INSIGHT: White House puts votes at risk with new carbon cap

29 March 2012 15:26  [Source: ICIS news]

By Joe Kamalick

WASHINGTON (ICIS)--The Obama administration this week took steps to impose carbon caps on the US electric power industry, a move that may please the nation’s environmentalists but could hurt the president among voters in coal-dependent states.

The Environmental Protection Agency (EPA) on Tuesday proposed the first US restrictions on carbon emissions by electric power plants, saying the limits are needed to avert the adverse health and economic consequences of global warming.

EPA administrator Lisa Jackson said that the proposed rule limiting greenhouse gas (GHG) emissions by power plants would allow only 1,000lb (454kg) of carbon for every megawatt of electric power generated.

Jackson noted that the proposed rule would apply only to new facilities. It would not affect existing plants – including coal-fired generators – or any planned power projects that will begin construction in the next 12 months.

Most existing and probably all new natural gas-powered power plants are likely to be able to meet the 1,000lb standard, but the carbon cap of 1,000lb per megawatt effectively bars any new coal-fired facilities.

Coal-fired power plants generate slightly more than 2,000lb of carbon per kilowatt, according to consulting firm Clear View Energy Partners. 

The only way to get a new coal-fired facility down to the proposed 1,000lb maximum would be with a 50% reduction through carbon capture and sequestration (CCS), a technology that even Jackson concedes is not available on a commercial scale and might not be realistic for another 10 years at best.

The proposed EPA rule is open to a 60-day comment period, and Jackson said the agency would hold further meetings with stakeholders and public hearings around the country before writing a final rule. A final rule was not expected before the US national elections on 6 November.

Even without a final rule, the proposed carbon limits for power plants are likely to encounter stiff resistance from US utilities, the coal industry, a wide range of manufacturers and many in Congress, where the efforts of Barack Obama’s administration to legislate for GHG limits were unsuccessful and are still strongly opposed.

Scott Segal, executive director of the Electric Reliability Coordinating Council (ERCC), a group of utility companies, warned that the proposed EPA carbon cap, and other EPA climate change initiatives, “will have the effect of increasing the price of energy for consumers by double digits in some areas”.

He also said that the carbon cap would “have the effect of making industry less competitive and destroying jobs as each [coal-fired] power plant closes”.

Segal dismissed Jackson’s statement that the administration has no plans to impose the cap on existing coal-fired plants.

“We have little confidence that the administration will adhere to this view, particularly after the election”, if Obama wins a second term, he said.

Congressman Ed Whitfield (Republican, Kentucky) said on Tuesday that the EPA’s proposed limit on carbon emissions by power plants is yet another element of the administration’s “war on coal”.

Whitfield, chairman of the House Subcommittee on Energy and Power, said, “President Obama and EPA Administrator Lisa Jackson are circumventing the will of Congress and the American people by moving forward with a regulation that threatens our most abundant, reliable and affordable domestic electricity source, coal”.

Coal-fired power plants account for just under half of US electricity. Whitfield’s home state of Kentucky is a major supplier of coal to the US power sector and other industries.

The EPA move to impose carbon caps on new electric power plants seems calculated to restore support for Obama in one of his key constituencies, the environmental movement.

Many in the US environmental community were cheered by Obama’s decision in January to postpone for another year any decision on the Keystone XL pipeline project that was to feed Canadian oil sands crude to US Gulf coast refineries.

But environmentalists were annoyed anew when Obama last week promised to fast-track permitting for the southern leg of the Keystone XL pipeline, running from Cushing, Oklahoma, to the Gulf coast.

Some in the green community were also angered that the EPA carbon cap proposal for power plants has no bearing on the hundreds of existing US coal-fired utilities.

On one hand, the White House is trying to deflect blame for rising US gasoline prices – now about double what they were when Obama took office in January 2009 – by declaring the president’s support for more domestic oil and gas production. But at the same time, he has to try to keep good relations with the greens.

The EPA plan to cap carbon emissions by new power plants is one way to win back some green support, but many think the move is risky because the same policy could alienate support for Obama in key US states as the November election nears.

Among the 50 US states, 31 rely on coal for 50% or more of their electric power generation, according to the US Energy Information Administration (EIA). That figure alone means that 62 US senators and about 200 House members may be put on the spot with voters this election year.

Of those 31 coal-dependent states, nine get 80% of their in-state electric power from coal. And of those, seven states – New Mexico, North Dakota, Ohio, West Virginia, Wyoming, Indiana and Kentucky – source more than 90% of their electric power from coal.

Even among the 19 states that use coal for less than half of their in-state power generation, many rely on coal for a third, 40%, or more of their electricity. Alabama, for example, falls below the 50% coal-fired power measure, but the state still relies on coal for 48% of its electricity.

Only two states, Vermont and Rhode Island, have no coal-fired electric utilities.

Even some states that have a low percentage use of coal for power generation within their borders are still dependent on coal-fired electricity because they import juice from neighbouring states that are coal-dependent, according to the EIA.

Mississippi, for example, uses coal to generate only 33% of its in-state electric power, but it does not have enough of its own generating capacity to meet demand, so it imports electricity from nearby states that burn coal.

All manufacturing industries in the country require electric power to one extent or another, so they would also face increased utility rates under the EPA plan, according to ERCC. 

In addition, many major manufacturing sectors are direct consumers of coal, and they have to anticipate that soon EPA will turn its attention to their carbon emissions.

Chemical manufacturers directly consumed 9.3m short tons (8.5m tonnes) of coal in 2009, according to the EIA. But chemical companies are by no means the leading, or only, coal consumers.

Paper manufacturing consumed nearly 10m short tons of coal last year. Non-metallic minerals production ate up 11.8m short tons, metal manufacturing burned 6.6m short tons and food production made direct use of 8.6m short tons of coal.

Other industrial sectors – such as fabricated metals and machinery manufacturing – are also direct consumers of coal, but the EIA said consumption totals for those were “withheld to avoid disclosure”.

From power generation to industrial use, coal permeates the US energy and manufacturing sectors, and business leaders warn that any national policy that penalises coal use will have substantial and attributable cost impacts on consumers, industries and jobs.

And the EPA’s proposed carbon cap for power plants could have its own substantial effect on the November election.

 ($1 = €0.75)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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