Winners and Losers In President Obama’s Global Warming Rule

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

US President Barack Obama speaks on his energy policies following a tour of the Copper Mountain Solar Project, the largest photovoltaic plant operating in the country, March 21, 2012 in Boulder City, Nevada. 
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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