(The author is a Reuters market analyst. The views expressed
are his own.)
By Gerard Wynn
LONDON Feb 8 The U.S. government can only
overcome industry resistance to planned carbon emissions limits
on coal-fired power plants by offering a wide range of options
to comply, from buying credits to making renewable energy or
Even then, it faces an environmental battle to rival the
fight over the Keystone pipeline serving Canadian oil sands
Green groups see regulation of existing power plants as the
best route to major emissions cuts in President Barack Obama's
second term, given that it would by-pass Congressional approval
by using the Environmental Protection Agency (EPA) instead.
Economy-wide climate legislation including national carbon
caps wilted under Republican opposition previously and
bipartisan prospects look no better now.
The EPA has already proposed rules limiting new coal plants,
after the U.S. Supreme Court 2007 allowed regulation of carbon
dioxide as a pollutant under the Clean Air Act (CAA), but they
will have little impact since no-one is building coal plants in
an era of cheap gas.
Far more significant will be a constraint on the existing
coal fleet which accounts for 37 percent of U.S. power
The EPA committed to finalise emissions standards for
existing power plants by May last year, as authorised by Section
111 of the CAA, but has failed to meet that schedule.
One immediate problem is that the only available technology
option for eliminating carbon from fossil fuel power plants -
carbon capture and storage (CCS)- is expensive and unproven at
Any new standard would therefore have to be phased in
gradually and applied sector-wide, and be flexible, for example
using crediting schemes which allowed polluters to meet
emissions limits by investing in various low-carbon alternatives
or else buy reduction credits.
It would still face a backlash in federal courts with coal
groups arguing for a Congressional mandate.
Britain, the United States and Canada have already shown
varying flexibility in proposed emissions limits on new
coal-fired power plants.
They have proposed thresholds of 0.42 to 0.45 tonnes of
carbon dioxide (CO2) per megawatt hour (MWh), which would force
new coal-fired power to fit CCS, but exempt less polluting
Unabated coal plants emit on average 0.9 tonnes of CO2/MWh,
meaning the new thresholds would require generators to apply CCS
(which is expected to capture 90 percent of emissions) to about
half their power output.
Canada and Britain would calculate the limits annually.
The EPA standard is averaged over 30 years.
"New coal-fired units could meet the standard either by
employing CCS of approximately 50 percent of the CO2 in the
exhaust gas at startup, or through later application of more
effective CCS to meet the standard on average over a 30-year
period," says the EPA.
Plants could delay fitting CCS for up to 10 years, although
they would still have to meet the latest efficiency standards in
The Canadian scheme allows operators to defer compliance
until 2025 provided they can show they are taking steps to meet
them by then.
The British scheme softens the rules for CCS demonstration
plants to account for uncertain costs.
Proposals for existing U.S. power plants will have to be far
more flexible, however, to head off an industry backlash.
The CAA allows for such a flexible approach, concluded a
2011 paper written by legal experts, "Prevailing Academic View
on Compliance Flexibility under Section 111 of the Clean Air
"Section 111(d) gives states extra authority to consider
'other factors' when regulating existing sources," found the
authors, from the Columbia Law School, New York University
School of Law and the think-tank Resources for the Future.
Such "other factors" could open the door for average grid
carbon intensity targets which allowed operators to meet coal
plant limits by deploying renewable energy or efficiency
improvements equivalent to the required carbon cuts.
Another policy option might be a scheme of tradable CCS
certificates issued per tonne of coal carbon emissions, from a
quota of allowances which met the state cap. Power plants
deploying CCS could sell certificates to those without.
Such certificates could be exchangeable with carbon
emissions allowances in regional cap and trade schemes, in a
possible boost to schemes where California this year joined
Environmental groups have not been slow to offer the EPA
suggestions for regulation.
In December, the Natural Resources Defense Council (NRDC)
proposed a state-specific scheme which capped fossil fuel
emissions based on a coal benchmark which would force emissions
cuts, ratcheted over time.
Operators could retrofit CCS, but more likely invest in
low-carbon alternatives including renewables and efficiency, or
co-fire coal with biomass, or tweak dispatch decisions to burn
more natural gas.
Alternatively they could acquire tradable emissions
reduction credits per tonne of avoided carbon dioxide.
The World Resources Institute think-tank this week chipped
in with similar proposals, where a "middle of the road scenario"
envisaged near 20 percent emissions cuts from coal by 2021,
compared with the NRDC scheme which implied a 27 percent cut in
Whatever choice the EPA makes, there will still be a
backlash from some in the industry and conservatives who already
oppose the proposed limits on new coal plants.
The eventual outcome could impact investment choices between
coal, natural gas and renewables not only in the United States
but further afield, as the European Union casts around for ways
to meet its own long-term emissions targets, possibly through
emissions performance standards.
(Reporting by Gerard Wynn; Editing by Anthony Barker)