March 28, 2012

Greenhouse Gas Standards for New Power Plants: Glass Half-Full and Half-Empty

With congressional action on climate change at a standstill, EPA’s new source performance standards (NSPSs) for greenhouse gases (GHGs) from new power plants should be applauded.  As required by the Clean Air Act, the agency is doggedly moving forward to establish emission standards for GHGs, air pollutants that unquestionably endanger human health and welfare. EPA deserves praise for setting a strong standard and proposing it notwithstanding political heat. The glass is half-full.

While attention is properly focused on what EPA has accomplished, it is important not to lose sight of what could be better. One concern is the standard’s flexibility: it lets new power plants (presumably coal-fired) violate the standard now and catch up in the future (presumably through the installation of carbon capture and storage (CCS)). In the somewhat unlikely event that utilities take advantage of that flexibility, it could give coal-fired power continued and environmentally damaging new life. A second, and more fundamental concern, is EPA’s silence on existing power plants. Notwithstanding Clean Air Act requirements, the agency has indicated that it has “no plans” to establish emission guidelines on existing power plants, the largest single source of GHG emissions in the United States. The glass is half-empty. I hope the glass will fill once the next election is over.

The Glass is Half-Full

EPA’s proposed standard for new power plants sends a strong message that future investments in fossil fuels must take carbon emissions into account.  The standard, which must reflect the “best system of emissions reduction” for the industrial category in question, is premised on the emissions achieved by a natural gas combined cycle power plant. It is noteworthy that EPA has created a general category for power plants that holds them all to the highest standard achievable. Had EPA set separate NSPSs for coal-, natural gas-, and oil-fired power plants, then each type of plant would have been required to reduce emissions only to the extent readily achievable in that category, rather than requiring all plants to achieve the highest standard possible for fossil-fuel power plants in general. In other words, coal-fired power plants, which generally emit about twice the level of GHGs per unit of energy produced, would have been allowed to emit at a higher level than more efficient natural gas plants.

Setting the standard based upon the lowest-emitting fossil fuel technology, natural gas combined cycle plants, sends a critical message to utilities that the easiest way to meet the standard is by avoiding coal. Coal-fired power is not prohibited; utilities could meet the standard with a coal-fired power plant if it installed CCS, a more expensive and uncertain alternative. (It is important to recognize that CCS is not the NSPS for coal-fired power; instead, the NSPS for fossil-fueled power plants is premised upon the use of natural gas, and “coal plus CCS” would be an alternative way to meet the emission standard without actually building a natural gas plant.)

 The standard creates a strong incentive to avoid further investments in coal-fired power. It goes further than the permitting requirements for new sources under the Prevention of Significant Deterioration (PSD) program. The states determine what constitutes the “Best Available Control Technology” (“BACT”) for new sources under the PSD program on a case-by-case basis, and EPA’s general guidance on applying the BACT standard suggested that states would not be expected to require facilities to reduce emissions to natural gas levels. In contrast the NSPS, which establishes federal minimum requirements for all new power plants, does provide that push.

That’s a plus not only for carbon, but for associated pollutants as well. Natural gas plants emit much less criteria and toxic pollution than coal-fired power, creating a double win, at least from the perspective of direct power plant emissions. Natural gas does raise its own concerns, however. As the shift in investment continues toward natural gas, EPA must be vigilant in providing safeguards against the environmental harms associated with natural gas extraction, including hydrofracking and the growing network of gas lines required to transport the gas. Without such vigilance by EPA and the states, we could find ourselves launched from the frying pan of one fossil fuel to the fire of another.  Ideally, this rule will be part of a larger set of strategies that will move us toward new renewable and clean sources of energy.

