By Amy Harder and Cassandra Sweet
New federal limits on greenhouse-gas emissions would force
sweeping changes in the U.S. electric system but wouldn't deliver
the knockout blow to coal that mining companies and some power
producers had feared.
The proposed caps on carbon emissions, unveiled by the
Environmental Protection Agency on Monday, give both states and
utilities credit for reductions they already have made, including
moving from coal to more natural gas and deploying renewable
energy. Burning gas produces less carbon than coal, and natural gas
has become cheap and plentiful during the past few years because of
the U.S. energy boom.
The EPA's plan, part of President Barack Obama's broader effort
to combat climate change, also allows states to count measures like
energy-efficiency programs to meet a nationwide goal of reducing
2005 greenhouse-gas emission levels by an average of 25% by 2020
and 30% by 2030.
Scott Segal of Bracewell & Giuliani LLP in Washington, D.C.,
who lobbies on behalf of coal-fired power plants, said he opposes
the carbon plan but said the rule "could have been a whole lot
worse."
The 645-page proposal is so complex that companies said they
were trying to sort out the potential impacts, which are likely to
vary widely by region. Coal consumption is highest in the Midwest,
the Ohio Valley and the Southeast, including Florida and Georgia,
and coal-burning states tend to have lower electricity prices.
American Electric Power Co. of Columbus, Ohio, said it is
concerned that in many states where the company operates, carbon
cuts could be more than 30% by 2030. "Climate change is a global
issue, and some states should not bear a disproportionate share of
the cost of U.S. action to cut emissions," a spokeswoman said.
Obama administration officials stressed that they were giving
states a great deal of flexibility both in how the states and
utilities meet the goals and when they must come up with a plan,
which for some states could be as long as three years from next
summer, when the rule becomes final.
Perhaps the biggest concession to the industry was the EPA's use
of the 2005 baseline for the cuts. Carbon emissions have dropped
14% since that year, so the overall reduction sought is smaller
than it would have been if the EPA had used a more-recent baseline
year, as both coal and utility executives had feared. "We aren't
sure how that happened, but it's a big relief," said a
coal-industry lobbyist Monday.
The EPA said 2005 is an international benchmark year for many
statistics including comparing pollution.
Building up to Monday's announcement, senior White House
officials reached out extensively to the utility industry and other
stakeholders, including labor unions and environmental groups.
White House senior adviser John Podesta spent two days last week
calling utilities, whose share prices barely moved Monday, and met
with coal-mining labor groups, according to a White House
official.
But the proposal will face challenges in court from both
industry and some states. A spokeswoman for Michigan Attorney
General Bill Schuette, a Republican, said Monday that the state,
which has challenged the EPA on other rules, may take legal action
against the rule.
Industry groups that oppose the administration push to cut
greenhouse gases warned the plan would raise the cost of
electricity, harming consumers and the economy.
"This proposal may adversely impact the affordability and
reliability of electricity supply to major industrial consumers,
which will harm workers, jobs and further impede the postrecession
growth of American manufacturing," said Thomas Gibson, president of
the America Iron and Steel Institute trade group.
The overall costs of the plan remain hotly debated. The
administration estimates that utilities would spend as much as $8.8
billion a year to comply with the rule, based on complex
assumptions including using more natural gas as a baseload fuel.
The U.S. Chamber of Commerce says the rule would cost the economy
$50 billion a year.
The utility industry accounts for about one-third of total U.S.
carbon emissions, according to the EPA, with coal making up most of
that share. Coal use has declined from a decade ago, but the fuel
still produced 39% of the nation's electricity last year, according
to federal tallies. Plants fired by natural gas produced about 27%,
nuclear plants generated 19%, and renewables including hydro, wind
and solar produced 13%.
Electric companies that have made big cuts in their emissions in
recent years but still have heavy concentrations of coal-fired
power plants include American Electric Power, Duke Energy Corp., of
Charlotte, N.C., and Atlanta-based Southern Co.
"No one is doing more than Southern Co. to address CO2," said
Tom Fanning, chief executive of that company, which says it has
slashed emissions by 26% over the past few years. The company,
which says it is still evaluating the impact of the new rules, is
building a plant in Mississippi that is supposed to capture carbon
emissions. It also operates the nation's biggest single emitter,
the Scherer coal plant in Juliette, Ga.
The EPA has set different carbon reduction standards for each
state based on what the agency believes is achievable, taking into
account cuts that individual states and utilities already have made
since 2005. For example, West Virginia must have a rate of 1,620
pounds of carbon dioxide emitted per megawatt hour of electricity
by 2030, meaning it must cut its carbon by 19.7% during that
time.
That is a relatively low percentage cut compared with some other
states that have fossil-fuel-intense economies, such as Colorado,
which must cut its emissions by 35.3% by 2030, and Louisiana, which
must cut carbon emissions by 39.7% over that period.
John W. Miller, Alicia Mundy and Ted Mann contributed to this
article.
Write to Amy Harder at amy.harder@wsj.com and Cassandra Sweet at
cassandra.sweet@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires