It has been a quiet summer for climate policy here in the United States, but yesterday brought a new development: President Obama announced rules for new power plants. The proposed rule, which could enter into force in the fall of 2014 if it survives the inevitable legal challenges from the power utilities and coal mining companies, is that new large (small) natural gas plants must not emit more than 1,000 (1,100) pounds of CO2 per megawatt hour, while coal power plants must also achieve the 1,100 pound limit.
For natural gas, this is not a big deal because the fuel produces much less carbon dioxide than coal. But for coal, the new rule is tough. The only realistic way to bring CO2 emissions down to 1,100 pounds per megawatt hour is carbon capture and storage, but this technology is currently experimental at best. Accordingly, some commentators have called the rule the first move in Obama’s “war on coal.”
How important is this tough new rule? At current natural gas prices, it would be nothing worth discussing. It is remarkable that new coal power plants today are not economically competitive, even if one ignores their severe negative effects on health and the environment. Unless natural gas prices increase significantly (major decreases in coal prices are not in sight), new coal power plants are not a winning proposition in the United States.
But if natural gas prices do increase, then Obama’s rules could be important. Since natural gas is the main competitor for coal in power generation, an increase in the price of natural gas — perhaps because estimates of the cost of extracting shale gas prove too optimistic — could bring coal back in the game. But not under Obama’s new rule. Increases in the price of natural gas would favor alternatives, such as wind and solar power. This would be great news for the country and the world. So, Obama’s new rules are a form of insurance. They do not have much effect unless natural gas prices change, but they could save us from a coal renaissance in that contingency.
The other question about the rule is whether or not it really signals a war on coal. I am skeptical. Tough rules on existing power plants would have real and immediate effects on electricity prices across the country, and this “nuclear option” would give Republicans a potent political weapon. Moreover, the whole idea of regulating carbon dioxide emissions hinges on the Clean Air Act, which was never designed to address climate change. If the coal industry is willing to fight against rules for new power plants, their response to tough rules for existing plants would be so much more aggressive.
President Obama is formulating policy in an environment characterized by three basic facts. First, climate change is not any kind of a priority for the public. Second, there are powerful interests who oppose limits to carbon pollution. Finally, the President must accept constitutional limits to his authority. Against this backdrop, Obama’s new rule should be recognized as a useful step forward. At the same time, we all should remain very depressed about the fact that this step is worth celebrating.