EPAs Carbon Pollution Rules:

Undermining Federalism & the

Separation of Powers
Marlo Lewis
Senior Fellow
Competitive Enterprise Institute
Crossroads Conference
Houston, TX
September 25, 2014
Obama and Coal
Under my plan for a cap and trade program, utilities
could build a new coal plant, but it would bankrupt
them San Francisco Chronicle, Jan. 2008
Cause electricity rates to necessarily skyrocket. Cause electricity rates to necessarily skyrocket.
Cap-and-trade exposed as cap-and-tax.
29 House Dems who supported Waxman-Markey get
pink slips in Nov. 2010
Obama day-after press conference vows to find
other ways of skinning the cat.
Carbon Pollution Rule: Bare Bones
Sets new source performance standards (NSPS) for
carbon dioxide (CO2) emissions from new fossil-fuel
power plants.
Coal: 1,100 lbs CO2/MWh Coal: 1,100 lbs CO2/MWh
Todays state of the art coal plants emit 1,800 lbs
CO2/MWh.
To meet the standard, coal plants must install
carbon capture and storage (CCS) technology.
Bankrupting Rule
CCS can considerably increase the cost of a new
coal plan (EPA).
Example: tab for the Kemper CCS plant in
Mississippi is $5.5 billion and rising about 4X cost Mississippi is $5.5 billion and rising about 4X cost
of new natural gas combined cycle (NGCC).
Even without CCS requirement, new NGCC is
cheaper than new coal.
So, yes, you can build a new coal plant but it will
bankrupt you.
Fuel Switching Mandate
Rule also establishes an NSPS for NGCC: 1,000
lbs CO2/MWh.
95 percent of all existing NGCC power plants
already meet the proposed standard. already meet the proposed standard.
Since new NGCC is already cheaper to build
than new coal without CCS, utilities will comply
by fuel switching.
That is, any utility planning to build a new coal
power plant will build new NGCC instead.
EPA: Super Legislature
Where in the Clean Air Act does Congress
authorize EPA to block investment in new coal
generation?
Even today, after more than 20 years of global
warming advocacy, any bill containing the proposed warming advocacy, any bill containing the proposed
standard would be dead on arrival.
The Waxman-Markey bill, which failed in 2010
when Senate leaders pulled the plug on companion
legislation, contained a CCS/fuel-switching mandate
comparable to EPAs proposal.
EPA is legislating through the regulatory back door.
Bait-and-Fuel-Switch
BACT (best available control technology) is more stringent than NSPS.
April 2010 Gina McCarthy: Dont worry, BACT for CO2 wont require
fuel switching.
Nov. 2010 & March 2011 Air Office Guidance Documents on
greenhouse gas permitting: BACT wont require fuel-switching. greenhouse gas permitting: BACT wont require fuel-switching.
Murkowski resolution to overturn Endangerment Rule June 2010:
Fails 47-53
Inhofe Energy Tax Prevention Act to overturn EPA regulation of CO2
from stationary sources: Fails 50-50
More Senators might have voted for those measures had EPA not
given false signals about its regulatory intentions.
Waxman-Markey: Alive & Well at EPA
Carbon Pollution Rule for new sources
CCS/fuel switching mandate.
The Clean Power Plan EPAs performance The Clean Power Plan EPAs performance
standards rule for existing power plants sets
CO2 reduction targets states can meet only by
adopting three other Waxman-Markey policies:
cap-and-trade, renewable portfolio standards,
demand-reduction policies.
Clean Power Plan: Bare Bones
The rule requires all states, on average, to reduce their power-sector
CO2 emissions 30% below 2005 levels by 2030.
Each state is assigned a different standard (calibrated in lbs
CO2/MWh).
Texas, for example, has a 39% CO2 reduction target. Texas, for example, has a 39% CO2 reduction target.
Two variables in particular affect both a states 2030 standard and the
expense required to meet it:
how much of the states current generation comes from coal,
and
how much idle natural gas combined cycle (NGCC),
renewable, and nuclear generation capacity exists to meet consumer
demand as the state ramps down and phases out coal generation.
What Numbers in the Chart Show
The Clean Power Plan is a de-facto coal suppression and premature
retirement mandate.
Compare the green and yellow columns in the chart. Two things are
noteworthy.
In 2012, 15 states have CO2 emission rates above 1,800 lbs.
CO2/MWh, the emission rate of todays most advanced commercial
In 2012, 15 states have CO2 emission rates above 1,800 lbs.
CO2/MWh, the emission rate of todays most advanced commercial
coal power plants. In 2030, no states have emission rates above 1,800
lbs. CO2/MWh.
In 2012, 12 states have CO2 emission rates lower than 1,100
lbs. CO2/MWh, the standard EPA proposes for new coal power plants
equipped with financially-exorbitant CCS. In 2030, 30 states have
emission rates lower than 1,100 lbs. CO2/MWh.
