Thursday, June 12, 2014

pushing President Obama's carbon limits

President Obama joined the US Environmental Protection Agency to introduce a proposal for reducing emissions from power plants. The draft regulation is over 600 pages, so I've been waiting for a reliable synopsis. My understanding is that each state will have to have a plan to reduce power plant emissions by 30% by 2030 - as emissions currently vary so widely I have trouble believing that could be deemed a "standard', but...
What has come out is the political aspect of the standards being introduced, and some economic lessons from the structure of the suggested regulations

On December 18, 2009, Barack Obama flew to Copenhagen to address an international climate summit that was widely being described as a disaster. The aim of the summit was to produce a legally binding agreement on greenhouse-gas emissions, but, after two weeks of fruitless talks, virtually no one at the session still believed that this was possible. In his address to negotiators, Obama pledged that, for its part, the United States would cut carbon emissions “in the range of seventeen per cent by 2020, and by more than eighty per cent by 2050.”
...the Copenhagen Accord, which contained no national commitments or enforcement mechanisms, would turn out to be the only notable achievement of the summit, though, as even many of its backers observed, it wasn’t terribly notable.

...If the new regulations are fully implemented, they will reduce emissions from U.S. power plants twenty-five per cent below 2005 levels by 2020, and thirty per cent below those levels by 2030. (The rules will doubtless face years of litigation.)

...Emissions from power plants make up about forty per cent of the United States’ total emissions. Thus, cutting them by twenty-five per cent is a ten-per-cent cut in emissions over-all. This is obviously less than the seventeen-per-cent cut that Obama promised in Copenhagen, but his Administration has already put into place fuel-efficiency standards for new cars, which should make up for the difference.

...According to the U.S. Energy Information Administration, carbon emissions from the energy sector fell by fifteen per cent between 2005 and 2012. Since the Administration is using 2005 as the baseline, this means the new rules really only require a fifteen-per-cent reduction from current levels. Given that a fifteen-per-cent reduction has already been achieved with no rules at all, it’s hard to see this as a game changer.
Karl Mathiesen, of the Guardian, wrote, “The drop in emissions required by the new E.P.A. rules over the next sixteen years is less than the drop which occurred without regulation in the seven years between 2005 and 2012.”
You haven't yet read the entire article at the New Yorker- which is worthwhile.

A lot of the commentary I've read speculates about a foreign policy benefit to President Obama's actions. The implication China may take great action on carbon now that the US has done something (commit to reducing power plant emissions half as quickly as it did in the past 7 years).

In praise of second best | The Economist
...the proposal is a net gain as it stands—but the international response could make its benefits bigger. China’s government is mulling over a national cap on carbon emissions, which would mean it is going further than Mr Obama. The regime in Beijing will, and should, impose such a cap in its national self-interest. But China’s leaders like diplomatic cover. If Mr Obama’s new rules help cajole the world’s largest polluter to do more to cut emissions, then second-best would be much better than nothing.
US policy in Copenhagen, and now, seems to mimic Germany's policy approach in Kyoto - after emissions have been reduced the reduction target is set based on a base year in the distant past.
I think China's leaders will be on to that - I don't think China's policies will be inspired by US policies any more than US policies are influenced by Canada's.

Nate Silver on vox, notes the new movement on limiting carbon emissions is a small part of what was promised by both main candidates in the 2008 Presidential election.
The European Union did seem to have some hesitation on new targets, but looks to "set itself a target of reducing emissions to 40% below 1990 levels by 2030."
Maybe that will inspire China.
probably not.

The modestly positive reviews on the EPA's proposed regulations seem to recognize politics as the art of the possible.
Political clout tempers utilities' fears of power plant rule to be implemented by states is one article noting industry resistance has been very muted because "power companies are confident in their ability to influence the state governments that will be crafting plans to hit required carbon dioxide emissions reductions." The article sites the Regional Greenhouse Gas Initiative (RGGI) - which as far as I've seen allocated a massive amounts of cap space - more than a business as usual (BAU) case would have allocated - and is now cutting back on the cap, but it's unclear if the amount of unused credits means the cap is dropping to BAU levels or if the whole scheme continues to be primarily for show.

James Conca's Hurray For EPA Carbon Rules! doesn't confince he thinks the new regulations would do much beyond the BAU scenario.

The academics point out the logical weakness of the new rules. Study Finds the Hidden—and Uneven—Price of Piecemeal Energy Policies begins:
When it comes to addressing climate change, market-based policies like a carbon tax and cap-and-trade system have gained little traction in the U.S. Instead, U.S. policies have taken the form of regulations focused on specific technologies and sectors. The recently proposed EPA rule to reduce carbon emissions from the power sector—though a step forward for climate efforts—is no exception...
“The key to creating cost-effective policies is making them flexible...A national cap-and-trade system applied to all sectors would limit carbon across the economy and incentivize the cheapest reductions. The EPA rule only applies to the electricity sector, making it less cost-effective. But it is certainly better than traditional piecemeal policies because it allows for some flexibility.”
The Energy Institute at HAUS blog's Unlocking Cost Savings with Cap-and-Trade includes a free lesson on the advantages of cap-and-trade. It concludes with:
As Max explained with his “Yoga Theorem” last week, the less flexible you are, the more you will suffer. This is exactly the case with the EPA’s proposed regulations. Nobody can predict with certainty exactly how much these regulations would cost, but economic theory is extremely clear on the benefits of making these policies as multi-sector, and as price-based as possible. In practice, every time we have implemented market-based environmental policies, they have ended up costing less than expected and there is every reason to believe this would work again for carbon dioxide.
I'll introduce a little more cynicism here. The EU's emissions trading system (ETS) has also been used to eliminate nuclear in Germany, where it was rationalized emissions couldn't increase anyway because they were capped (see my comment here).
It seems to me China is a concern because they've used cheap dirty energy to get wealthier, which cap-and-trade might no allow poor nations to do.
Aside from that socio-economic aspect, there's also another concern. States Testing Obama's Carbon Limits displays it:
"Will President Obama succeed at controlling carbon dioxide emissions or will his opponents succeed in controlling his proposals? An immediate test is coming from Kansas, where regulators have given permission to build a state-of-the-art coal-fired unit."
This is optics, and it has little to do with reducing emissions. For instance, in Ontario the seldom used Atikokan coal-fired generation station has been converted, at very great expense, to be a seldom used biomass-fired generating station. Not burning a clean fuel isn't cleaner than not burning a dirty fuel.
Modern coal plants are a compliment to modern wind turbine fleets - if Kansas wants to put up more industrial wind turbines (and they have a relatively good wind resource), a modern coal-fired plant with proper pollution controls might make sense.

Regardless, I think there are valid concerns about social and political issues preventing cap-and-trade from functioning efficiently. My preference remains a Hansen style carbon tax (I wrote my concerns on carbon taxes in A tool to heal, A tool to steal).

From Unlocking Cost Savings with Cap-and-Trade:

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