Obama Seeks Power-Plant Emissions Cuts Republicans Oppose

Jun 02, 2014 12:34 pm ET

(Updates with comment from EPA’s McCarthy in fourth paragraph.)

June 2 (Bloomberg) -- President Barack Obama proposed cuts in greenhouse-gas emissions from the nation’s power plants by an average of 30 percent from 2005 levels, a central part of his plan to fight climate change that also carries political risk.

The proposal, released today by the U.S. Environmental Protection Agency, represents the boldest single step the U.S. has taken to fight global warming, with the administration saying the effort would both boost the economy and cut health woes such as asthma and heart attacks. The effort drew immediate pledges from Republicans to try to block the rule, as they warned it would cost jobs and raise electricity prices.

“This is not just about disappearing polar bears or melting ice caps,” EPA Administrator Gina McCarthy said at a ceremony in Washington. “This is about protecting our health and our homes. This is about protecting local economies and jobs.”

The EPA is setting standards for each state based on the carbon emitted from their coal and gas-fired power plants, and it will now be up to state officials to come up with how they want to meet the targets. Because emissions from power plants fell about 15 percent from 2005 to last year, the preferred reduction equates to less than a 20 percent cut from current levels. The EPA said it would lead to $90 billion in climate and health benefits, and cost utilities up to $8.8 billion.

Rally Support

The administration is arguing that the plan would both have meaningful health benefits, because it would lead to less soot and smog as old coal plants shutter, and will lower customers’ electricity bills as they use less power. McCarthy said it would fuel investment and economic growth by promoting clean energy innovation.

In a call with Democratic lawmakers yesterday, Obama dismissed complaints that the rule will hurt the economy by driving up electricity prices, and told the Democrats listening: “Please go on offense” to promote the health impacts of the measure, said two people on the call, including Representative Gerry Connolly, a Virginia Democrat.

Coal producers, industry groups and Republicans in Congress criticized the plan.

Higher Prices

“The president’s plan is nuts, there’s really no more succinct way to describe it,” House Speaker John Boehner said in a statement. “Americans are still asking ‘where are the jobs?’ and here he is proposing rules to ship jobs overseas for years to come.”

The Consumer Energy Alliance, a Houston-based group whose members include Exxon Mobil Corp. and some coal groups, warned the proposal will hurt companies.

“Unfortunately, both the level of cuts in coal-based generation and the timelines for implementation that are proposed today will cause substantial reliability concerns and will ensure higher electricity prices across the board,” Michael Whatley, executive vice president for the group, said in a statement.

The proposed regulation will permit states to achieve the reductions in climate-warming pollutants by promoting renewable energy, encouraging greater use of natural gas, embracing energy efficiency technologies or joining carbon trading markets. The regulations apply to existing power producers. Separate regulations governing new plants have already been proposed.

Lower Emissions

The 30 percent reduction represents an average. Individual states may be directed to cut carbon emissions at levels that are greater or less than that figure.

Emissions from power plants were already down 15 percent from 2005 through 2012, halfway to the goal, according to Vicki Arroyo, executive director of the Georgetown Climate Center. The group compiled a list of reductions by state, which showed that many, including New York, Washington, Virginia and Georgia, have already exceeded cuts of 30 percent.

Hugh Wynne, a New York-based utilities analyst for Sanford C. Bernstein & Co., said today in an interview that the proposed cuts were “eminently doable.”

Friends of the Earth, an environmental group, said the rule, while a “significant step,” doesn’t do nearly enough to address the risks of global warming.

“The science on climate change has become clearer and more dire, requiring more aggressive action from the president,” said Erich Pica, president of the group.

Global Talks

Some advocates are looking at Obama’s climate plan to help in efforts to reach an international accord that would reduce carbon emissions. Obama pledged five years ago as part of international climate talks that the U.S. would cut its greenhouse gas emissions by 17 percent from 2005 levels by 2020.

“The decision by President Obama to launch plans to more tightly regulate emissions from power plants will send a good signal to nations everywhere that one of the world’s biggest emitters is taking the future of the planet and its people seriously,” Christiana Figueres, the United Nations’ top climate official, said in a statement today.

Legislation to require economy-wide cuts to emissions through a cap-and-trade system died in the Senate in 2010 under mounting opposition from Republicans and some industrial state Democrats who worried it would raise the costs of electricity. The proposal today is less sweeping, though still historic. Power plants are the source for about 40 percent of the total U.S. carbon emissions, which most scientists say are contributing to rising global temperatures.

Coal Generation

The 560 plants that burn coal to make electricity account for about 75 percent of all power-plant emissions. Coal, the most carbon-intensive fossil fuel, provided 39 percent of the U.S. power in 2013, according to Energy Department data. While that’s down from about half, coal is remains the single largest source of electricity generation in the U.S.

The EPA estimated coal will provide 30 percent of U.S. electricity when the cuts are in full effect by 2030. Some officials in states that rely on coal to generate a significant percentage of their electricity expressed concern the new rule, despite the flexibility, will raise consumer costs.

“I have a real problem with them pretending it’s not going to have an effect on electric rates,” said Chuck Eaton, the Republican chairman of the Georgia Public Service Commission. “They make the rules and I’m the one having to hand Georgians the bill.”

State Targets

The EPA is counting on coal plants being operated more efficiently and states shifting to natural gas from coal to get modest cuts in the next four or five years, people familiar with it said. Each state will have a target based on its emissions, and in the next decade the overall electric grid will need to become more efficient and use renewable generation to achieve the reductions, they said.

“President Obama is right to take decisive action to combat this clear and present danger,” Frances Beinecke, president of the Natural Resources Defense Council, said by e- mail. “The proposed standards will limit -- for the first time in U.S. history -- the unrestricted pollution of our atmosphere by carbon dioxide.”

Some industry observers have said the approach favored by the administration will leave the rule open to legal challenges under the Clean Air Act because it relies on an interpretation of the law that counts emissions reductions that occur outside power plants -- through such things as efficiency measures, greater use of renewable energy and even joining carbon-trading programs. Past regulations have sought to cut pollutants as measured at the smokestack.

Republican Challenge

Republicans signaled they intend to make the rule an issue in the House and in campaigns in states where the coal industry is a major employer.

“By imposing these draconian new rules on the nation’s coal industry, President Obama and every other liberal lawmaker in Washington who quietly supports them is also picking regional favorites, helping their political supporters in states like California and New York while inflicting acute pain on states like Kentucky,” said Senate Minority Leader Mitch McConnell, a Kentucky Republican who is up for re-election this year. He said the economic impact of the rules will be “staggering for millions.”

The House Republicans’ campaign arm targeted more than 30 vulnerable Democrats on the rule. “Now, Annie Kuster will have to decide between saving the economy and jobs or supporting the President’s liberal cap-and-trade scheme for political gain,” read one missive targeting Kuster, a freshman New Hampshire Democrat.

Democratic Backing

Most Democrats are supportive of the administration’s proposal, including Democratic leaders and the top Democrats on environmental panels.

“Thank goodness the president refuses to be bullied by those who have their heads in the sand, and whose obstruction is leading us off the climate change cliff,” Senate Environment and Public Works Committee Chairman Barbara Boxer said in a statement. “The president’s proposal is respectful of the states’ roles and allows major flexibility, while ensuring that big polluters reduce their dangerous contributions to climate change.”

Representative Nick Rahall, a West Virginia Democrat, said he will introduce legislation to block the Obama rules for both existing and new plants.

--With assistance from Mike Dorning, Derek Wallbank and Kathleen Hunter in Washington, Jim Polson in New York and Margaret Newkirk in Atlanta.