The following appeared as a comment in the National Journal Expert Blog: What Will Be Upshots of EPA Climate Rules?
EPA’s proposed New Source Performance Standards for greenhouse gas emissions from certain fossil-fuel-fired power plants ensures new power generation will be at least as clean as new natural gas combined cycle plants. Specifically, EPA has proposed that new base load fossil‐fuel‐fired power plants meet an output‐based standard of 1,000 pounds of CO2 per megawatt‐hour (lb CO2/MWh). And in setting the standard, EPA has offered new compliance flexibility in the form of 30-year averaging. Essentially, new coal plants can be built now and controlled later, so long as the 1,000 lb CO2/MWh standard is met on average over a 30-year period. This is in addition to the “innovative compliance waiver” already offered by the Clean Air Act. This openness to flexible approaches is important, not just for this rule, but also more broadly in how EPA can use the Clean Air Act to achieve effective and cost-effective policy outcomes going forward.
While this measure sets an important precedent on use of the Clean Air Act to achieve climate goals in a way that permits flexibility and innovation, it is critical to note that the trend toward cleaner electricity production is already happening based purely on the economics. Natural gas prices are at a historic low, which is already leading power generators to shift toward natural gas. New plants are increasingly NGCC anyway (or in some markets, renewable generation), and the dispatch of existing plants is also shifting to favor existing (and previously underutilized) natural gas-fired power generation resources. In fact, the Energy Information Administration (EIA) recently reported that coal-fired power represents less than 40 percent of total generation in the US—for the first time since March of 1978—and the EIA’s preliminary Annual Energy Outlook for 2012 projects only 900 MW of new coal will come on-line to meet demand in the next two decades. And even this estimate of new unplanned coal capacity would be expected to come down, as natural gas prices have declined since that study was completed. So in essence, this rule will not have adverse impacts on jobs and coal because the shift in the energy market has already driven the shift to cleaner fuels and dramatically reduced the potential for new coal plants to be built.
While a Congressional solution that puts a price on carbon emissions across the entire economy is still the most economical approach to carbon regulation in the long-term, Congress should be comforted that EPA is using its existing authorities under the Clean Air Act in a careful and thoughtful manner. The standard proposed for new base load power generation can be met quite readily using the same combined cycle technologies that would, in all likelihood, have been used anyway—particularly given low natural gas prices stemming from our large domestic shale gas resource. And EPA has offered compliance flexibility that would permit use of other fuel choices should relative fuel prices shift again in the future, so long as the future plans for such plants build in low-emitting technologies. While the expected emissions reductions from this rule are quite modest, EPA has insured against the long-term lock-in of new high emitting power generation resources in a way that does not impact existing generators at all. Going forward, we will look to EPA to continue to make thoughtful policy choices. However, as future policy guidance will involve existing power sources, striking the right balance will require more extensive stakeholder engagement. We look forward to supporting the Agency by fostering stakeholder dialogue around effective and cost-effective policy solutions under the Act.