Note: A nearly identical version of this column appeared last week in Forbes Online. I am reposting it here with many additional hyperlinks so that readers may more easily access the evidence supporting my conclusions.

The November 2012 elections ensure that President Obama’s war on coal will continue for at least two more years. The administration’s preferred M.O. has been for the EPA to ‘enact’ anti-coal policies that Congress would reject if such measures were introduced as legislation and put to a vote. Had Gov. Romney won the presidential race and the GOP gained control of the Senate, affordable energy advocates could now go on offense and pursue a legislative strategy to roll back various EPA global warming regulations, air pollution regulations, and restrictions on mountaintop mining. But Romney lost and Democrats gained two Senate seats.

Consequently, defenders of free-market energy are stuck playing defense and their main weapon now is litigation. This is a hard slog because courts usually defer to agency interpretations of the statutes they administer. But sometimes petitioners win. In August, the U.S. Court of Appeals struck down the EPA’s Cross State Air Pollution Rule (CSAPR), a regulation chiefly targeting coal-fired power plants. The Court found that the CSAPR exceeded the agency’s statutory authority. Similarly, in March, the Court ruled that the EPA exceeded its authority when it revoked a Clean Water Act permit for Arch Coal’s Spruce Mine No. 1 in Logan County, West Virginia.

A key litigation target in 2013 is EPA’s proposal to establish greenhouse gas (GHG) “new source performance standards” (NSPS) for power plants. This so-called carbon pollution standard is not based on policy-neutral health or scientific criteria. Rather, the EPA contrived the standard so that commercially-viable coal plants cannot meet it. The rule effectively bans investment in new coal generation.

We Can Win This One

Prospects for overturning the rule are good for three main reasons.

(1) Banning new coal electric generation is a policy Congress has not authorized and would reject if proposed in legislation and put to a vote. Once again the EPA is acting beyond its authority.

The proposed “carbon pollution” standard requires new fossil-fuel electric generating units (EGUs) to emit no more than 1,000 lbs of carbon dioxide (CO2) per megawatt hour (MWh). About 95% of all natural gas combined cycle power plants already meet the standard, according to the EPA. No existing coal power plants come close; even the most efficient, on average, emit 1,800 lbs CO2/MWh.

A coal power plant equipped with carbon capture and storage (CCS) technology could meet the standard, but the levelized cost of new coal plants already exceeds that of new natural gas combined cycle plants, and “today’s CCS technologies would add around 80% to the cost of electricity for a new pulverized coal (PC) plant, and around 35% to the cost of electricity for a new advanced gasification-based (IGCC) plant,” the EPA acknowledges.

In short, the EPA has proposed a standard no economical coal plant can meet. Not surprising given President Obama’s longstanding ambition to “bankrupt” anyone who builds a new coal power plant and his vow to find other ways of “skinning the cat” after the 2010 election-day slaughter of 29 cap-and-trade Democrats. But the big picture is hard to miss: Congress never signed off on this policy.

The only time Congress even considered imposing GHG performance standards on power plants was during the debate on the Waxman-Markey cap-and-trade bill. Section 216 of Waxman-Markey would have established NSPS requiring new coal power plants to reduce CO2 emissions by 50% during 2009-2020 and by 65% after 2020 – roughly what the EPA is now proposing. Although Waxman-Markey narrowly passed in the House, it became so unpopular as “cap-and-tax” that Senate leaders pulled the plug on companion legislation.

Team Obama is attempting to accomplish through the regulatory backdoor what it could not achieve through the legislative front door. The “carbon pollution” rule is an affront to the separation of powers.

(2) The “carbon pollution” standard is regulation by misdirection – an underhanded ‘bait-and-fuel-switch.’

In Massachusetts v. EPA (April 2007), the Supreme Court held that GHGs are “air pollutants” for regulatory purposes. This spawned years of speculation about whether the EPA would define “best available control technology” (BACT) standards for “major” GHG emitters so stringently that utilities could not obtain pre-construction permits unless they built natural gas power plants instead of new coal power plants.

