We Have Proposed Carbon Pollution Standards. Now What?

The most contentious (though not necessarily the most expensive) proposed environmental regulation to hit the power industry in this century was released by the Environmental Protection Agency (EPA) on June 2. The most immediate consequence was an increase in the volume of email.

The Big One

As I write this column a week after the EPA unveiled its proposed Carbon Pollution Standards for existing fossil-fired power plants, those of us in the media are still being inundated with “comments” and “perspectives” from all corners. The tsunami began even before the proposal (remember that it’s not a fait accompli) was released. Some of those pre-release statements in particular made claims based on inaccurate assumptions about what the proposal would include.

I’m not surprised by the volume (in both senses of that word) of chatter both before and after the announcement. (The rule was also a topic of discussion at the annual Edison Electric Institute meeting the following week, though the tone there was one of wait and see what emerges from the final plan; see my report on that meeting.) Until the proposal was made public, it was easy to fixate on the fossil industry’s worst fears about what the EPA would require. Now that we know (but maybe haven’t read the thousand-plus pages of documents), it’s easy to worry about how states will decide to implement the plan.

However, some aspects of the standards are a bit less worrisome now that we know what’s in the proposed rule. For example, the impact on reliability and affordability may be minimal, as the EPA promised. Given the range of options for compliance, the coal plants likely to be shuttered, if any are, are those already too old and uneconomic to maintain, let alone invest in, especially given current gas prices.

And the carbon rule looks to be less costly than the Mercury and Air Toxics Standards (MATS). The EPA projects that the annual incremental cost of compliance with the carbon rule (excluding costs associated with monitoring, reporting, and recordkeeping) could be as high as $7.4 billion in 2020 and $8.8 billion in 2030 (in 2011 dollars). Its “projected annual incremental private costs” to the electric power industry for the final MATS Rule were $9.6 billion in 2015. Not surprisingly, various industry estimates are higher.

As for the overall economic consequences, those may be flat to positive. A June 6 story in The New York Times noted that “Some critics of the Environmental Protection Agency’s new requirements for power plants argue that forcing emissions reduction will curtail economic growth. But the recent experience of states that already cap carbon emissions reveals that emissions and economic growth are no longer tightly tied together.” The article’s case in point was the market-based Regional Greenhouse Gas Initiative (RGGI) in the Northeast, which announced the results of its 24th auction the same day. The nine Northeast and Mid-Atlantic states participating in the cap-and-trade program have substantially reduced carbon emissions while experiencing stronger economic growth than the rest of the country.

There were other factors driving the trends as well, the Times noted. RGGI states’ emissions were dropping even before the 2009 program due to lower demand (caused by recession and warmer winters), switching to natural gas, retiring coal capacity, and adding renewables to the mix. But as the economy and demand recovered, since 2009, “the nine states have cut their emissions by 18 percent, while their economies grew by 9.2 percent. By comparison, emissions in the other 41 states fell by 4 percent, while their economies grew by 8.8 percent.”

RGGI has not been without controversy (including New Jersey Governor Chris Christie’s pulling his state out of the compact in 2011), and one should expect some bumps with any new type of program, but it has achieved its primary goal of reducing carbon emissions. A similar program, the President George H.W. Bush-era SO2 cap-and-trade program to reduce acid rain, also achieved its environmental goals at minimal cost and has been a model for subsequent market-based initiatives.

The experience of RGGI states aside, a multistate cap-and-trade program is only one possible approach. (For more details, see our June 2 story “Carbon Rules Proposed for Existing Power Plants”; for news coverage of future developments, watch for stories online and in our weekly POWERnews eletter.) The fact is, nobody knows whether this plan will, on its own, hurt or help the U.S. economy when it is eventually finalized. The odds are high that there will be some regional variation, given that implementation will be driven by the states. That conclusion doesn’t make for a clever sound byte or a rallying cry for any particular lobbying group, but it’s as close to reality as it’s possible to get at this early stage of the process. (Click the Webinar link at powermag.com to learn about our July webinar on how to prepare for the next stages of the EPA’s Carbon Pollution Standards.)

The Cumulative Effect

Of course, the flurry of analysis and punditry about carbon standards doesn’t diminish the significant challenges of complying with all the other long-standing regulations (including those governing “traditional” pollutants like SOx, NOx, and particulate matter), those recently finalized (especially MATS and the cooling water intake rule), and those anticipated (particularly coal ash and effluent limit guidelines). In fact, it’s the combination of all those rules that has to be giving heartburn to those charged with developing unit and fleetwide compliance plans.

Thinking about the tradeoffs involved—including those between energy and water and between efficiency and added controls—and the potential conflicts between the goals of various regulations led to the creation of this month’s cover, with its cumulus clouds. Taken together, the regulatory requirements and economic imperatives (including low gas prices, flat demand, and customer defection) facing coal plants in particular are going to make running more efficiently a core business goal. Look for articles on ways to do that in forthcoming issues. ■

Gail Reitenbach, PhD is POWER’s editor (@GailReit, @POWERmagazine).