INSIGHT: New Obama climate policy to ground on shoals of coal

27 June 2013 16:43  [Source: ICIS news]

Coal is held dear in many US statesBy Joe Kamalick

WASHINGTON (ICIS)--President Barack Obama’s ambitious new climate change policy was cheered by environmentalists and damned by energy producers and manufacturers in general, but its chances of success are as thin as smoke in any event.

Even if Obama’s multi-faceted regulatory assault on US emissions of carbon dioxide (CO2) goes exactly according to the rule-making schedule he outlined on Tuesday, it will be years - if ever - before the new restrictions take effect.

In the meantime, there are multiple opportunities for those opposed to his climate policy - members of Congress, state governments and legislators and a vast array of energy, power and manufacturing interests - to seriously delay the policy juggernaut or even bring it to a grinding halt.

The sweeping new carbon emissions proposal likely will have an uphill struggle among the many states that are dependent on coal for electric power and manufacturing fuel.

Those states’ representatives in Congress pose a threat to the president’s major move against coal, as every member of the House and a third of senators face re-election in just 17 months - and many of the president’s Democrat colleagues are now more vulnerable in coal-dependent states.

In a speech at Georgetown University in Washington, Obama said he was directing the Environmental Protection Agency (EPA) to craft new rules to limit CO2 emissions by existing US electric power plants.

The Obama administration already has rules pending that restrict carbon emissions by power plants yet to be built.  If made final as proposed, those new-plant rules would mean that no additional coal-fired utilities could be built in the US.

He also said he was directing the Interior Department to accelerate permits for renewable energy projects on federal lands, and to set goals for greater energy efficiency standards for industrial, commercial and multi-family residential structures.

Obama said that he will again seek elimination of federal tax credits available to US oil and gas energy producers - benefits provided to almost all manufacturers and producers as well as energy companies. 

He would need congressional approval for this particular denial, and Congress has shown no interest in that goal when the president has proposed it in each of the four years of his first term - even when he enjoyed large Democrat majorities in the House and Senate in 2009-2010.

In addition, he said that final approval for the Keystone XL pipeline will depend on whether the project will add “significantly” to greenhouse gas emissions.

But the real heart of Obama’s proposal is the goal of sharply reducing CO2 emissions from existing power plants, especially coal-fired facilities.

In a memo to the EPA administrator, Obama directed that proposed “standards, regulations or guidelines” on emissions from existing electric power plants be issued by June 2014, with final rules by June 2015, and guidelines by June 2016 on how EPA will work with states to implement the regulations.

The schedule means that, under the most optimistic circumstances, the president’s new climate policy initiative will not take effect until early 2017, after he leaves the White House.

In his memo to the EPA, Obama says that the agency’s administrator must ensure “that you launch this [regulatory effort] through direct engagement with states, as they will play a central role in establishing and implementing standards for existing power plants”.

He also said that EPA should work closely with industry and other stakeholders - such as leaders in the power sector, manufacturing and among unions - in establishing emissions standards for existing power plants “that allow the use of market-based instruments, performance standards and other regulatory flexibilities”.

The memo does not set a particular target for emissions reductions, and Obama said that he wants EPA to “ensure that the standards are developed and implemented in a manner consistent with the continued provision of reliable and affordable electric power for consumers and businesses”.

Those vague goals and parameters suggest that the president’s proposal has loopholes wide enough to drive a coal train through.

As Obama notes in his memo to EPA, the role of states is essential in bringing his new climate vision rules into force. 

It is at the state level that the president’s plans are almost certain to run aground.

Barely had the president finished his speech at Georgetown than four state attorneys general, representing Alabama, Montana, Oklahoma and West Virginia, said they would fight the proposed emissions plan “with full force”.

The four Republican attorneys general (the chief law enforcement officers in state governments) accused Obama of “skirting Congress to push regulations that harm industry, strong-arm states and stifle job creation”.

“This president’s unprecedented use of the EPA to enact overreaching regulations and circumvent state primacy has prompted our fellow Republican attorneys general to fight back at full force, and we plan to continue,” they said in a joint statement.

The governor of another state, Mike Pence of Indiana, also suggested that the EPA will not get a warm welcome when it shows up in his state to work on the planned reductions for existing power plant emissions.

“The president’s proposed carbon dioxide regulations will have a significant and detrimental impact on states like Indiana that rely on coal for reliable, affordable electricity,” Pence said, citing his state’s dependence on coal-fired electricity and manufacturing power.

Other state governors and legislators are likely to line up as well in opposition to the Obama proposal, which would essentially force shutdown of existing coal-fired power plants.  Those coal-fired plants produce up to 40% of US electric power.

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).

Within those 31 coal-dependent states, nine of them 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 in coal.

Even among the 19 states that use coal for less than half of their in-state power generation, many rely on coal for 33% to 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 low percentage use of coal for power generation within their borders still are dependent on coal-fired electricity because they import juice from neighbouring states that are coal-dependant, according to the EIA.

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

The wide, multi-state dependence on coal mining and/or coal-fired power was a main reason that Obama’s 2009 effort to get a cap-and-trade emissions bill through Congress failed.

That bill was indeed approved by the then-Democrat majority House, but Democrat majority leaders in the Senate were so fearful of the bill’s election consequences that the measure was never brought to a vote in that chamber.

Their worries were well founded.  The Obama effort to get congressional approval for cap-and-trade in 2009-2010 was seen as a major reason for the Democrats’ devastating defeat and loss of their majority in the House in November 2010.

For that reason, Republicans in Congress are likely to recruit some vulnerable Democrats in what is expected to be a House effort later this year or early next to bar funds to EPA for developing the Obama climate policy.

In the meantime, a blizzard of industry and state government lawsuits can be expected to chill the administration’s efforts to shut down coal-fired power.

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

By: Joe Kamalick
+1 713 525 2653

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly

Get access to breaking chemical news as it happens.
ICIS Global Petrochemical Index (IPEX)
ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index

Related Articles