In March 2011, the EPA published a guidance document assuring stakeholders that BACT for CO2 would not require a permit applicant “to switch to a primary fuel type” different from the fuel type the applicant planned to use for its primary combustion process. The agency specifically disavowed plans to “redefine the source [category]” such that coal boilers are held to the same standard as gas turbines.

The EPA reiterated this assurance in a Q&A document accompanying the guidance. One question asks: “Does this guidance say that fuel switching (coal to natural gas) should be selected as BACT for a power plant?” The EPA gives a one-word response: “No.”

This bears directly on the legal propriety of the “carbon pollution” standard. In general, NSPS are less stringent than BACT. NSPS provide the “floor” or minimum emission control standard for determining an emitter’s BACT requirements. BACT is intended to push individual sources to make deeper emission cuts than the category-wide NSPS requires.

Yet despite the EPA’s assurance that BACT, although tougher than NSPS, would not require fuel switching or redefine coal power plants into the same source category as natural gas power plants, the “carbon pollution” rule does exactly that.

In April 2011, the House passed H.R. 910, the Energy Tax Prevention Act, sponsored by Rep. Fred Upton (R-Mich.), by a vote of 255-172. H.R. 910 would overturn all of the EPA’s GHG regulations except for those the auto and trucking industries had already made investments to comply with. Sen. James Inhofe’s companion bill (McConnell Amdt. 183) failed by one vote. In June 2010, Sen. Lisa Murkowski’s (R-Alaska) Congressional Review Act resolution to strip the agency of its Mass v. EPA-awarded power to regulate GHGs failed by four votes. One or both of those measures might have passed had the EPA come clean about its agenda and stated in 2009 that it would eventually propose GHG performance standards no affordable coal power plant can meet.

(3) The “carbon pollution” rule is weirdly contorted, flouting basic standards of reasonableness and candor.

Under the Clean Air Act, an emission performance standard is supposed to reflect “the degree of emission limitation achievable through the application of best system of emission reduction” that has been “adequately demonstrated.” The EPA picked 1,000 lbs CO2/MWh as the NSPS for new fossil-fuel EGUs because that is the “degree of emission limitation achievable through natural gas combined cycle generation.”

But natural gas combined cycle is not a system of emission reduction. It is a type of power plant. The EPA is saying with a straight face that natural gas combined cycle is an emission reduction system that has been adequately demonstrated for coal power plants. By that ‘logic,’ zero-carbon nuclear-, hydro-, wind-, or solar-electric generation is an emission reduction system that has been adequately demonstrated for natural gas combined cycle.

A coal power plant could meet the standard by installing CCS, but, as the EPA acknowledges, CCS is too costly to qualify as “adequately demonstrated.” The only practical way for utilities to comply is to build new gas turbines instead of new coal boilers. This is the first time the EPA has defined a performance standard such that one type of facility can comply only by being something other than what it is.

The EPA sets performance standards for specific categories of industrial sources. A coal boiler is different from a gas turbine, and up to now the agency reasonably regulated them as different source categories, under different parts of the Code of Federal Regulations – Subpart Da for coal boilers, Subpart KKKK for gas turbines. The EPA now proposes to regulate coal boilers and gas turbines as a single source category — “fossil-fuel EGUs” — under a new subpart numbered TTTT. But only for CO2! Coal boilers and gas turbines will continue to be regulated as separate source categories for criteria and toxic pollutants under Subparts Da and KKKK.

Why hold coal boilers and gas turbines to different standards for those pollutants? The EPA’s answer: “This is because although coal-fired EGUs have an array of control options for criteria and toxic air pollutants to choose from, those controls generally do not reduce their criteria and air toxic emissions to the level of conventional emissions from natural gas-fired EGUs.”

