Clean Energy Climate Bill Gives Coal a Competitive Future
America's future climate law began working its way through Congress this week, rewritten with new details and changes that were negotiated to give the coal industry generous incentives and the regulatory certainty to compete for a place in the nation's energy future.
Here's how Rep. Rick Boucher of Virginia, a lead negotiator for coal state Democrats on the House Energy and Commerce Committee, described the deal they worked out:
I've been working extensively to fashion a controlled program that Congress can adopt which will preserve coal jobs, create the opportunity for increasing coal production and keep electricity rates in regions like Southwest Virginia affordable. The compromise that I have reached with Chairman Waxman achieves those goals.
Boucher and fellow coal state Democrats cut those deals with the bill's authors, Reps. Henry Waxman and Ed Markey, with President Obama -- a "clean coal" supporter -- giving them a free hand to arrive at the formula that would secure the votes needed for passage.
Although the president called for a polluter-pays 100% auction of carbon allowances when he asked Congress for a climate law, the now 932-page American Clean Energy and Security Act of 2009 does the precise opposite: It contains a formula that gives most of the allowances to polluters for free -- with about a third of them going to the coal-dominated power industry at no cost.
The free allocations were one major reason that Greenpeace withdrew support for the bill within hours of its introduction, but most of those in the climate community who have weighed in so far have been willing to swallow compromises that would have been unthinkable in January. Al Gore's support for the bill remains undiminished. Paul Krugman at The New York Times summed up the prevailing attitude best:
The legislation now on the table isn't the bill we'd ideally want, but it's the bill we can get -- and it's vastly better than no bill at all.
As climate actors start wading further into the details of the bill's provisions, however, they may find themselves hard pressed to justify passive acquiescence while enduring the certain further weakening of the bill on the Senate floor.
Ground zero of the contention centers around coal, an embattled industry which emerged from the negotiations with a surprisingly good deal. The bill contains performance standards for new coal plants that are weaker than those in the original Waxman-Markey discussion draft, funnels billions in funds and incentives to the development of "clean coal," and strips EPA of authority to proceed with development of regulations for smokestack CO2 produced by the industry.
Further, although the bill imposes a gradual economy-wide emissions cap, the penalty for non-compliance or failure to achieve target reductions would amount to no more than a slap on the wrist, given the low price permits are expected to fetch on the market for some time.
Mainstream environmental groups, however, are focused on what they would get in exchange -- the holy grail of their climate campaign -- the establishment of an economy-wide cap-and-trade system whose efficacy they believe can be increased over time. The bill also legislates valuable and groundbreaking support for clean energy, energy efficiency and green jobs, using federal law to erect economic pillars vital for eventually transitioning to a clean energy economy.
They seem satisfied even though the new bill also reduced the proposed national standard on renewable energy from 25% to 20%, compared to the first draft, diminishing its potential competitive pressure on coal.
All sides are now wading through the details of the massive bill, spinning messages and planning strategies for the political battle that is likely to continue for the duration of the year. It is unlikely that the parameters of coal's good deal will substantially change during this week's committee mark-up, but in the coming months, the future of coal will be a major topic of concern.
The continued growth and survival of coal brings three strikes against the bill in every climate campaigners handbook: It's the source of the lion's share of global CO2 emissions, it creates a weak negotiating position when across the table from China, and it fails to show the kind of leadership the world will want to see from the U.S. in Copenhagen.
Weakened Standards and Large Bonuses
The discussion draft of the Waxman-Markey bill contained performance standards for new coal plants that had some real bite. For starters, the draft stipulated that after January 1, 2015, no coal plants that emitted more than 1,100 pounds of CO2 per megawatt-hour would be permitted for construction. That's a natural gas standard of performance, something that no coal plant can currently do, so it looked as if after 2015, no coal plants could be built unless they could capture and store their emissions. But the current bill has relaxed the standard in both definition and start date (see page 91).
Utilities may build coal plants permitted between now and 2020, as long as by 2025 these plants "achieve an emission limit that is a 50 percent reduction in emissions of the carbon dioxide produced by the unit." The language stipulating specific rate of emissions per megawatt-hour has been removed.
At the heart of the standard is the assumption that carbon capture and sequestration technology will be available for commercial deployment so that industry can comply. The bill is silent on what happens if CCS technology is not ready or proves unworkable.
It is possible that these new coal plants would be permitted to continue operations through a relaxation of the legal standard, since EPA even now cannot enforce a technology standard that cannot be met. Companies in the UK are already negotiating for an opt-out clause there if CCS is not ready in time.
Utilities in violation in any case would not be shut down, but would face penalties -- set by the bill at two times the "fair market value of emissions allowances" (see page 427). The EPA estimates that a permit for a ton of CO2 would sell for only about $15 in 2020. That makes it possible for industry to plan to pay for non-compliance as the penalties would be relatively cheap, especially when compared to penalties under the acid rain cap and trade program, which are $2,000 per ton of pollutant in excess of allowance.
