INSIGHT: US bid to cut CO2 from power plants likely to fail

26 September 2013 16:40  [Source: ICIS news]

By Joe Kamalick

US industry charges that EPA is making war on coalWASHINGTON (ICIS)--The renewed US effort to force sharp reductions in carbon emissions by coal-fired power plants likely will fail because the regulatory mandate depends on carbon capture technologies that even the White House admits are not viable.

But that won’t stop the administration from trying.

Amid a broad and vociferous chorus of industry objections and criticism, the Environmental Protection Agency (EPA) has issued its revised proposed rule establishing limits on carbon emissions by new power plants.

The proposed rule sets a limit of 1,000lb (454kg) of carbon dioxide (CO2) emissions per gigawatt hour (GWh) for planned electric utilities powered by natural gas. And any future coal-fired facility would face a cap of 1,100lb/GWh.

Carbon emissions of even the most modern coal-fired power plants are nearly twice that level.

EPA administrator Gina McCarthy said the new emissions caps represent “common sense action to limit carbon pollution from new power plants”, saying that “climate change is one of the most significant public health challenges of our time”.

She said that with the proposed rules for new power plant emissions “we can slow the effects of climate change and fulfil our obligation to ensure a safe and healthy environment for our children”.

McCarthy said the new standards “will also spark the innovation we need to build the next generation of power plants, helping grow a more sustainable clean energy economy”.

But comments and opposition voiced by a wide variety of industries and multiple state governments contend that the only way that new coal-fired power plants can meet the EPA’s proposed limits would be to use carbon capture and storage (CCS) technologies, which have yet to be proved on a commercial or economical scale.

The consequence, they argue, is that with last Friday’s rulemaking, EPA has effectively banned any future coal-fired power generation.

US petrochemical producers, downstream chemical makers and a broad array of other manufacturers and industries have slammed the new proposed rule, charging that it will raise electricity costs, impede manufacturing and drive up the cost of natural gas.

Electric utility officials also charge that the new EPA rule - to be made final perhaps by early next year - will have no impact on the global climate, will almost certainly not survive judicial review and relies on carbon capture technology that simply is not available.

Scott Segal, director of the Electric Reliability Coordinating Council (ERCC), said that the EPA rule “likely will be illegal, counterproductive from an environmental perspective and contrary to our long-range interest in creating jobs, holding down costs and producing reliable energy”.

ERCC, which argues that coal-based energy should play a key role as the US moves toward a clean energy future, contends that the cap on CO2 emissions by yet-to-be-built coal-fired plants - and ultimately on existing coal-fuel power generators - will have no impact on global climate because coal-dependent electric power production is growing across the globe, not least in Asia and the subcontinent.

Indeed, says Segal, “as energy costs increase in the US [because of EPA carbon emissions limits], manufacturing assets will move overseas to areas less sensitive to energy efficiency” and as a consequence worldwide “carbon emissions might even go up as a result of the rules”.

Segal says that EPA’s carbon emissions limits for future or existing coal-fired power plants are likely to be be overturned in federal courts because the agency is basing its restrictions on the use of carbon capture and sequestration (CCS) technologies that have yet to be demonstrated as viable on a commercial and cost basis.

The Clean Air Act (CAA), on which EPA is basing its power sector emissions limits, requires that rulemaking must be keyed to cost-effective and proven technologies that are readily available.

“The truth is that if the [CO2 emissions] standard is based on unrealistic assumptions about carbon capture, the EPA will essentially ban new plants”, Segal argued.

Oddly enough, the White House essentially agrees.

In a comprehensive study ordered by President Obama and produced by a 14-agency task force, it was found that “widespread cost-effective deployment of CCS will occur only if the technology is commercially available and a supportive national policy framework is in place”.

Despite promises of cost-effective carbon capture and storage in the near future, the technology has yet to be proven on a commercial scale and at costs that would make continued use of coal economically viable.

In a somewhat dated but no less pertinent study produced by the administration’s Interagency Task Force on Carbon Capture and Storage (ITF), it is said that “if available on a cost-effective basis, CCS can over time play a large role in reducing the overall cost of meeting domestic emissions reduction targets”.

The key phrase there is “if available on a cost-effective basis”.

The ITF report goes on to note that “CCS projects face economic challenges related to climate policy uncertainty, first-of-a-kind technology risks, and the current high cost of CCS relative to other technologies”.

The report said that CCS technologies “will not be widely deployed in the next two decades absent financial incentives that supplement projected carbon prices”. Translated, that means federal subsidies for CCS technologies and a government-imposed price on carbon.

“A climate policy designed to reduce our nation’s GHG [greenhouse gases] emissions is the most important step for commercial deployment of low-carbon technologies such as CCS,” the ITF report says. 

In other words, a federal policy that mandates cuts in carbon emissions “will create a stable, long-term framework for private investments” in carbon capture and sequestration, the ITF report says.

That is what the EPA’s CO2 emissions limits for coal-fired power plants are meant to do.

The ITF report also relates that “estimates of the incremental costs of new coal-fired plants with CCS relative to new conventional coal-fired plants typically range from $60 to $95 per tonne of CO2”.

The report worried that “the lack of comprehensive climate change legislation is the key barrier to CCS deployment”.

“Without a carbon price [mandate] and appropriate financial incentives [federal subsidies] for new technologies,” the report adds, “there is no stable framework for investment in low-carbon technologies such as CCS”.

By proposing to essentially bar any new coal-fired electric power generating facilities, the EPA seemingly is moving to force a shift to carbon capture technologies no matter what.

In a closing and revealing bit of candour, the ITF report notes that “Whether the public will support or oppose commercial-scale CCS projects is largely unknown”.

But does it matter?

Myron Ebell, a senior energy analyst at the conservative Competitive Enterprise Institute (CEI), argues that even if EPA’s CO2 limits on coal-fired power plants eventually are overturned in federal court, the damage will have been done.

“During the several years it will take to finalise the rule and then to overturn it in federal court, no electric utility will invest in planning or building a new coal-fired power plant,” he said.

“American consumers and manufacturers will be denied the benefits of the low-cost electricity produced by coal,” he added.

($1 = €0.74)

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

By: Joe Kamalick
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