Be careful of trade-offs with cap-and-trade

By 2030, the U.S. power sector must cut carbon dioxide emissions 30 percent from 2005 levels, according to federal regulations announced on June 2.

The proposed rule, served up by the Environmental Protection Administration with a generous helping of gravity, is the cornerstone of President Obama’s pledge to combat climate change. The trick will be implementing it without further burdening an already battered middle class with fewer jobs and even slower economic growth.

This is arguably the most significant American environmental rule ever proposed and could transform the power sector. It is largely targeted at cutting pollution from coal-fired plants, which are the nation’s largest source of greenhouse gas emissions.

Coal has had a good run in the United States because it is abundant and therefore cheap. America has far larger reserves than any other country and has been called the “Saudi Arabia of coal.”

The new rule has come under attack from business groups and by Republicans and Democratic lawmakers from coal states. For example, the U.S. Chamber of Commerce claims it would cost the economy $50 billon a year and result in the loss of hundreds of thousands of jobs.

Despite concerns about the environmental consequences of natural gas, the president supports development of this resource as a means to combat global warming. In his 2012 State of the Union address he said, “We have a supply of natural gas that can last America nearly 100 years. And my administration will take every possible action to safely develop this energy.”

The fossil fuel natural gas is most frequently compared to is coal. The comparison much favors natural gas. It is the cleanest burning of all fossil fuels and produces the smallest amount of carbon dioxide per unit of energy. Burning natural gas for electricity produces roughly half the carbon dioxide that burning coal does.

Natural gas has been the fastest-growing energy source for electric power generation since the 1980s. Natural gas from shale has grown more than five-fold in the past five years. The domestic boom in shale drilling has led to a glut of cleaner natural gas, lower prices, ease of use and low levels of pollution. By 2012, the amount of natural gas used in electrical generation had grown to 28 percent from 11 percent in 1990.

Low natural gas prices also give a significant boost to the competitiveness of United States manufacturing by driving down electricity generation costs. The abundant supply of natural gas has kept prices so low that it is attracting manufacturing industries from overseas and positioning the United States to become a major player in the emerging globalized natural gas market. It may someday make  the United States an important source for countries now dependent on supplies from Putin’s Russia.

As the United States attempts to achieve ambitious greenhouse gas reductions, Americans would be wise to heed the advice all heard countless times from their parents: “Be careful!” Americans ought to recognize the possibility of economic trade-offs and what they may be.

In the midst of a still-fragile economic recovery, America cannot afford to make life further hell for the diminishing middle class.

originally published: June 14, 2014

America mugged by good intentions

The Obama administration has unveiled a sweeping 645-page pollution control rule limiting carbon dioxide emissions from the hundreds of fossil-fuel power plants. It’s a noble gesture, but one that ignores the fact that climate change is a global problem that requires a global solution.

The rule requires a 30 percent cut in carbon dioxide emissions by 2030 relative to 2005 levels. Hardest hit are the roughly 600 coal-fired power plants that account for 40 percent of U.S. electricity and about 38 percent of carbon pollution, the single largest source of greenhouse gas emissions. They contribute to the U.S. being the world’s second largest source of such emissions.

In 2007, the Supreme Court ruled that carbon dioxide and other global warming pollutants could be regulated under the Clean Air Act. The Court gave the EPA the green light to regulate heat-trapping gases in automobile emissions and regulate greenhouse gases such as carbon dioxide that contribute to global warming.

The proposed rule is the strongest action the president has taken on climate change. It fulfills the pledge he made in his first year in office that, compared to 2005 levels, the U.S. would reduce its greenhouse gas emissions such as carbon dioxide roughly 17 percent by 2020 and 85 percent by 2050. During his first term, the president increased vehicle fuel efficiency standards.

The various stakeholders have a year to comment on the proposed rule. Each state will then have a year to design and submit implementation plans. States can employ a variety of measures to meet the target, including plant upgrades, requiring plants to switch from coal to natural gas, enacting measures to reduce demand for electricity, producing more energy from greenhouse gas-free renewable sources such as solar and wind, or by starting “cap and trade” programs in which states agree to cap carbon pollution and firms buy and sell permits to pollute.

If states do not develop plans, the EPA will impose one.

The transition to a low-carbon economy won’t be free. It will likely drive up the price of electricity and of goods down the energy chain. Environmentalists and others argue that some of the expense will be offset by decreased health care costs and that new clean energy technologies will create jobs.

But the problem is not American warming, it’s global warming. The U.S. is only one player in the climate game.

China, India and other developing countries are poised to see an explosion in carbon pollution as millions of people join the middle class and enjoy cheap, available coal-fired electricity. Coal is used to generate nearly 40 percent of all the electricity produced in the world.

China has already passed America as the leading emitter of greenhouse gases due to its increased reliance on coal-fired power plants and growing use of automobiles. As recently as 2007, China was bringing one or two new coal-fired plants on line each week. With a growing economy and rampant urbanization, it is the world’s biggest energy consumer; its use of coal, oil and other fossil fuels doubled between 2000 and 2010.

Coal accounts for 70 percent of China’s total energy consumption and 80 percent of its electricity. Its share of global coal usage rose from 27 percent in 2000 to 47 percent in 2010, twice the volume consumed in the U.S.

Emissions have leveled off in the industrial world but continue to grow rapidly in developing countries. The question is whether developing countries have an interest in accepting economic constraints that would change that dynamic. What evidence is there that the environment edges out economic growth as developing countries’ top priority?

The logic behind the proposed mandate seems to be that by leading by example, the U.S. will spur others to reduce greenhouse gas emissions. The U.S. being one strong voice among a chorus of reasonable nations might be a splendid idea if nations were reasonable, but how many times must the U.S. get mugged by countries pursuing their own self-interest?

Sadly, as Walter Cronkite himself might have said, “that’s the way it is.” Case closed.

originally published: June 7, 2014