The Obama administration's 1,560-page rule setting the first limits on carbon emissions in the United States has big implications for the energy sector that could force major shifts in the energy sector.
The rule seeks a 32-percent reduction in electricity emissions from 2005 levels by 2030, up from a 30-percent cut in the proposed rule. The Environmental Protection Agency said the regulation reinforces what's already happening in the electricity sector.
The agency said the alterations largely resulted from new information about renewable power costs (they're falling) and construction (increasing). And while some energy sectors fared better in the version finalized Monday than what was proposed in June 2014, others took a hit. Here are just a few:
Wind and solar power
Renewable energy costs are dropping and projects are getting built at a faster rate than anticipated, according to new statistics from the Energy Department, said Janet McCabe, the EPA's air chief. That, combined with a change in how states calculate how much renewable power they have access to, increased the amount of renewable power the agency expects to come online. In the proposed rule, the EPA anticipated renewable energy would provide 22 percent of power by 2030. Now the agency thinks 28 percent of all capacity will come from such sources, partly through an incentive program that officials believe will compel early renewable energy deployment.
Cap and trade
EPA officials touted emissions trading schemes as potentially the most cost-effective way to comply with the regulation, a major about-face for a concept that became politically toxic in Washington following the collapse of cap-and-trade legislation in 2010. The rule also creates mechanisms for states to set up their own marketplaces for emissions- and energy efficiency-trading schemes without needing to sign interstate agreements that the EPA could monitor and enforce. The agency said the rule also would accommodate carbon taxes if states chose that option, though it did not suggest one.
Alaska, Hawaii, Guam and Puerto Rico
For now, at least. The EPA didn't provide a target for any of those states because it lacked appropriate information on their electricity grids, which exist apart from the contiguous U.S. system. The EPA said it would come up with a target at a later date, with McCabe saying it's best to think of those states' emissions plans as "deferred" rather than "exempt." Other states such as Arizona, Arkansas and Florida are also getting some room to breathe, with the EPA lowering the emission reduction goals for those states.
Proponents of electric power reliability persuaded the EPA to include a "reliability safety valve" measure in the final rule to guard against blackouts. The safety valve would kick in "where there is a conflict" between a state's emission requirements and a power generator being able to produce enough electricity to avoid a shortfall in power production. The safety valve would allow a plant to remain in operation if curtailing its operation would hurt the grid.
The EPA now expects coal to provide less of America's electricity in 2030 compared to what it thought in June 2014. The EPA expects coal to provide 27 percent of U.S. power by then, compared with 30 percent under the proposed rule. Administration officials have maintained that much of the decline in coal use was going to occur anyway because of competition from natural gas and higher costs for extracting harder-to-reach coal, although environmental regulations have played a role in making it costlier to burn. Either way, there was little sense that emissions reductions would happen without reducing coal's role in the power sector.
Once the linchpin of the power plant rule, natural gas was relegated to a supporting actor in the final version. The White House said its slice of the electricity mix in 2030 is now projected to be no more than under a "business as usual" scenario. Administration officials contend that's because its expectations for renewable power changed. The natural gas industry was upset by the change, as it has said the energy source, which produces half as much carbon as coal when used for electricity, could help address climate change. "We believe the White House is perpetuating the false choice between renewables and natural gas," said Marty Durbin, president of America's Natural Gas Alliance.
Existing nuclear reactors, which don't emit any greenhouse gases and provide 20 percent of U.S. power, won't count toward meeting state goals unless they expand. The Nuclear Energy Institute trade group called it an about-face for the EPA, as the proposed rule recognized that 6 percent of nuclear power nationwide is at risk of shutting down. It is now up to states to keep those reactors afloat — otherwise they will have to replace that zero-carbon energy with something else. But the nuclear industry did win one concession: Under-construction reactors in Georgia, South Carolina and Tennessee will no longer be assumed completed, which would have put those states in a bind for meeting reduction goals if the facilities weren't built.
Washington Examiner Energy & Environment writer John Siciliano contributed to this report.