The Environmental Protection Agency published its proposed revision of the Obama administration’s carbon dioxide emission standards for new coal power plants in late December. The Obama standards effectively ban investment in new coal generation—a policy Congress never approved and would not pass if put to a vote. EPA’s proposal will help restore the separation of powers and safeguard affordable energy for American consumers.
In more technical terms, EPA is proposing, under the Clean Air Act, to revise the agency’s 2015 determination that partial carbon capture and storage (CCS) is the best system of emission reduction (BSER) for new coal units. A CCS system uses various technologies to capture carbon dioxide emissions from fossil fuel combustion and deliver the emissions for storage in underground geologic formations.
Since new coal power plants are already more costly to build than new natural gas combined cycle power plants, and CCS increases both capital and operating costs, the Obama rule powerfully deters investment in new coal generation.
EPA now proposes that the best system of emission reduction is the most efficient commercially-viable coal boiler combined with best industry practices. New coal power plants would have to meet a standard of 1,900 pounds of carbon dioxide per megawatt-hour rather than the current more stringent standard of 1,400 pounds per megawatt-hour. To put those numbers in perspective, just one megawatt-hour is about as much electricity as the average American home consumes in three and a half weeks.
EPA’s proposal is based on an updated analysis of the cost and geographic availability of carbon capture and storage. EPA finds that CCS-based emission standards are “exorbitantly costly” and not “achievable” in all parts of the country, providing the justification for a new rule replacing the Obama standards.
Although carbon capture systems can substantially increase power plant construction costs, EPA is most concerned about the increase in operating costs. In deregulated markets, where units with the lowest operating costs are the first to be “dispatched,” CCS power plants would likely go to the back of the queue, rendering them uncompetitive or even unable to recover their capital costs.
Geographic constraints compound the problem. Clean Air Act performance standards must be “achievable”—a term determined by case law to mean achievable “anywhere in the country” by the “industry as a whole.” However, EPA finds, the significant water consumption requirements of most CCS systems make them “prohibitively expensive” to deploy in arid regions of the country.
In addition, the only two utility-scale CCS power plants in existence—Petra Nova in Texas and Boundary Dam in Saskatchewan—depend financially on the sale of carbon dioxide for use in nearby enhanced oil recovery (EOR) operations. Many potential sites of new coal power plants are not near oil fields. For that reason, too, CCS-based emission standards are not “achievable.”
In a press conference on the proposal, EPA Acting Administrator Andrew Wheeler stated: “By replacing onerous regulations with high, yet achievable, standards, we can continue America’s historic energy production, keep energy prices affordable, and encourage new investments in cutting-edge technology that can then be exported around the world.”
Critics instantly declared EPA’s proposal useless because the agency expects “few, if any” new coal power plants to be built in an era of cheap gas. But Wheeler and EPA are not trying to guarantee a market for coal generation. Rather, they seek to rescind an unlawful regulation that blocks investment in new coal capacity regardless of how market conditions evolve.
Critics also claim the proposal would exacerbate climate change because the proposed CO2 standards are less stringent than the Obama standards. That complaint conflicts with the first one because the potential number of new U.S. coal power plants that might be built under the revised standards is too small to significantly increase U.S. emissions or have any detectable climatic effects.
What both criticisms overlook is that hundreds of new coal power plants are being built overseas, especially in Asia. Access to efficient U.S. coal technology might help limit developing countries’ emissions. More importantly, if U.S. firms are free to compete in the global marketplace for advanced coal technologies, they can bring affordable energy to millions of people, helping them live healthier, more prosperous lives.
Developing future technologies is far more likely if the U.S. coal industry itself has a future. The prior administration’s unrealistic and unlawful standards—for both new and existing coal power plants—were tantamount to a regulatory death sentence.
Consumers are best served when economic competition rather than bureaucratic machination picks energy-market winners and losers. EPA’s proposal will advance that principle in law and national policy.
Marlo Lewis is a senior fellow in energy and environmental policy at the Competitive Enterprise Institute.