from 2013 levels by using a combination of approaches.

data from EIA

One of the main goals of this proposed regulation is reducing the amount of electricity generated from coal fired power plant and reducing the total number of coal fired power plants in the United States. In the past few years the EPA has implemented tougher regulations for these power plants. The Cross-State Air Pollution Rule (CSAPR) and the Mercury and Air Toxics Standards (MATS) are two of the latest regulations to address power plants. MATS regulates mercury, arsenic, acid gas, nickel, selenium, and cyanide and slashes emissions of those pollutants from coal fired electrical generation plants. The CSPR is aimed at coal fired electrical generation plants, too. It slashes smokestack emissions of SO2 and NOX that can travel into neighboring states. Those pollutants react in the atmosphere to form fine particles and ground-level ozone and are transported long distances, making it difficult for other states to achieve their particle requirements under the National Ambient Air Quality Standards (NAAQS) which have also recently been tightened. Until now there has been no federal rule to prevent power plants from releasing as much CO2 as they want, though several states already have some sort of limitation on CO2; and CO2 generation in the United States has been falling in the past seven years.

President Obama has directed the EPA to create national CO2 emissions standards for new and existing power plants with the goal of reducing CO2 emissions. Last September the U.S. Environmental Protection Agency (EPA) revised their proposed Clean Air Act standards to cut carbon pollution from new power plants. Under the revised proposal, new large natural gas-fired turbines would need to meet a carbon dioxide (CO2) limit of 1,000-1,100 pounds of CO2 per megawatt-hour depending on size, while new coal-fired units would need to meet a limit of 1,100 pounds of CO2 per megawatt-hour. Existing coal –fired electrical generation turbines emit about 2,080-2,180 pounds of CO2 per megawatt-hour of power produced. Natural gas produces about 1,170 pounds of CO2 per megawatt-hour.

With Monday’s announcement the EPA is proposing regulation for the existing power plants requiring a reduction in the overall CO2 emitted by the nation. If these regulations if implemented and in effect today, the effect would be to reduce overall CO2 emissions of all the nations on earth by less than 1% and by the time they are actually implemented the impact will be a fraction of a percent. So, these regulations are not going to change the impact of CO2 on the climate.

The approach the EPA is taking is to allocate to each state a CO2 limit. The basic formula for the limit assigned to each state is:

CO2 emissions from fossil fuel-fired power plants) divided by (state electricity generation from fossil-fuel fired power plants plus certain low- or zero-emitting power sources).

It is to be noted that existing hydropower is excluded from the base calculation, but additional hydropower will be included in the denominator. EPA lists the interim and final goal for each state on pages 346-348 of the proposed regulation preceded by the explanation of how they arrived at these goals. According to the EPA, their approach factors in megawatt hours from fossil fuel power plants plus other types of power generation like renewables and nuclear, as well as megawatt-hour savings from energy efficiency in the state. The final goal for Virginia is 810 pound of CO2 emitted per net megawatt hours of electricity produce in the state, for Maryland it is 1,187 and for West Virginia 1,620. The EPA expects the regulations to result in a reduction in the electricity used per capita and in the CO2 generated per megawatt hour of electricity produced, and details how each state will achieve it in the 645 page regulation.

There are expected to be comments and legal challenges to the regulation, since it appears to be an expansion of the scope of existing laws and there are significant fiscal implications of the regulation across the economy. Nonetheless the EPA will mandate the limit and the states must provide a plan for achieving that limit that is acceptable to the EPA by June 30, 2016. States must determine a mix of four overall strategies that the EPA “helps” them pick:

• Make fossil fuel power plants more efficient. Though, it is estimated by the EPA that many coal plants can be upgraded to become slightly more efficient; this will be very cost dependent. Efficiency gains are expected to be 6%.
• Use lower CO2 emitting power plants more. This strategy both encourages the increase in utilization of the existing natural gas fired power plants (as well as construction of gas fired power plants). EPA considers increase utilization of low CO2 emitting power generation in the base load the preferred option of achieving the goal. 
• Use more zero- and low-emitting power sources by expanding renewable energy programs. The EPA is requiring the expansion of states’ Renewable Portfolio Standards, RPS, which require that a portion of energy produced to be by renewable. Within the prosed regulation EPA has assigned each state (with the exception of Vermont) a renewable energy generation goal (pages 202-204 of the proposed regulation). Virginia which currently supplies 3% of electricity from renewable sources is required to supply 16% of electricity from renewable sources. (Maryland currently supplies 2% from renewables and is also required to supply 16% from renewable sources in 2030.) Texas will be required to supply 20% of their electricity from renewable sources and currently supplies 8%. You get the picture. 
• Use electricity more efficiently. EPA is also requiring each state to establish energy savings programs and the amount of savings that utilities must achieve through customer energy efficiency programs. See page 229 of the regulation for each states goal. 
• Utilization of programs such as state cap and trade to put pressure on the CO2 generation and encourage the investment into energy saving and greenhouse gas reducing technologies. EPA looks for expansion of the various cap and trade programs that exist in 10 states. The states can develop a state-only plan or collaborate with other states to develop plans on a multi-state basis and EPA supplies the states your home state is grouped with. Delaware, District of Columbia (despite having no goals), Maryland, New Jersey, Ohio, Pennsylvania, Virginia, and West Virginia are grouped together in the East Central group. 

Though a national cap and trade law to address CO2 failed to pass the senate in 2009 and died, cap and trade law and regulations for CO2 exist in California and a program exists among nine northeastern states. In addition, cap and trade was used successfully to address the acid rain problem in the 1990’s. That program served as a way to cut pollution without heavy-handed regulations, allowing each business to choose how to reach the mandated goal. Each year the cap would ratchet down, allowing less pollution while market forces drove up the price for permits, creating an incentive for industries to invest in air scrubbers and pollution removal technology. However, that program was a permit trading program among regulated plants and not effectively covering the entire economy. The proposed CO2 regulation covers all electrical generation, its cost and availability in the United States.

One of the challenges in reducing CO2 emissions in the United States has been that there is no economically feasible carbon capture technology that can be retrofitted to a coal fired power plant and too much of the CO2 generated nationally comes from coal fired power plants- almost 13%. In addition, power companies are utilities that are limited by layers of regulations that control pricing and limit flexibility due to technical, business and jurisdictional constraints. The U.S. is the largest producer of natural gas, so we have alternatives. With this regulation the EPA is now taking control of the power generation sector of the economy to remake that industry in a less carbon intensive and more efficient vision. These regulations are likely to increase the cost and possibly limit the availability of electricity, but are also intended to reduce the use of electricity. These regulations will mark the end of the era of using coal to generate electricity in power plants. This era began with the oil crisis in 1972 and will end with the EPA issuing CO2 “budgets” and potentially creates a regional or national carbon trading market for “carbon credits."

I should admit that I am one of the many who prefer a carbon tax to EPA's command and control regulations. Taxing the carbon content of products might be a more direct method to control CO2 generation and more effective method of reducing CO2 production without regulators taking control of a significant segment of the economy and could be applied to imports. However, a direct tax must come from the legislature, not regulation, and would have to be negotiated and vetted by the elected representatives of the people. It would certainly generate badly needed revenue for our government that is running at a deficit.