Winners and Losers In President Obama’s Global Warming Rule

The centerpiece of the president’s climate agenda is sure to create political fallout.

National Journal
Jason Plautz and Clare Foran
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Jason Plautz and Clare Foran
Aug. 2, 2015, 3:14 p.m.

The first lim­its on car­bon pol­lu­tion from the na­tion’s fleet of power plants — the center­piece of Pres­id­ent Obama’s cli­mate-and-en­vir­on­ment­al agenda — has the po­ten­tial to trans­form the Amer­ic­an en­ergy land­scape, fa­vor­ing re­new­ables such as sol­ar and strik­ing an­oth­er blow against coal.

It will also keep politi­cians and law­yers busy, as Re­pub­lic­ans and in­dustry team up to stop the rules, while the ad­min­is­tra­tion and green groups work over­time to make sure that Obama’s leg­acy play doesn’t get de­railed.

Here are the win­ners and losers of Obama’s clean-en­ergy plan:

WIN­NERS

Pres­id­ent Obama

Fi­nal­iz­ing the rule stands as a sig­na­ture achieve­ment for the pres­id­ent’s en­vir­on­ment­al agenda. It stands as the back­bone of the ad­min­is­tra­tion’s pledge to rein in cli­mate pol­lu­tion in the U.S. by 26 to 28 per­cent be­low 2005 levels by 2025, a pledge that the White House will tout at United Na­tions cli­mate talks in Par­is this year as it works to com­pel oth­er na­tions to strike a strong glob­al deal to stave off the worst im­pacts of glob­al warm­ing.

“We are con­fid­ent oth­er na­tions will fol­low and the world will reach a cli­mate agree­ment in Par­is later this year,” EPA Ad­min­is­trat­or Gina Mc­Carthy told re­port­ers on Sunday.

Re­new­able en­ergy

En­ergy that pro­duces zero-car­bon emis­sions such as sol­ar power and wind en­ergy is ex­pec­ted to get a ma­jor boost from the rule. One of the most ob­vi­ous and easi­est ways to cut emis­sions will be for states to bring more re­new­able power onto the grid and in­cent­ives ad­ded to the fi­nal rule should ramp up the use of zero-car­bon en­ergy faster than an­ti­cip­ated. By 2030, the share of clean en­ergy in the U.S. is slated to stand at 28 per­cent as a res­ult, an in­crease over the draft rule.

There will also be an ex­ten­ded timeline for states to com­ply with the reg­u­la­tion, which pushes the dead­line back two years to 2022. That’s likely to be­ne­fit clean en­ergy by giv­ing states more time to add it to the grid while the re­new­able in­dustry has more time to drive down the cost of zero-car­bon en­ergy sources. States will also be giv­en cred­it un­der a new Clean En­ergy In­cent­ive Pro­gram for bring­ing re­new­ables on­line be­fore the 2022 dead­line.

Nuc­le­ar power

Nuc­le­ar power has al­ways been a tricky is­sue in the cli­mate de­bate, giv­en that nuc­le­ar plants do not emit car­bon di­ox­ide but face fierce op­pos­i­tion from many green groups who fear that they cre­ate many oth­er en­vir­on­ment­al prob­lems — in­clud­ing the nev­er-end­ing ques­tion of what to do with nuc­le­ar waste.

Ad­voc­ates of nuc­le­ar power were frus­trated with the pro­posed rule, which they said did not put the en­ergy source on the same play­ing field as oth­er zero-emis­sion sources such as wind and sol­ar en­ergy. States un­der the pro­pos­al could take just 6 per­cent of their ex­ist­ing nuc­le­ar power and cred­it it to­wards emis­sion re­duc­tion goals (based on a cal­cu­la­tion that roughly 6 per­cent of the coun­try’s nuc­le­ar ca­pa­city is at risk of shut­ting down). And nuc­le­ar plants un­der con­struc­tion would not have been coun­ted as part of com­pli­ance, in­stead count­ing to­wards a state’s ex­ist­ing power mix.

The ad­min­is­tra­tion ap­pears to have re­gistered the com­plaints since the fi­nal rule will of­fer up in­cent­ives for nuc­le­ar power that did not ex­ist in the draft pro­pos­al. Un­der the fi­nal rule, plants un­der con­struc­tion — such as those in Geor­gia and Ten­ness­ee — would now go to­ward com­pli­ance, count­ing as new zero-car­bon gen­er­a­tion, and plants get­ting ef­fi­ciency up­graded would also gen­er­ate com­pli­ance cred­its.

Cap-and-trade

North­east­ern states already have the nine-state Re­gion­al Green­house Gas Ini­ti­at­ive, which is ex­pec­ted to be used as part of their com­pli­ance scheme, but states in the West and Mid­w­est also kicked around the idea of link­ing up and al­low­ing power gen­er­at­ors to trade emis­sions, or at least cre­at­ing con­cur­rent stand­ards that would al­low them to do so. It was seen as a pos­sib­il­ity un­der the pro­pos­al, but the fi­nal rule makes it ex­pli­cit that states can em­brace cap-and trade-and an in­ter­state trad­ing sys­tem. States who be­gin cut­ting pol­lu­tion ahead of the 2022 dead­line will get pol­lu­tion cred­its that Mc­Carthy said could be used as part of a trad­ing sys­tem. Cap-and-trade is also a part of a fed­er­al mod­el plan that states could ad­opt im­me­di­ately, sig­nalling how ser­i­ously the ad­min­is­tra­tion is treat­ing the po­ten­tial of in­ter­state trad­ing.

