The European Union (EU) preens itself on being the global leader in the fight against climate change. EU politicians scold the USA for ’failing’ to ratify Kyoto Protocol and enact cap-and-trade. Within the EU, the UK champions the most aggressive climate policies. So the UK’s carbon footprint must be shrinking, right?

Not according to a new report by the UK’s Department for Environment, Food, and Rural Affairs (Defra). The UK’s total net carbon dioxide (CO2) emissions rose 35% between 1990 (the Kyoto Protocol baseline year) and 2005. Emissions declined by 9% from 2008 to 2009 due to the worldwide recession. Nonetheless, the country’s carbon footprint was 20% bigger in 2009 than in 1990. How can this be?

Defra used a life cycle analysis (LCA) to estimate the UK economy’s net emissions. The agency examined not only the CO2 emitted by households and firms within the UK but also the emissions induced by the UK’s demand for imported goods. Carbon dioxide is emitted when goods are manufactured for export in, say, China, and then again when those goods are transported to the UK.

Emissions “embedded” in UK imports are increasing much faster than emissions from domestic production are declining. From 1990 to 2009, CO2 emitted by UK households and firms decreased by 14%. During the same period, emissions from imports directly used by UK consumers increased by 79% and emissions from imports used by UK businesses increased by 128%.

The Kyoto Protocol does not “cover” (regulate) import-induced emissions. So under Kyoto’s accounting rules, UK emissions are down. In reality, the UK has outsourced a sizeable chunk of its emissions along with its heavy industry. As one blogger commented, “The UK’s outsourced emissions almost double its carbon footprint.”

Source: Defra, UK’s Carbon Footprint 1990-2009

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.

Depending on where you live, April 21, 2011 may have already faded into yet another non-apocalyptic win for humanity. If not, you may still have about 12 hours to be worried.

Arnold Schwarzenegger has taken to The Wall Street Journal op-ed pages to warn of the potential future termination of humanity:

Today, I have tears in my eyes again, but for a very different reason. Some in Washington are threatening to pull the plug on this success. Since January, there have been more than a dozen proposals in Congress to limit enforcement of our clean-air rules, create special-interest loopholes, and attempt to reverse scientific findings. These attacks go by different names and target different aspects of the law, but they all amount to the same thing: dirtier air.

This is not an abstract political fight. If these proposals are passed, more mercury, dioxins, carbon pollution and acid gases will end up in the air our kids breathe. More Americans will get sick, end up in the hospital, and die from respiratory illness.

Don’t cry, Arnold! Much of this is an abstract political fight. The major push back and political grandstanding against the proposed EPA rules is what, if anything, should be done about the release of carbon dioxide into the atmosphere. The only proposal floated by Congress was found to be horribly ineffective, even by many environmentalists. During that fight, the Obama administration threatened opponents to accept it, because EPA regulations would follow if the legislation didn’t pass, and the EPA wasn’t capable of providing efficient or even effective “solutions.”

And here we are, with the EPA moving forward on costly regulations (during a recession) that, according to their own estimates, will reduce temperatures in 2100 by anywhere from 0.0015 to 0.006 degrees centigrade. Remember, Arnold, whatever your opinion on the historical benefits of the EPA, past performance is no guarantee of future success.

Finally, Arnold points to California as a model economy:

And, as I know from California’s experience, clean-air rules have led to innovation and new technologies that have created hundreds of thousands of new jobs and billions in clean-energy investment.

I’m not sure California ought to be cited as the model of anything, given their inability to budget and the steady exodus of business from the state.

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.

Global warming may or may not be a problem.  Man may or may not be driving it.  Given the uncertainties, a significant amount of global regret may apply if we divert too much of our global wealth to solving what may be a non-existent or trivial problem, especially if that diversion mires billions in poverty.  On the other hand, we may also regret not doing anything if man-made global warming does turn out to be a problem.  It is therefore prudent to examine what steps we can take that would prove beneficial whether or not anthropogenic global warming turns out to be a problem.  These steps can be termed “no regrets” policies.

What makes a No Regrets Global Warming Policy?  A global warming policy can be termed “no regrets” as long as it:

• Reduces the amount of greenhouse gases emitted into the atmosphere, or
• Mitigates, prevents or reduces a harm associated with global warming, or
• Provides greater capacity for dealing with problems associated with global warming
• Without imposing significant cost or diverting economic activity.

Top Five “No Regrets” Policies

1.)  Eliminate all subsidies to fuel use.
Subsidies to energy R&D cost taxpayers millions of dollars while producing minimal benefits. While these programs may be relatively small given the size of domestic energy markets, they serve little, if any, useful purpose while subsidizing large corporations at taxpayer expense. The potential threat of global warming, whether it is real or not, is simply one more reason to eliminate these subsidy programs. An international agreement aimed at ending energy subsidy with binding targets would be a significant victory for emissions reduction.  Unlike Kyoto, which forces an energy starvation diet on its participants, such a treaty would be a move to combat energy obesity.

2.)  Repeal the Federal Flood Insurance Program.
Much of the concern over global warming’s potential for harm in the US relates to sea level rise and the flooding that will result.  However, much of the investment in potentially vulnerable areas is a result of the Federal flood Insurance Program.  This program encourages building in vulnerable areas by acting as a moral hazard: people take greater risks because the government has said it will help bear that risk. Reform would reduce the moral hazard connected with building on vulnerable land, transferring the risk from the taxpayer to the private sector, which is likely to take a more realistic view of the issue.

3.)  Reform Air Traffic Control Systems.
Greater demand for air travel means more flights, which means greater fuel use and increased emissions. Yet, the current government-operated system of air traffic control, based on a 1920s-era system of beacons, may hinder innovations that could reduce fuel use and emissions. As a general rule, the shorter the flight, the less fuel will be consumed. Yet neither airlines nor pilots have the freedom to choose the most direct and economical route. Giving pilots freedom to map their own course is an attractive and desirable change in the eyes of the industry, and the impact on the environment would be tremendous. As well as saving considerable amounts of greenhouse gas emissions, the policy will deliver significant benefits in terms of time and expense to the US economy.  By obviating significant reductions in service levels associated with more routine applications of emissions reduction policy, it is to be preferred to that approach.

4.)  Facilitate Electricity Competition.
By rejecting the model of central regulation and allowing suppliers to meet their customers’ needs more exactly while relying on distributed generation, energy waste and the associated emissions will reduce considerably.  This reduction in waste will prove economically beneficial even if emissions themselves do not cause problems.

5.) Reduce Regulatory Barriers to New Nuclear Build.
There is no other technology than nuclear that is proven to be capable of providing emissions-free energy at the scale required to make significant reductions in carbon emissions.  The problem is that thanks to anti-nuclear activism by environmentalists in the 1970s, it takes a very long time to build a nuclear plant.  This pushes development and construction costs up to the level where it is not economically competitive with higher-emitting forms of electricity generation like coal and natural gas.  According to the nuclear energy institute, it takes 10 years from concept to operation to build a nuclear plant, and only four of those are construction, the rest is permit application development (2 years) and decision-making by the Nuclear Regulatory Commission (4 years).