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The First Cut is the Deepest: EPA Proposes First GHG Cuts for Power Plants

MOUNTAINS_Mountains_Montana_MHoldenBy Cecilia Segal — Oct. 9, 2013 at 2:14pm

On September 20, 2013, EPA issued a notice of proposed rulemaking to set standards of performance for GHGs emitted from new stationary sources. The proposal calls for new natural gas-fired plants to be built with an emissions limit of 1,000 lb CO2/MWh for smaller units and 1,100 lb CO2/MWh for larger units. New coal-fired plants must not exceed an annual average emission rate of 1,100 lb CO2/MWh. Alternatively, coal plants may elect to meet a 1,000 or 1,050 lb CO2/MWh/yr average over a seven-year period.

This rule proposal comes on the heels of a similar rule that was proposed in April 2012 but withdrawn on September 20, 2013. That earlier rule proposed a uniform standard for both natural gas- and coal-fired plants. Given new information discovered and the number of public comments received – over 2.5 million –in response to the 2012 rule, EPA felt substantial changes to the proposed standards were warranted and thus rescinded the 2012 version.

At first glance, the 2013 rule seems modest at best. It impacts only new plants being built, to the exclusion of existing, modified, or reconstructed sources. EPA also asserts that due to current industry trends – where low natural gas prices will encourage the construction of new natural gas, and not coal, power plants that already meet the emissions limits proposed – this rule “will result in negligible CO2 emission changes, quantified benefits, and costs by 2022.” With no declared costs or benefits, why then are environmentalists celebrating this rule and coal industry representatives condemning it?

There are a few reasons for this rule’s polarizing effect. For starters, this rule will in fact prevent the construction of any new coal-fired power plants that are allowed to emit an unlimited amount of CO– a huge win for environmentalists. Instead, such plants must incorporate partial implementation of carbon capture and sequestration (CCS) technology to reach the emissions limits. This is the piece that worries industry advocates. Because of its limited implementation to date, CCS is a young, expensive technology. Indeed, a coal plant with partial CCS will cost either 109 or 110 dollars per Megawatt hour, compared with 92 or 97 dollars per Megawatt hour without CCS technology. However, the main benefit of regulating CCS technology is that it will encourage technological innovation and widespread commercialization, which will in turn lower costs.

A bigger cause of the rule’s controversy is its symbolic effect. With this rule proposal, EPA is utilizing the authority granted it under Massachusetts v. EPA to regulate GHGs emitted by stationary sources for the first time ever. Moreover, this first step is a pivotal piece of President Obama’s Climate Action Plan, in which Obama intends to take executive action to evade congressional gridlock and move ahead with climate change regulation. This includes a rule imposing emissions limits on existing sources, to be proposed in June 2014. For this reason, opponents are denouncing the move as sparking a “war on coal.”

The real fight, then, is just gearing up. With standards regulating existing sources looming on the horizon, and possible Supreme Court review of Coalition for Responsible Regulation v. EPA, the D.C. Circuit decision upholding EPA’s GHG regulating authority, the next few months will mark a significant era in the U.S.’s stance on climate change.

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