(The author is a Reuters market analyst. The views expressed are his own.)
By Gerard Wynn
LONDON, March 28 (Reuters) - Proposed U.S. limits on carbon emissions from fossil fuel power plants follow British rules in stigmatising coal and could store up new CO2 problems if a wave of gas plants follows.
Both proposals drive a wedge between gas and coal by setting emissions limits which would allow gas, but stop new coal-fired power plants unless these were fitted with expensive, unproven carbon capture and storage (CCS) technology.
They imply that natural gas is alright as far as carbon emissions are concerned, for now, but coal isn‘t.
Britain underscored that separate treatment when it guaranteed two weeks ago that the limits were fixed through 2045 for gas plants built now, to assure these were safe from further regulatory tinkering through their lifetime.
U.S. President Barack Obama’s administration proposed on Tuesday the first rules to cut carbon dioxide (CO2) emissions from new U.S. power plants, a move hotly contested by Republicans and industry in an election year.
Each ruling has its own difficulties, leaving the governments with further decisions.
Britain has to square support for gas with a slew of other policies supporting zero-carbon technologies and driving ambitious cuts in carbon emissions - burning gas still emits carbon, just less than coal.
The trouble for the United States is the complete absence of those other policies, leaving the country in danger of becoming over-dependent on gas, with no long-term federal targets for low-carbon alternatives.
Natural gas emits about half as much CO2 as coal per unit of electricity.
A typical new coal plant emits 816g per KWh, according to U.S. Environmental Protection Agency (EPA) data. The average gas plant emits 372g per KWh.
Meanwhile, the U.S. rule proposed on Tuesday would limit emissions to 1 pound (454 grammes) of carbon dioxide per kilowatt hour (KWh).
The British cap is 450g/ KWh.
Both proposals would therefore end the construction of “unabated” coal, requiring CCS technology which traps 80-90 percent of CO2 emissions from a power plant.
Britain has set targets to halve national greenhouse gas emissions (of which CO2 is the main culprit) by 2025 compared with 1990 levels, and cut them by at least 80 percent by the middle of the century.
The 2050 target is enshrined in national law. So far, the country is 26 percent below 1990 levels, leaving work to do.
Meanwhile the United States has set a non-binding national target to cut greenhouse gases by 17 percent below 2005 levels by 2020. It was about halfway to that goal (down 8 percent) as of 2009, the last year where data were available.
Britain argues that a wave of new gas plants isn’t a threat, regarding carbon emissions, given it’s less dirty than coal and more renewable power is coming on line.
In other words, the measures are deliberately intended to drive new gas power plants to replace coal.
In the United States, growing production from vast new shale gas reserves means there is no need for such an incentive: cheap gas already dominates new construction. The rules are more about providing investor certainty that unabated coal is off the menu.
The proposals still leave difficult decisions.
To meet its ambitious 2050 climate target, the London government will still have to introduce an emissions limit for new gas-fired power plants in the next decade or so, to end the supply of unabated gas.
Britain will introduce this spring new support measures for renewable, nuclear and CCS power. Those payments must be generous enough to be sure that Britain isn’t just left with gas and too high emissions.
And the government will propose shortly a system which assures a regular revenue stream for new gas plants which in the future may spend much time idle (as competing low-carbon power comes on line), but remain available to meet peak demand surges. That new policy must meet industry needs to ensure gas plants are built.
In the United States, the problem is more of diversifying energy supplies, where policy contrasts with binding European Union climate laws which include a cap and trade scheme and national targets for renewable energy.
For example, the EU’s emissions trading scheme caps emissions and forces utilities to pay a charge per tonne of CO2, giving a competitive advantage to CCS plants which bury these emissions underground, while the bloc has also mobilised a 2-3 billion euro fund to support CCS projects.
Similar U.S. federal targets for CO2 and renewables will probably require an Obama win at this November’s presidential election, and a continuing economic recovery. (Editing by Keiron Henderson)