Despite being soundly rejected a few years ago, cap-and-trade will get its U.S. encore but not in Congress. The Obama administration will likely use its executive power to unilaterally impose carbon dioxide emissions trading systems.
The Environmental Protection Agency will unveil regulations for existing U.S. power plants early next month. For months, onlookers have speculating about what could be included in the EPA’s rule for existing power plants.
But over the past few days it has become clear that the Obama administration will use the EPA to push cap-and-trade systems and other anti-fossil fuel policies on U.S. states. Administration insiders have told news outlets that cap-and-trade will likely be one of the options the EPA gives states to cut their carbon dioxide emissions.
The Wall Street Journal reported the EPA’s proposal will “include a cap-and-trade component where a limit is set on emissions and companies can trade allowances or credits for emissions” to meet new federal rules. The journal added that power plant “operators could trade emissions credits or use other offsets in the power sector, such as renewable energy or energy-efficiency programs, to meet the target.”
The plan is being sold as a “flexible” one. By allowing states a menu of policy options to meet federal mandates, the standards will ostensibly meet the unique needs of each individual state. But the stark reality behind the proposal is that it will be a boon for states that have already imposed cap-and-trade systems — which are overwhelmingly Democratic states.
The Washington Post reported last week that “the measure will spur regional carbon-trading programs on the East and West coasts” according to “several individuals briefed on the matter”.
The Democratic governors of California, Oregon, Washington have all signed executive agreements to tax on carbon dioxide. California already operates a cap-and-trade system that went into effect in 2012. Washington’s Democratic governor Jay Inslee recently signed an executive order to impose cap-and-trade and phase out coal power.
“This is the right time to act, the right place to act and we are the right people to act,” Inslee said last month. “We will engage the right people, consider the right options, ask the right questions and come to the right answers — answers that work for Washington.”
Several eastern U.S. states and Canadian provinces have already started their own regional cap-and-trade system called the Regional Greenhouse Gas Initiative (RGGI). Currently nine states participate in RGGI — Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. Only one of the nine states is led by a Republican.
News reports say that the EPA will require states to reduce their carbon dioxide emissions from power plants by a whopping 25 percent in the coming decades. The new rules are set to be unveiled next week by President Obama himself, underpinning the significance of the new rules.
The EPA’s emissions limits for existing power plants will put new burdens on coal-reliant states and raise electricity prices as more coal plants are retired. The U.S. Chamber of Commerce is set to release a study on the economic costs of the EPA’s carbon dioxide regulations, which will likely be staggering.
“We anticipate it to be unprecedented in complexity and cost,” Dan Byers, senior director for policy for the U.S. Chamber of Commerce’s energy arm, told an audience last week.
Environmentalists have argued that emissions limits for existing power plants would not only prove environmentally beneficial, but would also be a boon to the economy.
“This is a magic moment for the President — a chance to write his name into the record books,” Frank O’Donnell, director of Clean Air Watch, told the Post. “But history will ultimately judge this less by an excellent speech than by the final contents and outcome of this initiative.”
The Natural Resources Defense Council, like the Chamber, is preparing to release its own study this week on the economic benefits of carbon dioxide regulations.
NRDC argues that mandating emissions limits would spur jobs in energy efficiency and green energy and lower power bills and pollution levels.
But the coal industry disagrees. They have already seen the Obama administration effectively ban the building of new coal-fired power plants unless they use costly clean coal technology.
“The impact will not only be to greatly increase electricity rates, putting U.S. manufacturing at a competitive disadvantage, but [also to] jeopardize reliability of the nation’s electric grid,” said Hal Quinn, president of the National Mining Association.
Coal currently generates about 40 percent of the country’s electricity — a share which has declined in recent years because of stricter environmental regulations and increased competition from natural gas.
Hundreds of coal plants have already been slated for early retirement across the country, according to industry data. And many more are sure to follow once the Obama administration cracks down on emissions from existing power plants.
Retiring coal plants are already set to help increase power prices by 4 percent this year, according to the Energy Information Administration. By 2020, power prices are predicted to rise another 13 percent — not including the cost impacts of the EPA’s upcoming power plant rules.
“While President Obama continues to pedal around his climate agenda in the hopes of solidifying a presidential legacy, concerns about how American businesses and consumers will actually meet these costly rules have been met with only silence,” said Laura Sheehan, spokeswoman for the American Coalition for Clean Coal Electrcity.
“Given the current path we’re on, the administration is gambling with the livelihoods of hardworking Americans and is threatening to tip our country over the edge in costly and unreliable energy policies,” Sheehan said. “And once we go over that ledge, there’s no coming back up.”
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