On June 2, the Environmental Protection Agency (EPA) announced a plan to cut carbon emission from power plants 30 percent below the 2005 level by 2030. While still not set in stone, the legislation would mean an end for many of the 577 coal-fired power plants across the U.S., coal industry insiders fear.
Coal-fired power plants currently account for 75 percent of carbon dioxide emissions from the U.S. power sector. With an average age of 42 years, many of them are outdated and puff about 40 percent more CO2 into the air than new-generation plants with an integrated gasification combined cycle.
The new legislation could mean a major shift in the U.S. power landscape, especially in leading coal-producing states like Wyoming, West Virginia and Kentucky. Coal currently provides 20 percent of U.S. primary energy supply and produces on average 39 percent of U.S. electricity. For these states, the industry is one of the main employers and the main source for electricity. For instance, Wyoming produces about 90 percent of its electricity from coal, and the sector employs about 12 percent of its working force.
No wonder that some expect the costs of this change are going to be high. The U.S. Chamber of Commerce estimates that the EPA plan will cost $50 billion a year and 220,000 jobs.
On the other hand, the Natural Resources Defence Council figures that the policy could create more than 250,000 new jobs per year and will lead to lower energy bills over time. The EPA reports that the investments needed to meet the new emission targets would only costs about $8.8 billion per year and save 6,600 lives and more than $50 billion a year in health care costs.
The coal sector has already been in decline in recent years as more and more of the old coal power plants are retiring. In this way, the EPA regulation might only accelerate the decline of the coal industry. Nationwide coal-mining employment fell from 425,000 in 1950 to less than 143,000 in 2011.
What happens next?
The EPA regulation is only a proposal, and the agency will spend until the end of October to gather comments from electric utilities and anyone who will be concerned about the reform. The final regulation will take effect in June 2015. From then, the states will have one or two years to draw up plans to implement the rule.
However, the EPA technically has the authority to regulate carbon dioxide emissions under the existing Clean Air Act, and Congress has the ability to repeal or modify the EPA's authority to do so.
What is the role of the individual states?
While the plan will reduce CO2 emissions nationwide by 30 percent by 2030, the EPA will set different emission targets for each state based on their CO2 emission per unit of electricity generated. For instance, Vermont and Washington, D.C., will be exempt because they have no fossil-fuel powered electric plants.
Until 2016, each state will have the time to set its own plant to reach those emission targets, and there are a variety of options:
- Stick with more efficient coal-power plants. Older coal-fired power plants could adopt more efficient technologies. However, as new-generation technology plants cost much more money, there will be rationale to invest in renewables and natural-gas fired plants.
- More natural gas. With the current natural gas boom this is, of course, one of the main options.
- More renewables. Especially as renewable technology advances, it is estimated that solar, wind and other renewables are to become cheaper than energy sourced from fossil fuels.
- Boost efficiency.
- Cap-and-trade. Nine states in the Northeast already have programs like this.