The same reasoning argues even more strongly against imposing a single GHG standard on coal boilers and natural gas turbines. Coal boilers do not have an “array of control options” for CO2 emissions, and have no “adequately demonstrated” option for reducing CO2 emissions to the level of gas-fired EGUs. Subpart TTTT is an administrative contortion concocted to kill the future of coal generation.

Why Care Even If You Don’t Mine or Combust Coal for a Living

At this point you may be wondering why anyone outside the coal industry should care about this cockamamie rule. There are several reasons.

First and most obviously, banning new coal generation could increase electric rates and make prices more volatile. For generations, coal has supplied half or more of U.S. electricity, and still provides the single largest share. The “carbon pollution” standard is risky because coal’s chief competitor, natural gas, has a history of price volatility and a future clouded by the environmental movement’s hostility to hydraulic fracturing, the technology transforming gas from a costly shrinking resource to an affordable expanding resource.

The “carbon pollution” standard itself could put the kibosh on new gas-fired generation if the EPA concludes, as Cornell researchers contend, that fugitive methane emissions from hydraulic fracturing make gas as carbon-intensive as coal.

The EPA is also developing GHG performance standards for refineries. “Unconventional” oil production from shale and oil sands is booming in North America, creating thousands of jobs, generating billions of dollars in tax revenues, and reducing U.S. dependence on OPEC oil. But unconventional oil production is energy-intensive and therefore carbon-intensive. It is unknown whether or how the forthcoming GHG standard for refineries will address the carbon intensity of unconventional oil. What we do know is that the environmental groups who litigated the EPA into proposing these standards are arch foes of unconventional oil.

In any event, the “carbon pollution” standard for power plants is just the start of a regulatory trajectory, not its end point. The EPA’s settlement agreement with environmental groups and state attorneys general obligates the agency to extend the standard to “modified” coal power plants and establish emission “guidelines” for non-modified units.

Moreover, the standard sets a precedent for promulgating NSPS for other GHG source categories, and for contriving new source categories (e.g. “electric generating units”) to hammer natural gas. As indicated above, if gas can set the standard for coal, then wind and solar can set the standard for gas. And at some point the refinery standard could undermine the profitability of unconventional oil. Although initially directed against new coal, the standard puts all fossil-energy production in an ever-tightening regulatory noose.

Pandora’s NAAQS

Taking a longer view, the “carbon pollution” rule moves the U.S. economy one step closer to the ultimate environmental policy disaster: national ambient air quality standards (NAAQS) for GHGs.

In December 2009, the EPA issued a rule under Section 202 of the Clean Air Act declaring that GHG emissions from new motor vehicles endanger public health and welfare. The endangerment rule was both prerequisite and trigger for the agency’s adoption, in January 2011, of first-ever GHG motor vehicle standards. The agency now claims that it need not issue a new and separate endangerment finding under Section 211 to adopt first-ever GHG performance standards for power plants, because subsequent science confirms and strengthens its Section 202 finding.

An implication of this argument is that the EPA need not make a new endangerment finding to promulgate NAAQS for GHGs under Section 108, because the Section 202 finding would suffice for that as well.

Section 108 of the Clean Air Act requires the EPA to initiate a NAAQS rulemaking for “air pollution” from “numerous or diverse mobile or stationary sources” if such pollution “may reasonably be anticipated to endanger public health and welfare.” Carbon dioxide obviously comes from numerous and diverse mobile and stationary sources, and the EPA has already determined that the associated “air pollution” – the “elevated concentrations” of GHGs in the atmosphere – endangers public health and welfare. Logically, the EPA must establish NAAQS for GHGs set below current atmospheric concentrations.

Eco-litigants have already put this ball in play. The Center for Biological Diversity and 350.Org petitioned the EPA more than two years ago to establish NAAQS for CO2 at 350 parts per million (roughly 40 parts per million below current concentrations) and for other GHGs at pre-industrial levels.

