The EPA has issued its long-awaited proposed rule to curb carbon dioxide (CO2) emissions from existing fossil fuel-fired electric generating units (EGUs). Although there has been a much-heralded pause in global warming over the past 16 years, EPA is moving ahead to fulfill President Obama’s Climate Action Plan, in which he calls for a reduction in CO2 emissions from power plants and to otherwise achieve his stated goal of bankrupting coal plants.
CO2 is the primary greenhouse gas (GHG), accounting for 82 percent of U.S. GHG emissions and 75 percent of global GHG emissions. Electricity generation accounts for 32 percent of GHG emissions and fossil fuel-fired EGUs are by far the largest emitters of GHG.
In the rule, EPA set emission reduction goals for each state to meet, which it can do singly or in a multistate approach, and requires states to submit plans that must contain standards of performance that reflect the best system of emission reduction (BSER). EPA provided flexibility to the states to achieve the goals by one of four methods, which it calls building blocks, and which include strategies such as making fossil fuel power plants more efficient and using more zero- and low-emitting power sources (that is, use less coal). The final rule will be issued by June 1, 2015, with state plans due June 30, 2016. Implementation must begin no later than 2020 to achieve the required reductions by 2030.
Generally, EPA seeks to reduce CO2 emissions by 30 percent of 2005 levels. EPA claims the rule will provide billions in benefits. Using the Social Cost of Carbon, it calculated between $17 billion and $31 billion in global climate benefits. As it has done in many recent rulemakings, EPA also included co-benefits of the rule, namely anticipated reductions in emissions of sulfur dioxide, nitrogen dioxide and particulate matter. EPA calculated between $15 billion to $62 billion in air pollution health benefits from these reductions.
In comparison, EPA indicated annual compliance costs would range from $5.5 billion to $8.8 billion. The U.S. Chamber of Commerce’s Institute for 21st Century Energy, however, has released a report asserting the costs will be much, much higher. The U.S. Chamber of Commerce claims the rule will suppress average annual U.S. gross domestic product by $51 billion, lead to an average of 224,000 fewer U.S. jobs every year through 2030, cause a decrease in 40 percent of existing capacity (that is, fewer coal-fired power plants) and cause consumers to pay an extra $17 billion per year for electricity.
At the end of the day, EPA seeks to achieve up to a 30-percent reduction in CO2. However, GHG and CO2 emissions are already plummeting, even without the rule. EPA’s own data within the proposed rule shows GHG emissions from the energy sector were reduced from 6,244 million metric tons (MMT) in 2005 to 5,499 MMT in 2012, a reduction of 12 percent. The 2012 total is only 239 MMT higher than the 1990 total. Further, CO2 emissions from coal-fired EGUs dropped from 1,984 MMT in 2005 to 1,511 MMT in 2012, a reduction of a whopping 473 MMT or 24 percent. Further, the 2012 number is actually 37 MMT less than the 1990 total. This trend will only continue as more plants switch on their own to cheaper natural gas and as the power plants are naturally retired due to age. EPA itself states the average age of coal-fired plants will be 49 years by 2025.
Even assuming a reduction of 720 MMT (30-percent reduction in CO2 from fossil fuel-fired EGUs from the 2005 level of 2,402 MMT), this amount of reduction pales in comparison to the billions of metric tons emitted every year. China and India continue to expand their economies and increase their CO2 emissions while the United States hampers its own economy to achieve small, almost miniscule, reductions. It is as if someone did not like the coal industry.
John B. King is a partner with Breazeale, Sachse & Wilson LLP in Baton Rouge, La. His practice relates mainly to environmental regulatory permitting and compliance. Prior to joining the firm in 2003, he served as chief attorney for enforcement for the Louisiana Department of Environmental Quality.
For more information, contact John B. King at jbk@bswllp.com or call (225) 381-8014.
