EPA Takes on Carbon Emissions

In an apparent attempt to appease conservatives, who favor States rights over federal regulation, the Obama Administration has released an EPA proposal for new rules on carbon emissions that essentially affords every States the option to deal with emissions from power plants on their own terms.  That said, the overall goal of the new regulations will be to reduce emissions by 30% from their 2005 levels.  To sell these changes to the American People, the Obama Administration has honed in on the health and economic benefits that might be realized in the future, though climate change is clearly a main motivation.

Unfortunately, the proposal relies on future, potential technological advancements and essentially promotes a more customizable form of the cap-and-trade approach that has roots in both Democratic and Republican Administrations.  This means it suffers from most of the same critical flaws.  Economically, the lack of an international solution means any benefits derived from reductions will be lost due to increased emissions elsewhere in the world.  Thanks to Free Trade, this type of solution would also cost the US in terms of competition, i.e. lost jobs and economic development.

 It would also mean we Americans would have to rely on more expensive forms of energy production, until new technology is developed to make production cheaper, which serves a disincentive for energy producers given the Administration hopes this proposal will reduce consumption, i.e. less volume and smaller profit margins.  On the other hand, we do have a problem with pollution, because pollution does affect our health, finances, and climate, while the EPA does have the authority to regulate carbon emissions according to the Supreme Court.  Consequently, the Obama Administration has the political leverage they need to force opponents of environmental regulation to offer better solutions. 

Although the US does need to show leadership on the world stage by bringing major players together to develop and adopt novel, viable solutions, leading by example will never be an effective approach on these types of global issues.  Technological development and economic pressure are what allow for improved energy efficiency as well as the propagation of cleaner energy sources.  As such, the punitive approach of increased regulation can only raise standards, not lead the charge for change.  What the Obama Administration needs is less stick and far more carrot.

On 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.  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.)