White House

The Phony War on Obama's Plan to Curtail Coal-Fired Power


Peabody Energy's Gateway near Coulterville, Illinois

Photograph by Seth Perlman/AP Photo

Peabody Energy's Gateway near Coulterville, Illinois

Business interests are up in arms over President Barack Obama’s plan to reduce greenhouse-gas emissions. The Environmental Protection Agency proposal released on Monday calls for reductions in carbon dioxide pollutants of 30 percent by 2030, based on 2005 levels. The goal: Slow climate change while reducing death and illness related to terrestrial air contamination.

It’s a “war on coal!” declared Republican Mitch McConnell, the U.S. Senate minority leader from Kentucky, echoing a theme sounded loudly by the U.S. Chamber of Commerce and other well-funded business interests. The EPA “is introducing sweeping coal plant regulations that will drive up the cost of power,” Peabody Energy (BTU), the largest U.S. coal producer, says on its website. The National Mining Association claims the proposal threatens energy grid reliability. “These regulations, if finalized, would be a loss for American consumers, manufacturers and businesses nationwide, but especially for those in states that rely on low cost electricity from coal,” the trade group said.

Don’t believe it. The coming corporate/conservative counter-offensive against the gradual Obama plan will rely on similar unsubstantiated hype.

Today, let’s not ask the Democratic policy analysts and die-hard tree-huggers for the arguments on the other side. Instead, let’s go to industry analysts helpfully assembled by Bloomberg News’ Mario Parker in a June 3 dispatch that deserves close attention in Washington and around the nation.

Under the Obama plan, coal still will be used to generate 30 percent of U.S. electricity by 2030, down from 39 percent in 2013, according to the EPA. “While it stifles increases in demand,” Parker notes, the Obama plan “isn’t fatal” to the coal industry or to that portion of the utility business that burns coal. In fact, he adds:

Utilities are seen by analysts as boosting consumption of the fuel at their most efficient plants to ensure power-grid reliability. “If anything, it’s a little bit better than expected,” Jeremy Sussman, an analyst at Clarkson Capital Markets in New York, said yesterday by phone. “There’s no change to coal burn for at least the next six or seven years and that’s not talking about legislation or any litigation that will come from this.”

Even before the Obama plan was announced, utilities were planning to shut enough coal-fired generation in the next six years to supply a city five times the size of New York in order to comply with existing environmental laws. So the hysteria this week about the administration’s climate change reforms is mostly a cynical tactic in the larger “war” over the authority of government to act in the interests of society at large. (Yes, Koch brothers, we’re looking at you.)

More useful facts from Bloomberg News:

The U.S. had 1,308 coal power plants at the end of 2012. To ensure a reliable supply, utilities will have to increase the output of the coal-fed units that survive the shakeout, analysts say. Under the new rules, the U.S. will still burn between 616 million and 636 million tons of coal for power in 2020, compared with 844 million if the curbs don’t go through, according to an analysis accompanying the EPA proposal. That’s a reduction of 25 to 27 percent.

Coal’s share of the country’s power generation will fall to about 33 percent in 2020 and 30 to 31 percent in 2030 under the proposed curbs, compared with an increase to 41 percent under existing rules, the EPA’s figures show. Most coal boilers—from 176 to 179 gigawatts of existing capacity—will improve efficiency to make more power with less fuel, the EPA said. Coal plants had the capacity to generate 336.3 gigawatts in 2012, according to the report.

Rather than raise energy prices, moreover, declining demand will drive down coal prices, the EPA said. The power sector will pay $2.18 to $2.19 per million British thermal units in 2020, about 16 percent less than if the rules don’t take effect, the EPA’s model predicts. In 2030, prices will recover to $2.44, still less than the $2.98 without the proposed rules, according to the report.

Bottom line: Remain calm in the face of distortion and noise. The Obama plan amounts to a modest demonstration that the U.S. is (finally) willing to lead on global warming. The EPA proposal will, of course, have a significant long-term impact only if it inspires other countries to follow suit. It is a start.

Barrett_190
Barrett is an assistant managing editor and senior writer at Bloomberg Businessweek. His new book, Law of the Jungle, tells the story of the Chevron oil pollution case in Ecuador.

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  • BTU
    (Peabody Energy Corp)
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