EPA’s Carbon “Pollution” Rules: War on Coal by the Numbers

How will EPA’s existing-source carbon “pollution” rule, released last week as a pre-publication document, affect U.S. power markets between now and 2030? The rule requires all states, on average, to reduce their power-sector carbon dioxide (CO2) emissions 30% below 2005 levels by 2030. Each state is, however, assigned a different “standard” (calibrated in pounds CO2 per megawatt hour), and the level of effort required to meet the standards will vary from state to state.

Two variables in particular affect both a state’s 2030 standard and the expense required to meet it: (1) how much of the state’s current generation comes from coal, and (2) how much idle natural gas combined cycle (NGCC), renewable, and nuclear generation capacity exists to meet consumer demand as the state ramps down and phases out coal generation.

The chart below presents some of the relevant data used to compute each state’s standard. It also confirms — despite EPA’s protestations to the contrary – that the agency is waging a war on coal.

As EPA reads the Clean Air Act, it must first propose emission performance standards for new sources under §111(b) before it may propose performance standard guidelines for existing sources under §111(d). Arguably, this means a court decision invalidating new source standards would invalidate existing source standards as well. EPA published its carbon “pollution” rule for new coal power plants in January. My colleague William Yeatman identifies six legal flaws in EPA’s new source carbon “pollution” standard.

Data in the accompanying chart make it even clearer that EPA’s new source rule is a de-facto fuel-switching mandate — a policy Congress has not approved and which would be dead on arrival if introduced as a bill.

Under EPA’s new source rule, new coal plants may emit no more than 1,100 lbs. CO2/MWh. EPA acknowledges that even today’s most advanced commercial coal plants emit 1,800 lbs. CO2/MWh (79 FR 1448). For perspective, look at the pale blue column in the chart. The new source standard is far below the average of existing sources, which ranges from 2,044 lbs. CO2/MWh in North Carolina to 2,852 lbs. CO2/MWh in Alaska.

EPA’s original new source carbon “pollution” rule, published in April 2012, was a blatant fuel-switching mandate. That is, it effectively ordered investors planning to build new coal power plants to build new NGCC plants instead.

The proposal held both new coal and new NGCC power plants to the same standard — 1,000 lbs. CO2/MWh. EPA estimated that 95% of existing NGCC units already met the standard (77 FR 22414). Although a new coal unit could comply by installing carbon capture and storage (CCS) technology, CCS would “add considerably” to the cost of new coal plants (77 FR 22399), which already cost more than new NGCC plants (77 FR 22394).

In the original proposal, EPA correctly concluded that CCS is not “adequately demonstrated” as a “best system of emission reduction” (BSER) for new coal power plants. But EPA also bizarrely asserted that NGCC is the adequately demonstrated BSER . . . for new coal power plants. This was downright weird — and didn’t pass the laugh test — because a gas turbine is a different type of electric generating unit than a coal burner, not an emission reduction system for the latter.

So in the January 2014 redo of the new source rule, EPA proposed two (marginally) different standards: 1,000 lbs. CO2/MWh for new NGCC units (as in the April 2012 proposal) and, as noted above, 1,100 lbs. CO2/MWh for new coal power plants. Reversing its earlier judgment, EPA also determined that CCS is the adequately demonstrated BSER for new coal power plants. But these revisions are a distinction without a difference, because the proposal is still a fuel-switching mandate.

CCS continues to “add considerably” to the cost of a new coal power plant. For instance, the budget for the Kemper CCS plant in Mississippi is now $5.5 billion and rising — more than four times the cost of an advanced NGCC unit. Look also at the orange column in the chart. Existing NGCC units on average already meet EPA’s standard for new sources in every state except Alaska, Nebraska, and South Dakota. New NGCC, which is already cheaper than new coal without CCS, will easily meet the 1,000 lbs. CO2/MWh standard and then some.

Although EPA no longer absurdly defines gas turbines as BSER for coal boilers, it still weirdly defines NGCC as both source and best system of emission reduction for . . . itself!

As the new source rule is a de-facto fuel-switching mandate, so the existing source rule is a de-facto coal suppression and premature retirement mandate.

Compare the green and yellow columns in the chart. Two things are noteworthy. First, in 2012, 15 states have CO2 emission rates above 1,800 lbs. CO2/MWh, the emission rate of today’s most advanced commercial coal power plants. In 2030, no states have emission rates above 1,800 lbs. CO2/MWh.

Second, in 2012, 12 states have CO2 emission rates lower than 1,100 lbs. CO2/MWh, the standard EPA proposes for new coal power plants equipped with financially-exorbitant CCS. In 2030, 30 states have emission rates lower than 1,100 lbs. CO2/MWh.