Obama’s New ClimateChange Regulations to Alter, Challenge Industry

A new rule mandating the first-ever federal limits on power-plant carbon emissions aims to change the way Americans make and consume electricity, accelerating a shift already under way toward cleaner fuels, renewable energy and consumer-generated power.The regulations, which will be unveiled by President Barack Obama at a White House event Monday, are part of a broader push by the administration to position the U.S. as a leader in tackling climate change. The Environmental Protection Agency regulations are central to the administration’s submission to an international climate conference set for December in Paris.

White House officials say Mr. Obama views addressing climate change as part of his legacy. He announced an aggressive climate deal with China in November and has put the issue high on the agenda in meetings with world leaders in recent months. The president also will discuss climate change with Pope Francis during his visit to the U.S. next month, following the pope’s release of an encyclical on the issue in June.

“This rule enhances in important ways our ability to achieve the international commitments that we have made,” Brian Deese, a senior adviser to Mr. Obama, told reporters Sunday.

But divisions at home cast some doubt on the administration’s ability to fully implement the regulations, which were released in draft form a year ago.

Industry officials say they are worried about the plan’s cost and timetable. Republicans in Congress and states hardest hit by the plan say they will fight it. More than a dozen states and the coal industry have vowed to sue the EPA, and several states have threatened to refuse to comply with the rule.

The rule would require a 32% cut in power-plant carbon dioxide emissions by 2030 from 2005 levels, an increase from the 30% target proposed last year. EPA Administrator Gina McCarthy said Sunday the rule would result in an estimated annual cost of $8.4 billion by 2030 and have total benefits, including public-health benefits, of $34 billion to $54 billion per year by then.

The regulations require states to draft their own plans to reduce power-plant emissions to reach an overall carbon reduction target nationwide. States would have to put in place compliance plans by 2018 and meet their first targets for reductions by 2022. As with the draft rule released last year, the EPA would impose a federal plan on states that don’t comply, according to the administration.

The final rule calls for the nation to get 28% of its electricity from renewable resources by 2030, versus roughly 13% last year. Industry experts say cutting carbon emissions 32% by 2030 will require billions of dollars in investments for new transmission lines that accommodate more solar and wind power and new pipelines to feed natural-gas-fired power plants, as coal becomes less important as a fuel.

U.S. electric utilities have already taken steps to shift to less carbon-intensive fuels, and they worry about the degree to which their whole system will need to be upgraded to accommodate more renewable energy, much of it generated by customers with solar panels or other equipment.

The industry, experts said, expects to spend more than $100 billion next year on capital projects, and will adjust its spending programs to reflect the new rules even as court challenges proceed.

“Utilities already are moving in that direction by retiring coal plants and adding renewables,” said Nick Akins, chief executive of Ohio-based American Electric Power Co., one of the nation’s biggest utilities, which has been a major user of coal. Though some states may object to the EPA rule, he said, most utilities “will be reaching out to our states and be very factual and objective and see if we can comply.”

Executives worry about the EPA plan’s cost, in part because it could result in shutting power plants that aren’t yet paid off, Mr. Akins said, meaning consumers will have to pay for assets that aren’t providing benefits. Other executives said consumers may be able to trim their electricity use and keep their bills flat—or even reduce them.

Administration officials said Sunday they had taken industry concerns into account in the year since the draft was released. Most significantly, the final rule pushes back the first year that states must begin complying, to 2022 from 2020.

In another nod to industry concerns, the final rule would help encourage nuclear power generation, which doesn’t emit any carbon and accounts for about 20% of the U.S.’s electricity.

Nuclear reactors under construction in Tennessee, South Carolina and Georgia will get credit toward compliance with the rule, a change from the proposal, according to the administration. Nuclear plants that boost their output also will get more credit.

One industry concern is the final rule seeks to prevent a wholesale shift to natural gas. Over the past few years, utilities have been burning more gas, which produces 50% less carbon emissions than coal but still more than zero-emitting sources like wind and nuclear power. That shift has been helped along by the domestic boom in gas production since 2008 aided by new drilling methods such as hydraulic fracturing, or fracking.

The 2014 draft rule relied on a large and early shift from coal to natural gas. The final regulations would remove that assumption and instead create a new program to encourage states to deploy more renewable energy and energy efficiency by giving credits toward compliance on such projects that begin construction early on.

“We’re disappointed and discouraged that they [the administration] seem to be ignoring the fact that natural gas has greatly reduced emissions,” said Marty Durbin, chief executive of America’s Natural Gas Alliance, a trade group representing natural-gas-producing companies.

Analysts at Sanford C. Bernstein & Co. said the rule would increase utility consumption of natural gas by 7.1 billion cubic feet a day, or 32%, enough to lift national demand for it by about 10%. The big loser—the coal industry—will see consumption drop 23% by 2020, adding to the crisis already rocking mining. Some opponents have labeled the rule a “war on coal.”

The administration is expected to address these and other concerns over coming weeks to make the case that urgent action is needed.

“We’ll hear the same tired plays from the same special-interest playbook, but the American people know better,” Ms. McCarthy said.

To date, states including California and nine in the Northeast have been in the minority in devising programs to trim carbon dioxide emissions blamed for climate change.

The new rule “will act like an accelerant,” said Ted Craver, chief executive of California-based Edison International, parent of Southern California Edison. “Now all the states will have to grapple with the need to reduce carbon emissions.”

Electric-grid operators would need to make sure their systems can handle power flowing from decentralized sources, such as millions of rooftop solar systems and thousands of wind turbines. Meanwhile, big utility-owned power plants that have provided round-the-clock electricity may face new restrictions that reduce their hours of operation to limit emissions.

Utilities have been shutting coal plants for several years to satisfy other EPA rules. Since 2011, Duke Energy Corp. says it has retired 40 older coal units in the Carolinas and the Midwest and replaced them with super-efficient coal units or gas-fired plants at a total cost of $9 billion.

The plan drew praise from Democratic lawmakers and presidential contenders. Hillary Clinton, the front-runner for the Democratic presidential nomination, lauded Mr. Obama’s plan on Sunday, pledging to push back against GOP threats to the regulations and to do more to address climate change.

Sen. Marco Rubio, a Republican candidate for president, said Sunday that Mr. Obama’s policies would hurt the economy and drive up the cost of electricity.

“They will do nothing to address the underlying issue that they’re talking about because, as far as I can see, China and India and other developing countries are going to continue to burn anything they can get their hands on,” he said.

Fonte: The Wall Street Journal