EPA announces carbon limits on coal power plants

September 20th, 2013, the EPA announced new regulations that limit the amount of carbon-dioxide emissions for new power plants to 1,000 pounds per megawatt of electricity for natural gas power plant and 1,100 pounds per megawatt of electricity for coal power plants.  In order to achieve reductions in emissions, proponents of these caps want power producers to turn to carbon capture technology.  Unfortunately, this technology has yet to be commercialized on such a large scale.  In fact, the most advanced, lowest carbon admitting power plants in service, or soon to be in service, produce around 1,800 pounds per megawatt of power.  Consequently, these new standards may well be a bit premature.  

The wonderful thing about carbon capture technology is that it prevents carbon from entering the atmosphere while the captured carbon can be used to produce byproducts like ethanol.  The not so wonderful thing about carbon technology is that it adds costs to electricity production, unless the value of any potential byproducts can equal or exceed those increased costs.  All emerging technologies need time to reach a point of equilibrium where the costs and manufacturing capacity of such products are able to approximate their intrinsic values versus artificial demand creating spikes in consumer costs.  In other words, a push to rapidly force these technologies into the marketplace can create unnecessary price spikes for consumers and producers of electricity while offering little return benefit for doing so.  The consequences is increased costs and an unwillingness to adopt newer technologies, which prevents further decreases in pollution while further increasing costs through a ongoing lack of efficiency.

The truth is that these efforts to reduce emissions from new power plants will have negligible benefits to the environment, because they only apply to power plants that may come into existence.  Should these regulations be extended to already existing power plants, the environmental benefit over the next few months or years would also be minimal.  As such, the most prudent action is to rollout these regulations in a smarter fashion.  If 1,800 pounds per megawatt is achievable now, all new power plants should be limited to or slightly below this amount.  Adding a carrot to this stick, power plants should receive tax credits for reducing the amount down to at or below the 1,100 pound limit.  (A progressive tax credit structure may be helpful.)  This would help foster the construction of more efficient, new power plants that can replace old power plants, which is important as the US is light-years from shedding our reliance on coal power.  As part of a second  phase, old power plants can then be required to adapt increasing limits that encourage power producers to either use carbon capture technologies on these plants or replace them.  In tandem, the EPA should also tighten all standards the development of new technologies, i.e. lower caps and drop the threshold for tax credits.

Moreover, this approach would force change without creating too much economic instability in the form of price spikes and incentivize our power industry to progress as it must.