The potential for mischief is hard to exaggerate. Not even a worldwide depression that permanently lowers global economic output and emissions to, say, 1970 levels, would stop CO2 concentrations from rising over the remainder of the century. Yet the Clean Air Act requires States to adopt implementation plans adequate to attain primary (health-based) NAAQS within five or at most 10 years. A CO2 NAAQS set at 350 parts per million would require a level of economic sacrifice vastly exceeding anything contemplated by the Waxman-Markey cap-and-trade bill or the Copenhagen climate treaty, which aimed to stabilize CO2-equivalent emissions at 450 parts per million by 2050.

The EPA has yet to decide on the CBD-350.Org petition. Perhaps this is another case of punting unpopular regulatory decisions until Obama’s second term. The one instance where the administration addressed the issue is not reassuring. In a brief submitted to the Supreme Court in American Electric Power v. Connecticut, the Obama Justice Department described Section 108 as one of the provisions making the Clean Air Act a “comprehensive regulatory framework” for climate change policy.

Ultimately, only the people’s representatives can protect coal generation, hydraulic fracturing, and unconventional oil from hostile regulation. But nixing the “carbon pollution” standard would be a big setback to both the EPA and the eco-litigation fraternity, and would help safeguard America’s energy options until a future Congress reins in the agency.

Today (June 25th) is the deadline for submitting comments on the EPA’s proposed Carbon Pollution Standard Rule, which will establish first-ever New Source Performance Standards (NSPS) for carbon dioxide (CO2) emissions from fossil-fuel electric generating units.

The proposed standard is 1,000 lbs of CO2 per megawatt hour (MWh). The EPA claims that 95% of all new natural gas combined cycle power plants can meet the standard — maybe, maybe not. One thing is clear — no conventional coal power plant can meet the standard. Even today’s most efficient coal power plants emit 1,800 lbs CO2/MWh on average.

A coal power plant equipped with carbon capture and storage (CCS) technology could meet the standard, but the EPA acknowledges that  CCS is prohibitive, raising the cost of generating electricity by as much as 80%.

So what the proposal is really telling the electric utility industry is this: If you want to build a new coal-fired power plant, you’ll have to build a natural gas combined cycle plant instead. Not surprising given President Obama’s longstanding ambition to “bankrupt” anyone who builds a new coal power plant.

In a comment letter submitted today on behalf of the Competitive Enterprise Institute, I recommend that the EPA withdraw the proposed regulation for the following reasons:

1. The EPA’s proposal would effectively ban construction of new coal-fired power plants, a policy Congress has not approved and would reject if proposed in legislation and put to a vote.
2. The proposal is an underhanded ‘bait-and-fuel-switch.’ The EPA assured electric utilities in March 2011 that it would not require fuel-switching from coal to natural gas. Had the EPA come clean about its agenda in 2010 and 2011, Senators Murkowski and Inhofe would likely have garnered more support for their efforts to overturn the agency’s greenhouse gas regulations.
3. The proposal relies on weird contortions – a consequence of the EPA’s attempt to use the Clean Air Act as a framework for regulating greenhouse gases, a purpose for which the Act was neither designed nor intended. For example, the EPA pretends that natural gas combined cycle – a type of power plant – is a “control option” and “system of emission reduction” that has been “adequately demonstrated” for coal-fired power plants.
4. The proposal will provide another precedent for establishing National Ambient Air Quality Standards (NAAQS) for greenhouse gases, taking America one step closer to policy disaster.

A word of explanation about point #4. The EPA argues that it need not undertake a new endangerment finding to adopt the proposed standard, because the agency already determined in December 2009 that “air pollution” related to greenhouse gas emissions “may reasonably be anticipated to endanger public health and welfare.” But if that is so, then the EPA also need not make a new finding to initiate a NAAQ rulemaking for greenhouse gases.