The Glass is Half Empty

Flexibility Measures for Coal plus CCS

If new coal-fired power plants had to meet the NSPS immediately, through installation of CCS, then coal would not be a real option due to the current cost and uncertainty of the technology. EPA has, however, provided a lifeboat for the industry by creating flexibility. For the first ten years of operation, the emissions standard would reflect emissions associated with efficient supercritical coal-fired power plants (1800 lb CO2/MWh), almost twice the allowable level for natural gas plants (1000 lb CO2/MWh).  During that time, the facilities could work to optimize already-installed but not fully functional CCS, or could simply wait to install CCS on the expectation that its costs would decrease and feasibility would increase.  After 10 years, coal-fired power plants with CCS would have to meet a moredemanding standard (600 lb CO2/MWh) to make up for the additional emissions during the first ten years of operation. Over a thirty-year period, the average emissions would be required to meet the NSPS of 1000 lb CO2/MWh. 

That flexibility makes the construction of coal-fired power plants a more feasible option. That raises a couple of concerns. First, the proposed rule expresses repeated optimism that CCS will become more technically and financially viable, but it is not clear whether that optimism is warranted. If CCS does not provide the hoped-for technological fix, new coal-fired power plants might find themselves in a difficult position 10 years down the line. The inability to meet the required performance standard, or the high cost of meeting the standard if costs do not come down, could force them to retire, wasting a substantial investment. Alternatively, given the potential for a wasted investment, they could seek legislative relief that would exempt them from the stringent standard, leading to higher GHG emissions. Lastly, they could simply fail to comply, leaving emissions results dependent upon EPA’s and the states’ willingness to enforce the standard.

Second, while “coal plus CCS” might be a way to appease the coal industry, the proposal does not grapple with its negative consequences, including increased co-pollutants. At least as currently conceived, separating carbon from the emissions stream is an energy-intensive process. If that ultimately increases the combustion of coal, then it could lead to all of the negative consequences associated with coal, including mountaintop removal mining, increases in ambient pollution levels, more acid rain, and increased mercury and other toxic emissions. While these co-pollutant emissions are subject to increasingly stringent regulation, it is still worth considering whether a GHG control mechanism that increases rather than decreases co-pollutants is advisable.

It is possible that these will be non-issues; utilities may well choose not to take the lifeboat for coal. CCS is expensive and uncertain and, even with a 10-year grace period, utilities could seek to avoid the risks associated with eventual requirements. Moreover, if, as EPA suggests, the energy market is driving almost all new investment into natural gas, then new coal-fired power plants may be history, regardless of EPA’s flexibility measures.

The Importance of Existing Sources

The NSPS is critical to direct new investment into a more sustainable energy infrastructure. At the same time, it remains disheartening that the United States has failed to impose any controls on GHG emissions from existing power plants -- which contribute forty percent of the nation’s carbon emissions -- much less from any other stationary sources. Section 111(d) of the CAA requires the agency to establish emission guidelines for existing sources, guidelines that the states ultimately implement. As I discussed here in January, failing to impose standards on existing as well as new sources not only skirts the law, it also creates a perverse incentive to continue operating more polluting existing facilities, rather than investing in cleaner new facilities.

EPA Administrator Jackson has stated that the agency has “no plans” for existing facilities.  I hope that just means “no plans until November.” In the meantime, some progress is unfolding; all may not ride on existing source GHG performance standards. The combination of new environmental regulations on coal-fired power plants and cheap natural gas prices is leading to the unprecedented retirement of old, heavily-polluting coal-fired power plants. While direct GHG controls on existing sources are legally required, it is certainly worth watching to see if existing source emissions are on a downward trend notwithstanding the lack of direct controls.

The Vision Thing

The politics of climate change are tricky. Ultimately, however, we will need to do things differently.  Yet rather than offer a vision of positive change, the tone of EPA’s proposal is: “this won’t make any difference.” Luckily, this time, market forces favoring less-polluting natural gas coincide with the Administration’s proposal, so its natural-gas standard probably won’t require any real shifts in course. But, in the long term, there may be value in building support for positive change, and value in generating a public discourse that does not take the status quo as given, but instead generates momentum toward a more sustainable future.

Alice Kaswan, CPR Member Scholar; Professor, University of San Francisco School of Law. Bio.

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