If the coal plants succeed in capturing and sequestering CO2 on the other hand, the owners stand to reap huge profits. First, the bill reserves 2% to 5% of allocations to pay for the development of CCS, which would amount to tens of billions of dollars of federal support for industry out of the gate, supplemented by an additional $1 billion annually made available through a small ratepayer levy.
The bill also provides enormous bonus allowances for the first movers of CCs technology potentially worth tens of billions of dollars. For every ton of CO2 that it sequestered, a utility would receive a bonus allowance many times more generous than the open carbon market would provide, from a minimum of $50 a ton to a maximum of $90 a ton for every ton of carbon sequestered.
EPA to Lose Primary Authority over CO2
In March 2008, Lisa Heinzerling of Georgetown Law School testified before Congress to explain the implications of Massachusetts v. EPA, the landmark case decided by the U.S. Supreme Court. In no uncertain terms, Heinzerling, an expert on the Clean Air Act who now works as an advisor to EPA Administrator Lisa Jackson, testified that the agency must regulate CO2 from power plants as a result of the decision.
It was a prospect that sent shivers through the fossil fuel industry, fearful of an uncertain and protracted regulatory process. The Waxman-Markey bill, through amendments to the Clean Air Act, imposes limitations on the authority of EPA to proceed. The bill devotes an entire title, Title VII, to the amendments (see page 590), which prohibits any greenhouse gas, including CO2, from being listed as a "criteria pollutant" or a "hazardous air pollutant" on the basis of their effect on climate change.
The bill also does not permit greenhouse gases to trigger New Source Review, nor affect the granting of a permit to operate under Title V of the Clean Air Act.
In short, the legislation rewrites the law so that the impact of Massachusetts v. EPA is narrowed in scope and Congress takes the lead on GHG regulation. With coal state lawmakers controlling the swing votes, however, some groups like Greenpeace would rather see EPA in charge of setting the rules on climate protection.
Kansas and New Hampshire
In recent years, the utility industry has had an almost impossible time proceeding with construction of new coal plants. Sierra Club's Beyond Coal campaign has halted close to 100 projects, forcing industry to look to extending the life of its aging fleet of existing plants, which on average are close to 40 years old.
A look at circumstances in two cases -- one in Kansas and one New Hampshire -- shows how a proposed new plant and the upgrading of an aging plant, respectively, would proceed even if Waxman-Markey is signed into law. The long time horizon before the law begins to bite in 2025 -- when allowance auctions begin and performance deadlines hit -- means the regulations have little chance to impact the behavior of corporations, which can barely contemplate a decade of strategic planning.
Evidence of this comes recently from Kansas, where the new governor recently signed a surprise deal with Sunflower Electric to allow construction of a new coal plant that would send 75% of its electricity to customers out of state. The deal signaled a reversal of two years of effort championed by former Gov. Kathleen Sebelius, now Obama's Health Secretary.
The utility said it planned to break ground on construction within 10 months, fully aware of pending federal legislation that would impose a price on carbon and emissions standards on new plants eventually. There are no plans to make the plant ready for a CCS retrofit.
Similarly in New Hampshire, PSNH's Merrimack Station, the largest single source polluter in the state, is moving ahead with a massive upgrade despite the opposition from leading local businesses, including Stonyfield Farms and Timberland.
The nearly half-billion dollars worth of upgrades won't do anything to reduce the plant's carbon emissions, but will allow the utility to reap an extra $20 million to $25 million a year from ratepayers. The state legislature, under the influence of the utility lobby, is turning a blind eye to the survival strategy of a dinosaur responsible for close to half of the CO2 emissions in the state.
Waxman-Markey is silent on the regulation of aging plants like these, presuming the carbon cap embedded in the bill will force needed changes through market mechanisms. PSNH, undeterred by the pending federal legislation, is already proceeding with construction on the half billion dollar upgrade.
There is some optimism within the climate community that market forces unleashed by the cap-and-trade program will put sufficient pressure on coal to force plants to close or diminish new construction in the coming decade. But the satisfaction within industry at the currently negotiated outcome is causing concern among others that the cap is far too weak to have an effect for decades.
It calls for a 4% reduction in U.S. emissions below 1990 levels by 2020, which is far below the EU target of a 20% reduction. The market signal may be barely audible. Indeed, one industrial Fortune 100 company with a carbon-intensive product line has been advised by three separate teams of consultants about the impact of a carbon price upon its business. Independently, the consultants reported that the impact in 2020 would be negligible, according to a company executive not authorized to speak publicly.
And even after 2020, one watchdog group was skeptical of success in ever making polluters pay. In a statement released today, Public Citizen had this to say:
We should not assume that a future Congress will hold fast to today's pledge to hold polluters accountable in 20 years. In fact, using history as a guide, these polluters will simply ramp up their lobbying and influence-peddling in an effort to again stall the day of reckoning when their greenhouse gas emissions carry a price.
