The Energy Information Administration (EIA) concluded its analysis of the House climate Bill:
“¦ new coal bill without CCS beyond those that are already under construction are almost eliminated. There is also a large increase in coal power plant retirements [and a 60% drop in coal use in power plants] by 2030 from current levels in the ACESA main cases, well above the 1% of existing coal capacity projected to retire in the reference case.
EIA comes to this conclusion even though it is lousy at modeling energy efficiency and natural gas and renewable energy (see “Despite its many flaws, EIA analysis of climate bill finds 23 cents a day cost to families, massive retirement of dirty coal plants and 119 GW of new renewables by 2030 “” plus a million barrels a day oil savings”).
Indeed, by 2020, the House climate bill would likely reduce reduce coal use at existing power plants by 20% to 30% or more (see “Why unconventional gas makes the 2020 Waxman-Markey target so damn easy and cheap to meet”). The CBO analysis would lead to roughly the same conclusion (see here). And by 2030, I expect an even bigger coal use drop than EIA projects.
So it is dismaying that two people whom I respect greatly have published an op-ed that, while well-intentioned, is just quite wrong on this subject. I’m referring to “No more loopholes for King Coal,” an op-ed written by Carl Pope, executive director of the Sierra Club and Eric Schaeffer, director of the Environmental Integrity Project, along with Trip Van Noppen, president of Earthjustice. Since their mistaken assertions have become a common refrain among some environmentalists, I will address this issue in detail. Their piece begins:
The American Climate and Energy Security Act takes a big first step toward reining in both our addiction to fossil fuels, and the global warming pollution that is slowly cooking our planet. But the House bill, engineered by environmental champions Henry Waxman and Ed Markey, contains one big loophole that needs to be closed by the Senate.
Although coal-fired power plants account for roughly a third of U.S. carbon-dioxide emissions, the legislation gives them a free pass to continue business as usual “” without making any serious reductions in heat-trapping carbon dioxide for 15 years or more.
The good news is that new coal plants permitted after January 1, 2009, would be required to cut their emissions in half no later than 2025. But the bad news is very bad: the bill exempts the huge fleet of America’s oldest and dirtiest coal plants from any Clean Air Act requirement to control carbon-dioxide emissions. In the face of a warming world and a cooling economy, old dirty coal plants need to clean up or retire to make way for cleaner energy. Instead of encouraging investment in new industries and new plants that are subject to stringent standards, the bill leaves the door open for the expansion of old plants that are subject to no safeguards at all. By “grandfathering” existing coal-fired capacity, which accounts for half of U.S. electricity generation, the bill repeats the mistakes of the 1977 Clean Air Act “” mistakes that we have been paying for in the form deadly air pollution ever since.
The bold-faced statements are simply not accurate, especially not as written.
No existing coal plants are grandfathered under this bill. All coal plants — all electric power plants — must have allowances in order to emit CO2. It is true that the bill does not mandate shutting down existing coal plants — and I do think it would be worthwhile to have a “Cash for coal clunkers” provision. But fundamentally this bill uses a shrinking emissions cap and a rising carbon price to shut down existing coal plants.
The article asserts:
The tilt toward coal in the House bill means that other sectors — including the bankrupt auto industry, now largely owned by the taxpayers “” will have to do the bulk of what is necessary to meet the bill’s target of an economy-wide 17 percent reduction in all greenhouse gas emissions by 2020.
I read some version of that myth regularly in critiques of the climate bill — but in fact the reverse is true.
CO2 emissions reductions must come from reductions in coal, oil, and natural gas.
It is hard to drive down oil consumption sharply in the near term (through, say, 2030), especially using a cap-and-trade system. That is especially true because Obama has already put in place tough new fuel economy standards (see “Obama to raise new car fuel efficiency standard to 39 mpg by 2016 “” The biggest step the U.S. government has ever taken to cut CO2“), so the climate bill doesn’t really focus on that sector.
Also, under this bill, natural gas consumption is likely to be no worse than flat, if not slightly higher over the next two decades under this bill. This is an important point I will address in a separate post. Fundamentally the efficiency measures aimed at end-use natural gas consumption will free up gas to be used in the electric sector to replace coal. Since so many tens of gigawatts of existing natural gas plants are underutilized, this is the cheapest way to cut CO2 emissions (after efficiency and conservation) in the bill (as I discuss in detail here).
