This article was previously published in the June 28, 2012 edition of the New York Law Journal Â© 2012 ALM media Properties, LLC.
Power plants are the largest emitters of greenhouse gases (GHGs) in the nation, emitting approximately 40 percent of all U.S. anthropogenic carbon dioxide (CO2) emissions. In recognition of the power sector’s contribution to GHGs, and armed with the U.S. Supreme Court’s 2007 ruling that GHGs meet the definition of an “air pollutant” under the Clean Air Act (CAA),1 the U.S. Environmental Protection Agency (EPA) issued a proposed rule on March 27, 2012, limiting, for the first time, GHGs from new fossil fuel-fired power plants.2 The New York State Department of Environmental Conservation (DEC) has proposed a similar rule as it relates to the siting of new power plants in New York State.3 Most notable about these two proposals is the apparent adoption of policy positions by both agencies that will essentially restrict the construction of new power plants that burn coal.
Proposed Federal Regulation
Pursuant to CAA Section 111, the EPA has proposed establishing a New Source Performance Standard that would require new fossil fuel-burning power plants to emit no more than 1,000 pounds of CO2 gas for every one megawatt hour of power they generate (“1,000 lb CO2/MWh”). For new coal plants, the proposed rule also includes a 30-year averaging option, which would allow coal plants to phase in emerging and expensive carbon capture and storage (CCS) technology to reduce emissions over time, resulting in the same 1,000 lb CO2/MWh standard, but averaged over 30 years.
While most new power plants would be covered by the rule, “transitional sources,” which are those power plants that have already received preconstruction permits and are “poised to commence construction within the very near future” (i.e., within 12 months of the proposed rule), are exempt. The EPA is aware of 15 such transitional sources.
The most controversial aspect of the proposed rule is that it establishes the emissions of a modern natural gas plant as the performance benchmark for all future fossil fuel plants. The 1,000 lb CO2/MWh standard is based on the typical emissions of natural gas combined-cycle power plants, which the EPA says meets the relevant CAA standard of performance of the “best system of emission reduction” that has been “adequately demonstrated.”4 By contrast, coal burning power plants emit twice as much CO2 per unit of energy as combined-cycle natural gas plants.
In order to meet the new standard, coal plants would have to install CCS. Although there are various CCS pilot projects in the United States and around the world, CCS remains prohibitively expensive and has not been installed on a commercial basis on any power plant. Depending on whom you ask, commercial CCS is either right around the corner, or decades away due to technological, economic, and legal obstacles. In response to the proposed rule, coal industry groups say that the 30-year compliance option is “sleight of hand,” because no reasonable utility would commit to build a new plant and hope that CCS would become feasible in the future.5 Coal industry groups also assert that if CCS becomes commercially feasible, there is no reason not to apply it to natural gas plants as well to reduce emissions.6
The EPA asserts that CCS is technologically feasible, its costs will decline, the few coal plants that are constructed can take advantage of existing government subsidies and other funding sources, and several states have already set standards that will make CCS necessary.7 Regarding technological feasibility, the EPA wrote that “there are no insurmountable technological, legal, institutional, regulatory or other barriers that prevent CCS from playing a role in reducing GHG emissions.”8
On the cost of CCS, the EPA states that current research will “dramatically lower the cost of capturing CO2 from fossil-fuel energy plants compared to today’s available capture technologies.”9 While the government estimates that the CCS technology available today would add approximately 80 percent to the cost of electricity for a pulverized coal plant and 35 percent for an advanced gasification-based coal plant, Department of Energy research is working to reduce those premiums to below 30 and 10 percent, respectively.10
In light of the divergent views about the readiness of CCS technology and as a reflection of the lack of political consensus on climate change in the federal government, 216 members of Congress wrote a letter opposed to the rules to the Office of Management and Budget, stating that “[f]orcing a transition to commercially unproven technologies could send thousands of U.S. jobs overseas and raise electricity rates on families and seniors at a time when the nation can least afford it.”11 In addition, the regulatory uncertainty surrounding CO2 had occasionally become a hindrance to the development of CCS technology.
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