Climate advocates still have time to reassess where this legislation is headed. For now, official statements are supportive, though laced with carefully wrought caveats about the need for strengthening its climate protection mechanisms. The 932 pages have been publicly available for only a few days, and the first order of business is getting the bill out of committee and onto the House floor.
It remains to be seen how hard lawmakers will allow themselves to be pressed to dial back the generous cards being handed to coal-fired power generation in particular, and the massive bet they are making on a future in which greenhouse gases will kept out of the atmosphere and instead buried underground.
No one can dispute that politics has trumped science in the design of this law -- at least considering the gradual pace of emissions reductions contemplated for the next decade or two. And there is great concern that this climate bill in Copenhagen will look like too little too late from an administration that has promised global leadership on climate change.
See also:
Polluters' War on Climate Legislation Is Taking a Toll
Lawyers Advising Clients to Prepare for Economy-Wide GHG Regulation
Greenpeace: We Cannot Support This Climate Bill
Greens Give Lukewarm Embrace to Draft Climate Bill
House Climate Bill a Centrist Balancing Act
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
If this was the only actions government was taking against global warming, I would be sorely disappointed. Why should we be building any new coal plants at all without carbon sequestration? We can meet future energy needs with wind, solar, other alternatives, and/or nuclear and phase out coal. I suppose it's inevitable that huge entrenched industries hold sway in Washington but how will we ever move away from carbon-based sources if there are many politicians to protect them until the last chunk of coal is mined?
I hope the EPA doesn't settle for Congressional climate legislation. They have the ability to deny permits for coal plant construction and the public endangerment finding to back it up.
I'm pleased with what the Obama Administration has done so far, from accelerating the timetable on CAFE standards to large incentives and investment in renewable energy, smart grid, and mass transit.
All of the above is needed. It's clear that climate legislation is not going to be the silver bullet.
See David Sassoon's Profile
The legislation would prohibit EPA from considering climate change and CO2 emissions in permitting decisions for coal plants.
There is a lot positive going on, I agree, but let's no forget the pivotal role that coal plays in the climate problem. You can't pick up a board you're standing on.
Frankly then, I don't know why Waxman had to water the legislation down so much to appease Democrats from coal states, especially if the EPA public endangerment finding on greenhouse gases becomes practically useless. It seems to me that strict regulation of coal, such as ending permits for almost all new coal plants, would be preferrable than weak cap and trade legislation that allows continued coal expansion. Do coal-state politicians really have much sway, given the EPA ruling? What are the benefits/drawbacks to insisting on better legislation and if it's shot down, letting the EPA do its thing?
Let's make a deal with all the fossil fuel companies, CAFOs, mining companies, and all other resource-intensive industries. We'll untax their profits IF they agree to pay true costs for resources (which, rightfully, really belong to all of us; Exxon didn't make the oil in the ground, did it?), as well as pollution, land use and whatever else they don't actually produce, but merely take from nature.
This Geonomic idea would discourage the waste of resources, end land and commodity speculation on the markets by taking away the "fuel" for it in the form of taxes which would be returned to the community, free up innovation by untaxing true productive operations, and vastly reduce pollution by finally taxing these "externali
Sign the petition:
http://www
One big problem with your case, those taxes that you will be taking from the companies and returning to the communities, will be paid by those same people. You tax the energy companies, their costs increase, they pass the increases on to their customers, they pay more. What's the point? How would taxing these externalities, as you put it, vastly reduce pollution? Ending most poverty? What dream world do you exist in?
Radioactive fallout from burning coal kills an estimated 50,000 downwind folks a year by inducing cancer.
Coal can be superseded .Revolutionary self-powered engines and generators are expected to replace the need to plug-in a plug-in hybrid. A 2 kW generator is on the horizon. It will eventually demonstrate a compact, inexpensive, capability to end the need to plug-in.
Since no fossil fuel or battery recharge is required, existing engines are likely to become obsolete. Consumer purchasing patterns could begin to reflect a new reality, with the market deciding most future cars will never need fossil fuel.
When a substantial number of vehicles powered by such systems fill a parking garage, wireless power transmission technology can turn it into a multi-megawatt power plant.
The cost of many vehicles might be paid for by utilities, as they purchase electricity whenever needed.
The parked cars, trucks and buses, each become decentralized power plants - a rapid, cost-effective alternative to the many tough and costly challenges of constructing new coal burning and nuclear power generation facilities.
Auto makers will have no trouble selling fuel free cars that need no batteries or recharge, and can pay for themselves.
Imagine the potential for stimulating the world economy.
Auto makers and utilities have a unique opportunity to lead the nation and the world.
See David Sassoon's Profile
The problems with coal are many and horrible but I do not think radioactive fallout is really one of them, and we don't need to include it in the list. It undermines credibility. I read reports about it, and traced the contention back to its source -- a scientific paper -- and found there no real evidence for concern. If there is evidence on this that I am not aware of, pls provide the scientific evidence.
Appalachia can't stand anymore of Boucher's progress and prosperity thanks to the new and improved, clean, green, hybrid coal industry. http://www
You must be logged in to comment. Log in or connect with