One eco­nom­ic op­tion not giv­en much weight in the fi­nal rule, however, is a car­bon tax. Mc­Carthy said that the EPA pre­ferred to keep the suite of op­tions to the “stand­ard ways “¦ the util­ity world does busi­ness.”

Law­yers

The reg­u­la­tion is ex­pec­ted to face an on­slaught of lit­ig­a­tion and has already been sub­ject to an un­pre­ced­en­ted leg­al chal­lenge be­fore it was even fi­nal­ized, a law­suit that was thrown out by a pan­el of judges in June. Law­yers for the oil-and-gas in­dustry and the en­vir­on­ment­al move­ment have been gear­ing up to at­tack and de­fend the reg­u­la­tion, and a leg­al battle over the rule is likely to drag on for years. But Mc­Carthy was quick to say that the rule is leg­ally sound, cau­tion­ing that Amer­ic­ans will hear “the same tired plays from the spe­cial-in­terest play­book,” and adding simply that “they are wrong.”

LOSERS

Purple state sen­at­ors fa­cing tough 2016 elec­tions

Vul­ner­able sen­at­ors on both sides of the aisle star­ing down tough elec­tions will face pres­sure to take a stand on the reg­u­la­tion. New Hamp­shire’s Kelly Ayotte has ex­pressed con­cern about cli­mate change, and en­vir­on­ment­al­ists will be quick to pres­sure her for a po­s­i­tion on the rule. Ayotte did not join 41 Sen­ate Re­pub­lic­ans in send­ing a let­ter to the pres­id­ent ask­ing for the ad­min­is­tra­tion to take the rule off the table. If Ayotte de­cides to sup­port the rule, she could win en­vir­on­ment­al sup­port dur­ing her 2016 reelec­tion race but would ex­pose her­self from at­tack on the Right. Illinois’s Mark Kirk, mean­while, has faced con­stant cri­ti­cism from the Left over his lack of sup­port for the reg­u­la­tion in what is ex­pec­ted to be a tight 2016 race.

Demo­crats won’t be im­mune either. Mi­chael Ben­net faces a tough race in Col­or­ado and will likely face ques­tions from his state’s fossil-fuel in­dustry over the ex­pec­ted im­pact.

Nat­ur­al gas

Nat­ur­al gas was ex­pec­ted to win a ma­jor boost un­der the draft rule, but that treat­ment ap­pears to have changed in the fi­nal ver­sion. States can still cut cli­mate pol­lu­tion by switch­ing from coal gen­er­a­tion to nat­ur­al gas, a move that en­vir­on­ment­al­ists are wary of, giv­en that Amer­ica’s frack­ing boom has driv­en down the cost of nat­ur­al gas. But while the pro­posed rule pre­dicted a quick ramp up in the use of nat­ur­al gas, the fi­nal rule pro­jects that nat­ur­al-gas power gen­er­a­tion will be vir­tu­ally identic­al to a busi­ness-as-usu­al scen­ario. That’s in large part be­cause of ad­di­tion­al in­cent­ives for zero-emis­sion sources such as wind, sol­ar, and nuc­le­ar.

Mc­Carthy noted that the fi­nal rule may res­ult in “less im­me­di­ate in­vest­ment in new nat­ur­al gas, but it cer­tainly hasn’t done any­thing to elim­in­ate or re­duce the im­port­ance of nat­ur­al gas in the en­ergy sys­tem.”

The coal in­dustry

Coal has struggled to com­pete with nat­ur­al gas for years. But the re­lease of Obama’s cli­mate rule is ex­pec­ted to ac­cel­er­ate that de­cline, and is likely to trig­ger even more coal-plant shut­downs — as well as com­plaints from con­gres­sion­al and 2016 Re­pub­lic­ans about an Obama “war on coal.”

In­deed, the rule could deal a ma­jor blow to the in­dustry. An ana­lys­is from the En­ergy In­form­a­tion Ad­min­is­tra­tion, the fed­er­al gov­ern­ment’s stat shop, pre­dicted that coal-power pro­duc­tion would de­crease by 32 per­cent by 2030 as a res­ult of the draft rule. One sav­ing grace for coal could be over­seas. In 2012, U.S. coal ex­ports hit a new high with 126 mil­lion short tons sent abroad, ac­cord­ing to EIA data. Ac­cord­ing to White House of­fi­cials, un­der the fi­nal rule, coal is pro­jec­ted to be 27 per­cent of the en­ergy mix in 2030, down from the ini­tial pro­jec­tion of 30 per­cent.

Car­bon cap­ture and stor­age

A tech­no­logy once touted by the ad­min­is­tra­tion as the key to the coal in­dustry’s sur­viv­al will still be part of the pres­id­ent’s plan to curb emis­sions from fu­ture power plants, but won’t be re­lied upon as heav­ily as an­ti­cip­ated. Reg­u­la­tions for new coal plants will man­date the use of car­bon cap­ture and stor­age tech­no­logy, con­trary to re­ports that the re­quire­ment would be elim­in­ated. But plant op­er­at­ors will be able to run the tech­no­logy at a lower rate of car­bon cap­ture than pro­posed in a draft reg­u­la­tion. Car­bon cap­ture and stor­age has already suffered a wide ar­ray of set­backs as ef­forts to show­case the tech­no­logy in the U.S. have hit massive cost over­runs. And it re­mains to be seen how widely the tech­no­logy will ul­ti­mately be de­ployed.

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