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!