Since the EPA defines the relevant “air pollution” as the “elevated concentrations” of greenhouse gases in the atmosphere (Endangerment Rule, p. 66516), the agency would have to set the NAAQS below current atmospheric levels. Picking up on this logic, the Center for Biological Diversity and 350.Org petitioned the EPA more than two years ago to establish NAAQS for CO2 at 350 parts per million (roughly 40 parts per million below current levels) and other greenhouse gases at pre-industrial levels.

Sooner or later, the EPA will have to address the NAAQS issue. Statutory logic (and precedent, if the Carbon Pollution Rule is not overturned) will favor the CBD/350.Org petition.

The potential for mischief is hard to exaggerate. The Clean Air Act requires States to adopt implementation plans adequate to attain a “primary” (health-based) NAAQS within five or at most 10 years. Implementing a CO2 NAAQS set at 350 parts per million would require a much higher degree of economic sacrifice than would be demanded by either the Waxman-Markey cap-and-trade bill or the Copenhagen climate treaty, which aimed to stabilize CO2-equivalent greenhouse gases at 450 parts per million by 2050. Even if the NAAQS for CO2 did not require much of the economy – all fossil-fuel-based power generation, manufacture, transport, and agriculture – to simply shut down, it would effectively prohibit growth in those sectors.

Nonetheless, some good may yet come from the EPA’s overreach. A policy crisis over NAAQS regulation of GHGs would finally make clear to the public and their elected representatives that Massachusetts v. EPA created a constitutional crisis by authorizing the EPA to enact policies that Congress has not approved and would reject if proposed in legislation and put to a vote.

Yesterday, EPA proposed its first-ever “carbon pollution standard rule” for power plants. The rule would establish a new source performance standard (NSPS) for carbon dioxide (CO2) emissions from fossil-fuel electric generating units (EGUs). The proposed standard is an emission rate of 1,000 lbs CO2 per megawatt hour. About 95% of all natural gas combined cycle (NGCC) power plants already meet the standard (p. 115). No existing coal power plants do. Even today’s most efficient coal plants emit, on average, 1,800 lbs CO2/MWh (p. 134). EPA is effectively banning investment in new coal electric generation.

Like the rest of EPA’s greenhouse agenda, the proposed rule is an affront to the Constitution’s separation of powers. Congress never voted to prohibit the construction of new coal power plants. Indeed, Congress declined to pass less restrictive limits on coal electric generation when Senate leaders pulled the plug on cap-and-trade. Congress should reassert its constitutional authority, overturn the rule, and rein in this rogue agency.

EPA of course denies its proposal would “interfere with construction of new coal-fired capacity” (p. 38). How so? Because “a new coal-fired power plant may be able to meet the 1,000 lb CO2/MHh standard by installing CCS [carbon capture and storage] at the time of construction.”

That doesn’t pass the laugh test. As EPA acknowledges, “at present,” installing CCS would “add considerably to the costs of a new coal-fired power plant,” which are already higher than the costs of new natural gas combined cycle plants. The CCS option is phony — there is no market demand for it.

EPA says financing is “available to support the deployment of CCS,” but private funding would not exist absent lavish federal grants and tax breaks that our deficit-ridden government can ill-afford to renew or expand.

EPA lists six coal-fired EGU projects that plan to install CCS (pp. 159-160), and acknowledges that “most if not all” get grants or loan guarantees from the Department of Energy. Consider one of the largest, Southern Company/Mississippi Power’s Kemper County project. Here’s what the company’s Web site says about federal financial support:

To offset the costs to construct the facility, Mississippi Power has received a $270 million grant from the Department of Energy, $133 million in investment tax credits approved by the IRS provided under the National Energy Policy Act of 2005, and loan guarantees from the federal government. . . .Mississippi Power also recently received an additional $279 million in IRS tax credits.

Why should Congress pony up billions more for exotic CCS coal plants when virtually all natural gas power plants already meet the proposed standard at much lower cost and no risk to taxpayers?

EPA’s proposed rule is weird in four ways.