Thus the emissions reductions in the bill are primarily going to come from coal use. That is why EIA comes to the conclusion it does. That is why the CBO analysis — and my own — leads inexorably to a sharp reduction in coal use at existing plants over the next decade.
Giving out some allowances for free to regulated utilities is not grandfathering nor does it let coal plants off the hook (see Robert Stavins: “The appropriate characterization of the Waxman-Markey allocation is that more than 80% of the value of allowances go to consumers and public purposes, and less than 20% to private industry”). Harvard University’s Robert Stavins is certainly not anyone’s idea of a progressive economist (see here and here), but he is obviously one of the country’s leading economic experts on cap-and-trade. As he explains:
Generally speaking, the choice between auctioning and freely allocating allowances does not influence firms’ production and emission reduction decisions. Firms face the same emissions cost regardless of the allocation method. When using an allowance, whether it was received for free or purchased, a firm loses the opportunity to sell that allowance, and thereby recognizes this “opportunity cost” in deciding whether to use the allowance. Consequently, the allocation choice will not influence a cap’s overall costs.
The Pope et al. article contains one very confusing statement:
… the bill exempts the huge fleet of America’s oldest and dirtiest coal plants from any Clean Air Act [CAA] requirement to control carbon-dioxide emissions.
Well, there currently aren’t any CAA requirements to control CO2 emissions at coal plants — nor are there likely to be for a long, long time (if ever) even if the climate bill fails. Yes, if the bill passes in its current form, it does stop the EPA from using the endangerment finding to regulate CO2 emissions under the CAA, but the endangerment finding is far better suited to addressing new sources that it is existing sources, as I discuss here: “The dangerous myth that the EPA’s endangerment finding can somehow stop dangerous warming if the climate bill dies.” As John Podesta, former Clinton Administration Chief of Staff and now CEO of CAP, recently said “It would be difficult for the EPA to enact a CO2 cap and trade without congressional cooperation.”
I agree with NRDC that it would be valuable for EPA to keep this authority under climate legislation, but is not one of the top five things I would change about the climate bill if I could. Certainly, if the EPA does keep the authority, it won’t try to use that authority to shut existing coal plants down faster than the bill itself would.
Ironically, the Pope et al. piece doesn’t mention offsets at all, and offsets are certainly the biggest potential way coal companies could avoid shutting down existing coal plants. But in fact, EIA assumes a great many offsets will be used and it still finds a very sharp reduction in existing coal plants over the next two decades. The CBO analysis also assumes a lot of offsets will be used, and yet its analysis suggests coal consumption will drop 20% to 30% by 2020. I’m not a big fan of offsets, as I’ve said many times, but in the climate bill, they do fulfill one useful political purpose — they are a backstop against exorbitant costs in case clean energy advocates (like me) turn out to be wrong in our analysis of the bill. If 1) domestic clean energy emissions reduction strategies prove expensive and scarce, while 2) offsets prove to be cheap and abundant, then the utility industry (and rate-payers) aren’t screwed over the next decade. I’m not terribly worried about either one of those propositions being proven true (let alone both), since it would fly in the face of all reasonable analysis and all historical precendence (as I discuss at length here and here). That said, I’d still like to sunset the offsets.
In the real world the much-maligned House climate and clean energy bill would do what clean energy and climate advocates have been demanding for decades: It would set up the framework to allow low-carbon technologies to compete against fairly — and thus steadily replace — existing coal at the lowest possible cost.
Efficiency, renewables, and natural gas would meet the overwhelming fraction of the emissions targets, ultimately generating some $100 billion a year investment in clean energy (see “The only way to win the clean energy race is to pass the clean energy bill”). Yes, if carbon capture and storage proves practical and affordable at a large scale by the 2020s, then coal producers will be able to avoid some of the sharp reductions EIA projects. But again, that wouldn’t be such a bad thing since such then China and India could use the technology — and we could combine it with biomass cofiring to create negative carbon electricity. In reality, though, CCS is unlikely to be a major player through 2030 (see here and here) especially since the coal industry continues to be unserious about the technology.
The bill can certainly be improved — and like CAP, I know Pope and Schaeffer are working very hard to make those improvements and deliver the strongest possible bill. But it simply isn’t true that the bill grandfathers existing coal plants or gives coal a free pass. Quite the reverse.