Climate Rules: Why Natural Gas Will Be the Big Winner in New Greenhouse Gas Regulations

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New coal plants like this station in Illinois could be a rare sight thanks to new EPA regulations on carbon emissions.

Ever since comprehensive climate legislation died of neglect in the U.S. Senate in 2010, environmentalists have looked to the Environmental Protection Agency (EPA) to step in and save the day. According to the Supreme Court, the agency has the power—and the responsibility—to regulate greenhouse gases under the Clean Air Act if the EPA decided climate change posed a threat to public health, which it did under the Obama Administration. Direct greenhouse gas regulations were always considered a second-best route to curb climate change, and one the White House was loathe to pursue given the political ramifications among conservatives, but once cap-and-trade legislation died, it was just a matter of time.

Now that time has come. Juliet Elperin of the Washington Post broke the news last night that the Obama Administration is set to unveil the first federal standards to limit greenhouse-gas emissions from electric power plants, the biggest source of climate pollution. “This is an important common sense step to tackling the very real threat of climate change,” said EPA Administrator Lisa Jackson in a conference call with reporters that officially announced the rules. “These are smart regulations that build on what the industry is doing.”

But the rules will only apply to new power plants, which means all existing plants—including hundreds of coal-fired power stations that release significant amounts of carbon dioxide—will be exempt from the new rules. And while the regulations could sound the death knell for new coal power in the U.S.—already under pressure from tougher EPA regulations on traditional air pollutants—the winner from the rules might be another fossil fuel: natural gas.

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The regulations will force new power plants to emit no more than 1,000 lbs of CO2 per megawatt-hour (lb CO2/MWh gross). That level isn’t accidental—recent natural gas plants emit a little less than 1,000 lbs of CO2/MWh gross, while coal plants can produce as much as 1,800 lbs. Essentially the regulations will ban any new coal plant that isn’t being built with advanced carbon capture technology—which is to say, nearly all coal plants—while allowing utilities to take advantage of low natural gas prices by replacing coal with cleaner natural gas. “This is the first ever nationwide standard that imposes carbon limits on new power plants in the U.S.,” says Megan Ceronsky, an attorney with the Environmental Defense Fund (EDF). “It is incredibly important.”

The rules signify one more phase in the decline of coal power in the U.S. The Energy Information Administration (EIA) recently predicted that coal consumption would fall by 5% in 2012 to less than 900 million tons, a 16-year low. Even before the greenhouse gas rules came out, coal was already under assault from tougher pollution rules and from cheap gas, which made it easier for utilities to switch away from coal, long the backbone of the U.S. power plant fleet. The only new coal plant to break ground during the Obama Administration is an experimental carbon capture and sequestration facility—Southern Company’s Kemper County plant in Mississippi. As Dominion Resources CEO Thomas Farrell told the Post last week:

Gas is contributing to the closure of these plants. It’s not all EPA. It’s a combination of low gas prices and EPA working at the same time.

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The coal industry isn’t happy with the new rules, unsurprisingly, and you can expect them to fight back—with the help of Republicans and some coal-state Democrats in Congress. National Mining Association CEO Hal Quinn said in a statement:

Requiring coal-based power plants to meet an emissions standard based on natural gas technology is a policy overtly calculated to destroy a significant portion of America’s electricity supply. This is a movie we have seen before, and the script remains unchanged. Volatile natural gas prices will, once again, expose millions of households to higher utility bills, threaten hundreds of thousands of workers with unemployment and weaken both the competitiveness of basic industries and the reliability of the nation’s electricity grid.

Environmentalists for their part, were happy to see the EPA finally move on greenhouse gas regulations—the agency had delayed its rulemaking for months—but wished that something could have been done about existing coal plants. From Kevin Kennedy of the World Resources Institute:

Moving forward, it will be important for EPA to address carbon emissions for existing power plants as well. Existing plants represent a significant opportunity to improve efficiency and reduce U.S. greenhouse gas emissions. We can achieve these reductions at low cost while providing power plants flexibility in complying with them.

Indeed, while we can all gird ourselves for a political war over these regulations, the reality is that they may not make much of a difference. Existing Clean Air Act rules and the shale gas revolution—yes, fracking—already made new coal plants uneconomical. The greenhouse gas rules only solidify those facts. A braver EPA would have tackled the enormous problem of existing coal plants now, but understandably the Obama Administration has little stomach for that fight—especially in an election year. “Today’s rule only applies to new plants,” said Jackson. “We don’t have plans to address existing plants,” she added, saying that any additional regulations would have to go through open public debate.

It’s true that under the Clean Air Act the EPA eventually has a responsibility to tackle carbon emissions from existing power plant, and the EPA is working with environmentalists, industry and states on just how those rules will work. But don’t expect anything to happen before the November elections—and if a Republican takes the White House, expect the momentum to halt all together. Politically, the EPA has no virtually no other choice. But don’t think that these regulations will make much of a dent in climate change which—as scientists meeting this week in London declared—appears to be moving towards a disastrous tipping point. (And while coal consumption may be down in the U.S., it is up, up, up in rapidly growing China.) Today’s rules are much better news for natural gas than for the climate.

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