(1) The proposal tries to palm off natural gas combined cycle — a type of power plant — as a ”control option” or ”system of emission reduction” for coal-fired power plants.

EPA picked 1,000 lb CO2/MWh as the “standard of performance” for new fossil-fuel EGUs because that is the “degree of emission limitation achievable through natural gas combined cycle generation” (pp. 35-36). But consider how the Clean Air Act (CAA) defines “standard of performance” [Sec. 111(a)(1)]:

The term “standard of performance” means a standard for emissions of air pollutants which reflects the degree of emission limitation achievable through the application of the best system of emission reduction which (taking into account the cost of achieving such reduction and any nonair quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated.

Performance standards are supposed to reflect the best “system of emission reduction.” But natural gas combined cycle is not a system of emission reduction. It is a type of power plant. EPA is not proposing that new coal power plants install emission reduction systems that have been “adequately demonstrated.” Rather, EPA is proposing that new coal power plants be new natural gas plants. EPA is saying with a straight face that natural gas combined cycle is an emission reduction system that has been adequately demonstrated for coal power plants.

To my knowledge, this is the first time EPA has ever defined a performance standard such that one type of power plant or facility can comply only by being something other than what it is.

(2) The proposed rule lumps coal boilers and natural gas turbines into a newly-minted industrial source category (fossil-fuel EGUs) — but only for CO2 emissions, not for conventional air pollutants.

EPA sets performance standards for specific categories of industrial sources. A coal boiler is different from a gas turbine, and up to now EPA reasonably regulated them as different source categories, under different parts of the Code of Federal Regulations (Subpart Da for coal boilers, Subpart KKKK  for gas turbines). EPA now proposes to regulate them together as a single source category — fossil fuel EGUs — under a new subpart numbered TTTT. But only for CO2! Coal boilers and natural gas turbines will continue to be regulated separately for “criteria air pollutants” (pollutants contributing to soot and smog) under Subparts Da and KKKK (p. 71).

Why hold coal boilers and gas turbines to different standards for criteria pollutants? EPA’s answer:

This is because although coal-fired EGUs have an array of control options for criteria and air toxic air pollutants to choose from, those controls generally do not reduce their criteria and air toxic emissions to the level of conventional emissions from natural gas-fired EGUs. [p. 102]

Wouldn’t the same logic argue even more strongly against imposing a single CO2 standard on coal boilers and natural gas turbines? Coal-fired EGUs have only one real option for reducing CO2 emissions to the level of emissions from natural gas power plants — install CCS, which nobody can afford to do without subsidy. As EPA notes, ”using today’s commercially available CCS technologies would add around 80 percent to the cost of electricity for a new pulverized coal (PC) plant, and around 35 percent to the cost of electricity for a new advanced gasification-based (IGCC) plant” (p. 124).

So we’re back to EPA’s contortion of classifying natural gas combined cycle as a ”control option” for CO2 emissions from coal-fired power plants.

(3) The proposed rule exempts modified coal-fired power plants from the CO2 performance standard even though CAA Sec. 111 requires modified sources to be regulated as “new” sources.

CAA Sec. 111(a) defines “new source” as “any stationary source, the construction or modification of which is commenced after the publication of regulations (or, if earlier, proposed regulations) prescribing a standard of performance under this section which will be applicable to such source [emphasis added].” The provision defines “modification” as “any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source or which results in the emission of any air pollutant not previously emitted.” These definitions clearly imply that, once EPA promulgates CO2 performance standards for power plants, a coal-fired EGU that increases its CO2 emissions due to a physical change or change in operation is a “new” source and should be regulated as such. Yet under EPA’s proposal, modified coal-fired EGUs will not be treated as new sources.

Why? EPA claims it does “not have adequate information as to the types of physical or operational changes sources may undertake or the amount of increase in CO2 emissions from those changes.” That’s odd. Hasn’t EPA been collecting data on power plant CO2 emissions since the 1990 Clean Air Act Amendments (Sec. 821) and on power plant modifications for even longer? EPA also says it does not have ”adequate information as to the types of control actions sources could take to reduce emissions, including the types of controls that may be available or the cost or effectiveness of those controls” (p. 151).

