A Wrong Way To Reduce CO2 Emissions

BY DENISE FUREY/ The media are highlighting the Obama administration’s executive actions affecting immigration and ObamaCare. Another attempt to do an end-run around Congress, which is receiving less press, is the Environmental Protection’s proposed “Clean Power Plan”.

Not only is this rule skirting the legislative process, but it will potentially hinder companies investing in their business (and thus their communities), negatively impact employment and lead to higher power prices.

The problem with the rule is not so much the intent to reduce carbon dioxide (CO2) emissions, but the convoluted way the EPA proposes to do so.

The draft rule suggests the US mandate that the power sector reduce CO2 emissions from 2005 levels by 30% in 2030 or by 24% in 2025. The proposed rule establishes CO2 reduction targets for each state and relegates the actual detailed rule-making to those states. The EPA is encouraging the states to set of cap-and-trade programs singularly or jointly with other states to help companies comply with targeted emission standards.

The Obama administration was unable to get federal CO2 cap-and-trade legislation through Congress. This new rule is Plan B.

There is good regulation and bad regulation. Bad regulation is that which is unnecessary and/or poorly drafted. I question the point of targeting a reduction in CO2 of 30% by 2030 because the industry has already reduced CO2 output by 14% since 2005 due to increased use of natural gas in generating power owing to low natural-gas prices compared to coal.

Coal plants emit roughly twice the amount of CO2 per unit of power as natural-gas facilities. Continued low natural-gas prices owing to the shale-gas revolution will probably result in lower CO2 emissions without this new regulation.

That being said, once the EPA determined that CO2 “endangered” humans, it was required to regulate CO2 as per the Clean Air Act. Additionally the US Supreme Court determined the EPA should regulate CO2.

Good regulation is consistent and clear. This rule will not result in consistent regulation. The Clean Plant Plan sets up a situation where there could be 50 materially different rules affecting the emission of same gas, CO2. Many power companies operate in multiple jurisdictions, forcing them to set up potentially costly duplicative compliance functions.

The EPA’s rule is to be finalized by June 2015. The states have until June 2016 to promulgate their detailed regulations. If states want to coordinate efforts such as regional cap-and-trade programs, they have until June 2017 to do so.

There is no way the states can meet these deadlines because the regulatory processes in most states do not move that fast. Furthermore, there will be numerous lawsuits at both the state and federal levels; therefore we will not see any clarity for a number of years.

The upshot is power companies will not be able to make informed decisions about needed investments in their business for a number of years. So they will delay projects, thus negatively affecting local economies and employment. Furthermore, the failure to build new capacity may impair the reliable supply of electricity in certain parts of the country.

Anyone can register his or her comments on the Clean Power Plan with the EPA until the end of this month.