Does the new source rule have any
climate benefits?
EPA acknowledges the new source rule will not reduce
emissions and will have no climate benefits! Official
explanation: Gas is so cheap nobodys building new coal
anyway.
Whats the point? Whats the point?
Under the Clean Air Act, EPA must propose a new source rule
before it may propose an existing source rule.
What EPA and its allies want most is the power to shift
existing generation from coal to natural gas and renewables,
and force coal plants into premature retirement.
If courts overturn the new source rule, does the Clean Power
Plan go down with it?
New Source Rule: Legally Dubious
NSPS are to be based on systems of emission reduction that are adequately
demonstrated.
Although a handful of heavily subsidized CCS plants are in development,
there are still no utility-scale CCS plants in commercial operation.
EPA is to take costs into account when setting NSPS. D.C. Circuit Court says EPA is to take costs into account when setting NSPS. D.C. Circuit Court says
costs may not be exorbitant. CCS can increase the cost of a new coal plant
by several hundred percent.
EPA claims CCS is adequately demonstrated based on three projects in
various stages of development.
However, the 2005 Energy Policy Act prohibits EPA from basing adequately
demonstrated determinations on CCS plants receiving subsidies under the
Act. All three projects are beneficiaries of such subsidies.
Clean Power Plan: Alleged Legal Basis
EPAs authority to require states to adopt performance
standards for existing sources comes from CAA 111(d).
EPA has exercised this authority only five times in the
history of the Clean Air Act four times in 1979, once in history of the Clean Air Act four times in 1979, once in
1996.
111(d) is an obscure provision used to control
emissions of things like sulfuric acid mist from sulfuric
acid production units.
States, per EPA approval, set emission rate standards for
particular sources.
Plan Targets Emissions Beyond the
fence line (all components of state
electricity markets)
Building Block 1: Increase efficiency of each existing coal
power plant by 6% by 2030.
Building Block 2: Operate NGCC plants at 70% capacity
utilization to shift base load power from coal to gas. Cap-and- utilization to shift base load power from coal to gas. Cap-and-
trade would help you achieve this (hint, hint).
Building Block 3: Establish or tighten renewable electricity
mandates.
Building Block 4: Reduce electricity demand by 1.5%
annually.
Only Building Block 1 is a traditional, inside the fence line,
source-specific performance standard.
Plan Will Replace Economic Dispatch
with Low-Carbon Dispatch
For decades we have relied on the concept of economic
dispatch of electric generation. Simply put, the power plants
with the lowest operating cost are called first to generate
electricity with various reliability requirements and other
factors as part of the decision, depending on the structure of factors as part of the decision, depending on the structure of
various markets. By moving to what is essentially
environmental dispatch, units will be called to generate
primarily based upon the emission profile of the unit. FERC
Commissioner Philip D. Moeller
Giving low-carbon generation priority over low-cost
generation how could that not increase electric rates?
Californication of State Electricity
Policies
More importantly, EPA seeks to direct the evolution of state
electricity markets.
The Plan will make all state electricity policies more like those of
California and the Northeast Regional Greenhouse Gas Initiative.
Federalism: Federalism:
Allows each state to be a laboratory of democracy.
Empowers Americans to vote with their feet for and against
state policy regimes they like or dislike.
Forces state policymakers to compete for the talents, assets,
and allegiances of the American people.
Provides a vital check on bad policy and the abuse of power.
EPAs plan undermines this system of policy choice and competition
Bogus Flexibility: Policy Lock-In
The Plan runs until 2030, and EPA views it as a first step.
States that adopt ambitious renewable goals or
aggressive carbon caps today wont be able to rescind
those commitments if experience reveals them to be
unwise or public opinion changes.
those commitments if experience reveals them to be
unwise or public opinion changes.
States have flexibility (many options) to meet the
targets, but the targets preclude freezing, relaxing, or
repealing cap-and-trade, low-carbon dispatch, etc. once
EPA approves those policies in State Implementation
Plans.
Casualty: Self-government.
Bogus Benefit Assessment
EPA claims the Plan will deliver $31 billion in climate benefits
in 2030 far outweighing estimated compliance costs ($7.7b-
$8.2b).
But according to EPAs own climate model (MAGICC), the
Plan will avert less than two hundredths of a degree C of Plan will avert less than two hundredths of a degree C of
global warming by 2100. Too small an amount to detect.
Warming reduction by 2030 would be even more miniscule.
Far too little to make any perceptible difference in sea-level
rise, weather patterns, polar bear populations, or any other
climate-related indicator people care about.
Big Picture
In addition to breaching the separation of
powers and subverting federalism, the Clean
Power Plan is all economic pain for no climate Power Plan is all economic pain for no climate
gain.
Thank You, EPA!