June 3, 2014
National Review Online
On Monday, the EPA unveiled a 645-page document detailing regulations aimed at cutting carbon dioxide emissions from the electricity-generation sector by 30 percent by 2030 when compared with 2005 levels.
While the Obama administration may get kudos from the green left for its attacks on coal, the hard reality is that the EPA’s new rules will have negligible impact when it comes to soaring global carbon dioxide emissions and surging global demand for coal. Just as important, the new rules are merely repeating the policy mistakes of the past and, in doing so, risk making the U.S. too dependent on a single fuel source. And this new policy mistake is happening even though the U.S. leads the world in carbon dioxide reductions.
Let me start by reminding readers about one of the worst energy-policy mistakes in American history: the Powerplant and Industrial Fuel Use Act (FUA). Passed by Congress in 1978, the FUA restricted the use of natural gas for electricity generation. Given that the U.S. is now producing record quantities of natural gas, it’s hard to imagine a time when natural-gas shortages were common. But during the mid and late 1970s, shortages were a frequent occurrence. Those shortages weren’t caused by a lack of gas resources. As we now know, America sits atop decades-long supplies of the fuel. Instead, the shortages were caused by a briar patch of federal regulations that hampered the development of interstate markets for natural gas.
Nevertheless, political leaders were convinced that a crisis was at hand. (Sound familiar?) And the solution was . . . more coal-fired power plants. In April 1977, President Jimmy Carter declared that an “energy crisis” was at hand, that we were running out of oil and gas, and that “too few” domestic electric utilities “have switched to coal, our most abundant energy source.”
There’s no small bit of irony that the EPA is now trying to shut down some of the very same coal-fired power plants that were built in the 1970s and 1980s as a result of the congressional restrictions on natural-gas-fired electricity production. Although FUA was in effect for less than a decade, it significantly distorted the power sector. In 1978, natural gas was generating 13.8 percent of U.S. electricity. By 1988 — a decade after FUA was passed — natural gas’s share of the U.S. electricity business had fallen to a modern low of just 9.3 percent. By contrast, between 1978 and 1988, coal’s share of the U.S. electricity-generation market soared, going from 44.2 percent to 56.9 percent, the highest level of the modern era.
Today, the claimed crisis isn’t a shortage of energy; instead the claim is that we have too much. The climate crisis, the regnant political consensus insists, is due to excessive use of hydrocarbons. And it’s clear from the language in the EPA’s new regulations that the agency expects a significant shift away from coal and toward natural gas for electricity generation.
I’m adamantly in favor of natural gas. But the EPA’s move risks putting too many of our energy eggs in the natural-gas basket. We need a diverse energy portfolio. If policymakers want more low-carbon electricity, they should be encouraging construction of more nuclear plants. And if they want to keep the lights on, they must realize that coal should remain part of the nation’s array of available energy sources, particularly given that the U.S. has more coal resources than any other country. America’s coal deposits total 900 billion barrels of oil equivalent; that’s nearly as much as the 1 trillion barrels of proven oil reserves held by OPEC.
Now let’s consider the EPA’s new regulations in light of surging global carbon dioxide emissions and increasing coal demand. The key section of the EPA’s new 645-page document appears on page 18: “This proposal would result in significant reductions of GHG emissions that cause harmful climate change.” The key question, of course, is this: What qualifies as “significant”? Let’s do the math.
Recall that the EPA wants the electricity-generation sector to cut its emissions by 30 percent from 2005 levels. That year, according to the Energy Information Administration, those emissions totaled 2.4 billion tons. Simple math (2.4B tons x 0.3) shows that the EPA’s proposed carbon dioxide reduction would total about 720 million tons.
That sounds significant until you consider that, since 1982, global carbon dioxide emissions have been rising by an average of about 500 million tons per year. In 2011 alone, according to the BP Statistical Review of World Energy, global carbon dioxide emissions rose by 723 million tons. Thus, in one twelve-month period, just the increase in global emissions was about the same as the decrease the Obama administration plans to make over the coming 16 years.
In China alone, between 2006 and 2012, carbon emissions increased by more than 3 billion tons. Thus, in a six-year period, China’s coal-related emissions increased by four times the size of the reduction that the EPA is seeking over 16 years.
Throughout the developing world, coal remains the fuel of choice for electricity generation because it is cheap and abundant, its deposits are geographically widespread, and the market for the fuel is not affected by any OPEC-like collusion. And while it’s true that developing countries such as China and India are increasing their consumption of coal, we are also seeing increased coal use in wealthy countries.
According to a recent report by Goldman Sachs, South Korea will add 14 gigawatts of new coal-fired capacity between now and 2018. Meanwhile, in Japan, the home of the vaunted Kyoto Protocol, coal consumption is at record levels. It’s up about 12 percent in the last year alone. And the Japanese government has announced plans to build about 6 gigawatts of new coal-fired capacity over the next 15 years or so. In Germany, where renewable-energy subsidies are now costing consumers about $32 billion per year, some 7 gigawatts of new coal plants will be brought online by next year.
On March 10, the same day that Senate Democrats ended their all-night talkathon in the Senate chamber on climate change, Maria van der Hoeven, the head of the International Energy Agency, said that coal use in Europe is rising because natural “gas prices are high” and “coal is cheap.”
That’s the essential point: Coal is cheap. While we remain obsessed with so-called clean energy here in the U.S., the rest of the world is rushing to produce electricity from the cheapest fuel they can find. They are doing so because cheap, abundant, reliable electricity is the commodity that separates the wealthy countries from the poor ones.
There’s no doubt that renewable and energy-storage technologies continue to improve. Solar, in particular, has seen dramatic reductions in cost over the past few years, and it will see big gains in the years ahead. But for rich and poor countries alike, when it comes to producing electricity, the fuel of choice continues to be coal. And unless or until someone can come up with a new source of energy that can compete with coal on the key issue of cost and scale, the black fuel will continue to dominate the electricity-generation business.
And that brings me to a final point: The U.S. — not renewable-energy-crazed Germany — is already leading the world in reducing its carbon dioxide emissions. The White House itself made that point last week. The U.S. is leading the world in that regard thanks to innovation in the Oil Patch. That innovation led to a surge in domestic natural-gas production (up 34 percent since 2005), which lowered the fuel’s cost, which allowed it to steal market share away from coal in the electricity-generation sector, which, in turn, resulted in lower carbon dioxide emissions.
But rather than let the market work, the Obama administration has chosen to repeat the policy mistakes of the past. In short, the EPA’s new Clean Power Plan is just a retread of the Powerplant and Industrial Fuel Use Act of 1978: an overly complicated policy designed to address an issue that would have been better solved by the market.
Original story may be found here.