A more plausible answer is that EPA knows full well what types of controls would be available, how costly such controls would be, and how damaging the political backlash to EPA and the Obama administration. There are no economical options to reduce CO2 emissions from modified coal-fired EGUs to 1,000 lb CO2/MWh. The owner of a modified coal-fired EGU would either have to install CCS or convert the facility from a coal-fired to a natural gas-fired power plant. Is EPA once again “tailoring” (amending) the CAA to avoid a regulatory debacle of its own making?

(4) The proposed rule has no monetized costs or benefits.

EPA says the rule will not ”add costs” to the electric power sector, ratepayers, or the economy (p. 36). That’s because EPA “does not project construction of any new coal-fired EGUs” between now and 2030. Rather, EPA expects electric power companies “to build new EGUs that comply with the regulatory requirements of this proposal even in the absense of the proposal, due to existing and expected market conditions” (p. 200), namely, the superior economics of natural gas:

. . . new natural gas-fired EGUs are less costly than new coal-fired EGUs, and as a result, our Integrated Planning Model (IPM) projects that for economic reasons, natural gas-fired EGUs will be the facilities of choice until at least 2020, which is the analysis period for this rulemaking. Indeed, our IPM model does not project construction of any new coal-fired EGUs during that period. This state of affairs has come about primarily because technological developments and discoveries of abundant natural gas reserves have caused natural gas prices to decline precipitously in recent years and have secured those relatively low prices for the future [p. 36].

The rule won’t “add costs” because it simply ratifies where the market is already going. Conversely, the rule will have no quantifiable benefits:

As previously stated, the EPA does not anticipate that the power industry will incur compliance costs as a result of this proposal and we do not anticipate any notable CO2 emissions changes resulting from the rule. Therefore, there are no monetized climate benefits in terms of CO2 emission reductions associated with this rulemaking [p. 202].

Creeping Kyotoism

So what’s the point? Why propose a “carbon pollution standard” that won’t reduce CO2 emissions and has no estimated climate benefits?

Because the rule expands EPA’s control over the power sector and advances its greenhouse regulatory agenda. It puts fossil-fuel EGUs squarely under EPA’s regulatory thumb with respect to CO2 emissions. It sets the precedent for EPA to promulgate CO2 performance standards for other industrial source categories. Most importantly, it tees up EPA to extend CO2 emission controls to modified and existing (i.e. non-modified) coal power plants. In EPA’s words:

Although modified sources would not be subject to the 1,000 lb CO2/MWh standard for new sources, the EPA anticipates that modified sources would become subject to the requirements the EPA would promulgate at the appropriate time, for existing sources under 111(d). [p. 153]

The proposed rule will also serve as a necessary predicate for the regulation of existing sources within this source category under CAA Section 111(d). [p. 201]

The proposed rule is EPA’s first — not last — action to fulfill the agency’s December 2010 settlement agreement with state attorneys general and environmental groups. The agreement requires EPA to establish CO2 performance standards for new and modified EGUs and emission guidelines for non-modified EGUs (p. 64).

So yes, the proposed rule will add no cost (other than paperwork) to modified and existing coal power plants. But once the framework is in place, EPA will be able to impose costs down the line. Coal is already losing market share to natural gas even without having to meet CO2 performance standards. The proposed rule positions EPA to put coal power plants in an ever-tightening regulatory noose.

It is hard to imagine EPA not targeting modified and existing coal plants in a second Obama administration. Consider how fast Team Obama has moved on the mobile source side of the greenhouse agenda. Only two weeks after EPA and the National Highway Traffic Safety Administration (NHTSA) published model year (MY) 2012-2016 greenhouse gas/fuel economy standards for new motor vehicles in the Federal Register — standards costing the auto industry an estimated $51.7 billion (Tailpipe Rule, p. 25642) – the White House announced plans to establish even tougher standards for MYs 2017-2025.

