Market News

 September 20, 2013
Obama's coming climate crackdown

 The Obama administration is about to take a major step forward on climate change --- a crucial piece of a long-term strategy to join other countries in tackling the Earth's environmental woes, but one sure to fuel a furious GOP counterattack in 2014.

The proposed rule, expected Friday from the Environmental Protection Agency, won't cut any carbon immediately and won't come anywhere near the sweeping mandate of the cap-and-trade plan that died in the Senate three years ago. But it will force the first-ever limits on greenhouse gas pollution from yet-to-be-built power plants, requiring costly carbon-cutting technology for those that burn coal.

The White House-vetted proposal is also the legal precursor to a far more ambitious draft regulation due next year that would seek cuts to climate-changing emissions at existing power plants.

The president's supporters hope both actions, and more to come, will boost U.S. credibility in talks for the next big climate treaty.

That's if everything goes right for the administration: If the EPA rules aren't weakened or killed in court. If Congress or a future Republican president doesn't roll them back. And if it's not too late to head off the worst effects of the rising seas and worsening droughts that climate scientists warn are already starting to ravage large swaths of the planet.

It's a long game that is likely to bridge multiple presidencies. Experts have said the rules may not start reducing power plants' emissions until 2018.

"We're not going to solve this problem in three years," said Elliot Diringer, a former environmental aide in the Clinton White House who's now executive vice president at the Center for Climate and Energy Solutions. "This is a problem that is decades in the making and will continue for years to come."

Of course, the rules' fine print will determine how much pollution they actually cut --- and the range of possible outcomes is vast. In a report in February, the World Resources Institute said EPA regulations and other federal efforts aimed at power plants could cut the sector's greenhouse gas emissions anywhere from 7 to 77 percent below "business as usual" in 2035, depending on how aggressive they are.

Here's how the EPA's new rule could fit into a long-term climate strategy:

This week's rule

The proposal EPA is rolling out will impose the first-ever federal restrictions on carbon dioxide pollution from future power plants. It will put the biggest burden on new coal-burning plants, which for the first time would have to implement expensive controls to capture and store their carbon emissions, according to sources familiar with White House negotiations over the rule.

But because the rules won't apply to the nation's thousands of existing power plants, their immediate impact will be limited. Low natural gas prices and the promise of more environmental regulations have shifted most utilities' eyes from coal, and few new coal plants are in the works right now. Those that are have been in progress for years.

EPA may give a pass to two planned coal-fired power plants that won't capture their carbon but have already received air permits, one source who saw the draft EPA that was sent to the White House, said last week.

Even those limited effects would put an already struggling coal industry in a deep chill, EPA critics say. And everyone expects the rules to face industry-backed legal challenges.

Supporters say the rule could also encourage industry to deploy carbon-capture technologies on a commercial scale --- something companies have little incentive to do without regulations. Wider use could cause the costs to drop, allowing the technology to spread even further.

This week's rule builds on past efforts by EPA and other agencies during Obama's first term to cut carbon pollution from other sources, including a dramatic tightening of vehicle fuel economy standards.

Next target: Existing plants

The rule also sets the legal groundwork for EPA's next step: Releasing a draft regulation in June that would reduce carbon pollution from existing power plants, which produce about 40 percent of the nation's greenhouse gases --- making them the biggest source of U.S. carbon emissions.

As with the future-plant rule, EPA would be wielding the legal authority it already has under the Clean Air Act. But this time, the agency will be employing a previously unused portion of the law. That means much of the legal dispute will be foraged from new territory.

EPA plans to provide the goal and guidelines, but states will be able to fill in the fine print, writing agency-approved plans for cutting carbon.

Exactly what EPA can require is unclear so far, but greens are pushing for wide-ranging requirements that would necessitate carbon cuts garnered outside individual plants' walls. They would like to see states creating carbon-credit trading systems, shifting power production to less polluting sources such as natural gas or wind, or finding ways to reduce electricity demand from households and businesses.

Experts say the existing-plant rule will represent the single biggest climate action the president can take using his own authority. But it, too, will have to withstand attacks in court.

Beyond power plants, other sectors of the economy could be next. Eventually, the administration is expected to propose climate regulations for oil refineries. On separate tracks, the administration is pursuing efforts to reduce methane leaks from natural gas development, make appliances and federal agencies more energy-efficient, and curb emissions of hydrofluorocarbons, a short-lived but potent greenhouse gas used in refrigerators and air conditioners.

Obama's efforts might let the U.S. meet the target he committed to during international climate talks in his first term: reducing the nation's greenhouse gas emissions 17 percent below 2005 levels by the end of this decade. But the planet needs much deeper cuts, experts warn. Obama has set a long-term goal of achieving an 83 percent cut by 2050, something EPA can't accomplish on its own.

"The 2020 target is a way station," said Kevin Kennedy, director of the U.S. Climate Initiative at WRI's Climate and Energy Program. "It's an important point in the process, but that's not the end-game."

Eventually, though, EPA and other agencies will exhaust the limits of their legal authority. To go beyond that would require action from Congress.

Back to Congress

Republicans on the Hill are dead-set against passing any kind of climate bill, arguing that activists have exaggerated the problem and warning that emissions limits would wipe out jobs. Cap and trade couldn't even get through a Democratic Senate in 2010.

Still, experts say Congress could have a big impact if it chose to, for example by placing an economy-wide price on carbon pollution that would give all industries an incentive to cut back. One way of doing that is cap and trade, a system that some states like California are imposing on their own. Another is a carbon tax, which some conservatives favor as a more market-friendly alternative to regulations.

But don't expect anything like that from the current Congress, which has no appetite for cap-and-trade and is proving to be a tough arena for even the most modest, bipartisan energy legislation. Just this week, the Senate was unable to make progress on an energy efficiency bill that Democrats, Republicans, environmental groups and many industry groups support.

Still, activists remain hopeful that Republicans' opposition to action on climate change will soften in the coming years. Some are even searching for a high-profile GOP politician who can lead the way, as well as focusing on helping climate-minded candidates win in 2014 and 2016.

"We know it's a long journey and it's important to get started in the right direction with some momentum. And we're actually very focused on the next several years," said Pete Altman, climate and clean air campaign director at the Natural Resources Defense Council. "There is a long-game, but it's going to be one that requires subsequent administrations as well."

Going global

Carbon cuts at home could give the United States renewed credibility as it works with other countries to craft a major international climate agreement by 2015. U.S. clout suffered after it failed to ratify the last big treaty, the Kyoto Protocol, which the Senate rejected by a 95-0 vote in 1997.

Still, experts following the talks say other countries aren't going to praise the U.S. as a trailblazer any time soon.

"I don't think the U.S. is really in a position to hold itself up as a global leader," Diringer said. "The perception is more that the president is trying to do all within his power to catch up and fulfill the promises he made [in 2009], which as you recall at the time were considered to be weak."

Meanwhile, scientists and environmentalists warn the clock is ticking. A recently leaked draft report from the United Nations' climate science panel warned of potentially disastrous sea-level rise of as much as 3 feet in the coming century if polluting countries don't significantly cut their carbon. Global temperature data show that all 10 of the warmest years on record have occurred since 1998.

Even if Obama's efforts survive the political and legal gantlet, some effects of climate change are here to stay.

In truth, climate activists say, Washington should have started tackling this issue a long time ago. But they say EPA is taking a crucial step by acting on it now.

"It's like asking Thelma and Louise if it's too late to hit the brakes as the car starts to go over the cliff," the NRDC's Altman said. "We've really put it off for too long. But that said, the sooner we begin to tackle the problem, the less dire the consequences will be."