The Smart Money: How will the new carbon standards affect the economy?

Posted Sunday, June 1, 2014 in Analysis

The Smart Money: How will the new carbon standards affect the economy?

by Gina Hamilton

President Barack Obama and the Environmental Protection Agency announced new greenhouse gas limits on power plants on Monday, cutting carbon emissions by 30 percent by 2030.

Power plants are the largest generators of U.S. emissions, contributing some 39 percent of all carbon dioxide to the atmosphere, more than vehicles (which have just received strict new emissions standards), industrial coke and petroleum products such as asphalt and plastic production, fuel oil, propane, kerosene, or jet fuel. 

About 56 percent of the carbon comes from coal, while 41 percent comes from natural gas. The remainder comes from biomass, mostly.  Biomass, such as wood, however, releases carbon that has only recently been in the carbon cycle. In a well managed forest, the trees are being replaced and are cleansing CO2 from the air. 

Coal and natural gas, however, are fossil fuels, which have been locked away from the carbon cycle for hundreds of millions of years, so pumping that carbon back into the atmosphere and oceans creates a massive imbalance, which causes atmospheric and ocean warming.

Predictably, there was almost immediate blowback. The U.S. Chamber of Commerce released a paper before the new standards were even announced, saying that the expected rules would cost the economy $50 billion per year and eliminate a quarter of a million jobs. 

Lawmakers, mostly Republican, from coal and gas producing states issued warnings that such a move would kill coal and its 800,000 jobs.

Indeed, hopes for a “clean coal” economy have largely faded. Despite some valiant attempts, carbon capture and sequestration efforts have mostly failed for various reasons, some related to the geography of the region where the power plants exists, and others related to the difficulty in transporting and storing, long term, what is in fact a very deadly gas in large quantities.

How deadly? In 1986, a lake in Cameroon released mass quantities of carbon dioxide, which is heavier than air. Within minutes, it suffocated 1,700 people and 3,500 farm animals.

Recycling the carbon may be an option in some cases, using carbon dioxide for things like carbonated beverages, but the amount of carbon that could be used industrially for that sort of thing is a lot less than the amount being generated by power plants.

Natural gas is “cleaner” in terms of other pollutants, but still generates a great deal of carbon dioxide. And how natural gas is generated these days is causing other forms of heartburn — hydraulic fracturing, or fracking, has led to great booms for some, but virtually useless properties and water sources for others, and the evidence for earthquakes caused by fracking is stronger than ever.

However, the 30 percent goal is national, and some states, including Maine, would stand to benefit if we could just get out of our own way.

Maine  joined the Regional Greenhouse Gas Initiative, or RGGI, in 2007. The states currently involved are Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont. Pennsylvania would like to get in. Since Maine joined, the state has received $51 million for energy efficiency work, of which $31 million has been spent. Those millions are expected to net $257 million in lifetime energy savings.

Essentially, all power plants have been told that they must decrease the amount of carbon they emit. For some, it’s easier than for others. In Maine and the other RGGI states, which are investing in energy efficiency and aren’t using coal in their power plants, a certain number of carbon energy “credits” aren’t used and are therefore available to share. These are called offsets. RGGI markets these offsets on an exchange so power plants with high-carbon emissions can meet their targets. 

The offset program was supposed to be a temporary fix until the utilities got around to replacing the plants, which happens when the plants age and become too inefficient to be profitable. The problem is that coal is much cheaper than other energy sources, primarily because of its huge quantities available domestically. But even “scrubbed” coal gives off large quantities of mercury, much of which ends up in rivers and lakes, ultimately ending up in the ocean. A proposed coal gasification plant in Wiscasset in 2006, with mercury scrubbers, was expected to release 22 pounds of mercury annually, much of it landing in prime lobstering waters.  A more recent process using “activated” coal, similar to what is found in water purifiers and fish tanks, may reduce more of the mercury, but older plants are balking at the cost, which can add up to $4 per ton of coal burned.

Under the new rules, states will be allowed to keep older coal plants by offsetting their own energy across the state — by adding new solar and wind systems or energy efficient technology, or by joining regional cap and trade programs, like RGGI, and buying offsets to continue polluting for a time.

RGGI is going to be the national model for how regions can capitalize on energy efficiency. RGGI reduced its cap in 2013, and the market has already responded. Maine will likely come out well under the new rules, and if Maine adds more wind, especially in the Gulf of Maine, the number of offsets RGGI can sell will quadruple.

Although the U.S. Chamber and others say that the rules will cost tens of billions, the E.P.A. estimates that the rule may cost $7.3 billion to $8.8 billion annually initially, but will lead to economic benefits of $55 billion to $93 billion over the life of the rule.  In most places in the nation, electricity bills are expected to decrease by about 8 percent owing to energy efficiency when the program is fully implemented in 2030.

In addition, there are expected health benefits — less asthma and other respiratory disease — as the coal plants shut down. And EPA disputes the loss of jobs; while jobs may decrease in coal mining, millions more will be  generated as demand is created for designing and building energy-efficient technology at power plants, throughout the electric grid, and in homes and buildings. Together with the new vehicle fuel economy standards, the U.S. will be well on its way to meeting its target for greenhouse gas emission set forth at the United Nations in 2009.

Environmentally, and economically, this should be a boon for the U.S., provided we can keep the jobs in the country, and refrain from off-shoring them. What’s not to like?

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