I attended an excellent briefing  today on “Creating a low-carbon future” by Michael Howard of the Electric Power Research Institute (EPRI).  The event  was hosted by the U. S. Energy Association and its executive director, Barry Worthington.   EPRI has done a lot of work on how the electricity sector could meet the greenhouse gas emissions target in the Waxman-Markey energy-rationing bill.  That target is economy-wide emissions 83% below 2005 levels by 2050.

Howard said that EPRI wanted to identify a strategy by which the electric sector could be de-carbonized affordably.  Here’s the background and how EPRI would do it:

The decisions made today and in the next few years will shape electric generation in 2050, so we have to make the right decisions starting now.  Electricity generation accounts for about one-third of the 2005 U. S. total of six billion metric tons of carbon dioxide emissions.  Electric rates in constant dollars have been remarkably flat for the past forty years.

EPRI has identified two paths to meeting the 83% reduction target.  The first is by deploying a full portfolio of energy sources.  A full portfolio would most notably include expanded nuclear power and widespread carbon capture and storage for coal and natural gas.  The second is by deploying a limited portfolio of sources that would exclude nuclear and carbon capture and storage.

What is most apparent in EPRI’s modeling is that the limited portfolio approach would end the use of coal completely by 2030.  Renewables would go up, but the biggest increases would be in the use of natural gas.  The result is that electricity would become very expensive, with rates tripling by 2050 in constant dollars.  In addition, we would be forced to use much less electricity in order to meet the emissions reduction targets.

The full portfolio scenario projects that most of the cuts would be made by building new nuclear power plants and new coal plants that capture and store 90% of the carbon dioxide emissions produced.  Natural gas use would go down considerably.  EPRI projects that electric rates would not quite double by 2050 were the full portfolio approach pursued.  Enforced reductions in use would only be about half as severe under the full portfolio compared to the limited portfolio.

The full portfolio scenario sounds very nice, but it’s fantasy.  It has almost nothing to do with the real world.  What EPRI (understandably) does not include in their models are the increasing political, regulatory, and legal obstacles to building new power plants.  Even if carbon capture and storage technology becomes commercially viable by 2020 (which is highly unlikely), it will take decades to permit and build more than a handful of coal plants that capture the carbon dioxide, the pipelines to transport it, and the underground pockets to store it.   Permitting delays will put pipeline siting and construction years behind schedule.  Lawsuits will be filed claiming that pressurized CO2 is too dangerous to be allowed.   Similarly, a few new nuclear power plants may be built in the next twenty years, but building a lot of new plants will take decades to overcome the permitting obstructions.

These obstacles do not apply only to coal and nuclear plants.  Proposed wind and solar energy projects are being blocked and delayed all around the country.  Bobby Kennedy, jnr., is leading the campaign to block a big wind farm off Cape Cod, where his family own valuable, scenic vacation property.  At the same time, Kennedy has lashed out at local environmental pressure groups at the other end of the country that are trying to block a big solar energy development in the Mojave Desert that he has invested in.  Even if both projects eventually get built, they are being delayed for years.  This is a problem that the environmental pressure groups have helped to create and don’t want to admit exists.  It means that the limited portfolio approach modeled by EPRI is fantasy, too.

One of the problems with relying on EPRI’s or any of the economic models to predict the costs of reducing greenhouse gas emissions is that they assume that political decisions will be made in a rational, orderly way that will allow economic decisions to be made in an efficient way.  The Waxman-Markey energy rationing bill (H. R. 2454) is just the latest disproof of this assumption.  The bill creates a cap-and-trade program to reduce emissions and then adds several hundred other programs to pay off individual special interests.  Nearly all these programs get in the way of the efficient working of cap-and-trade.  They will raise the costs of making mandatory reductions beyond what any model can predict.