Texas Faces Steep Cut Kentucky Avoids Under Obama Climate Plan

Tuesday, 03 Jun 2014 06:36 AM

 

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Texas Governor Rick Perry and Kentucky Senator Mitch McConnell were among the strongest critics of the Obama administration’s plan to address climate change yesterday, defending their states fossil-fuel producers.

But the cuts in power-plant emissions each state faces is radically different.

Texas alone will account for a quarter of the total U.S. reductions, with a cut of 39 percent required over the next 15 years if the EPA’s proposed rule is adopted. Kentucky and other coal-dependent states like West Virginia and North Dakota face requirements of less than half that.

“Fairness is going to be an issue with any scheme that attempts to reduce emissions,” Rob Barnett, an analyst at Bloomberg Government, said in an e-mail. “It doesn’t sit well with the citizens of Texas that they’ve got large emission reduction burden while folks in a state like North Dakota are already much closer to their target.”

The vagaries occur because the EPA is grading on a curve.

The agency is looking at each state’s ability to cut its emissions by first tuning up existing coal plants and then using more natural gas to replace coal power. Next are the options for renewable power and efficiency. Some states have more scope to use more gas or increase efficiency than others, which means their mandated cuts are greater.

Natural Gas

The top source of electricity in Texas is natural gas, and the EPA determined it has the scope to run those plants more. Kentucky, on the other hand, is almost entirely reliant on coal power, and so has less ability to expand its gas use.

In the boldest single effort by the U.S. to tackle climate change, the Environmental Protection Agency said yesterday it would create a series of state-by-state targets for 2030 that would average 17 percent reductions from current levels. Once achieved, they would mean the country had cut emissions from power plants by 30 percent from 2005 levels.

Once those standards are finalized, a year from now, the individual states will then face the task of coming up with their plans for how to make those cuts. They can do so by mixing and matching policies outlined by the agency.

The proposal set off a flurry of responses from states. Some heavy polluters, such as Louisiana and Texas, vowed to fight the rules. Others, such as Washington State, which EPA data show has the biggest percentage cut to make to meet the 2030 target, were more supportive.

Eliminate Coal

“We have an obligation to protect our state, our economy and our environment for our children and for future generations,” Washington Governor Jay Inslee said in a statement.

Though the state must cut its emissions by 72 percent to meet the EPA’s preferred target, Washington has already taken steps to comply. Inslee signed an executive order in April committing the state to “eventually eliminate” the use of coal, according to a statement. The state’s lone coal plant is slated to shut by 2025.

By reducing both the risks of climate change, and the pollution associated with coal-fired power plants, the administration said that the plan would lead to $90 billion in climate and health benefits. It would cost utilities and other companies as much as $8.8 billion.

Because overall electricity use would fall, the plan will lower customers’ electricity bills, as well, it argues.

What EPA has put forward is “a sensible, state-based plan” President Barack Obama said yesterday in a conference call with health groups.

Higher Prices

Critics aren’t convinced, and warned that the effort would stifle the economy and send electricity rates skyrocketing. It could also mean less coal demand, a key component of Kentucky’s economy.

‘By imposing these draconian new rules on the nation’s coal industry, President Obama and every other liberal lawmaker in Washington who quietly supports them is also picking regional favorites, helping their political supporters in states like California and New York while inflicting acute pain on states like Kentucky,’’ McConnell said in a statement yesterday.

The 560 plants that burn coal to make electricity account for about 75 percent of all power-plant emissions. Coal, the most carbon-intensive fossil fuel, provided 39 percent of the U.S. power in 2013, according to Energy Department data. While that’s down from about half, coal remains the single largest source of electricity generation in the U.S.

Texas’ Cuts

The nation’s top emitter of greenhouse gases, Texas must cut about 100 million metric tons of carbon dioxide from its annual emissions, more than the next three states combined, according to EPA data compiled by Bloomberg Government. Other states facing steep cuts are Louisiana, Florida, Pennsylvania and Arizona.

Texas has the nation’s second-largest economy and the second-largest population after California, so it’s large reductions aren’t a complete surprise. Even so, its prominence highlights the fact that Obama will depend on Republican-led states to achieve the goals he highlighted yesterday.

The plan “is the most direct assault yet on the energy providers that employ thousands of Americans, and fuel both our homes and our nation’s economic growth,” Perry said in a statement. “These rules will only further stifle our economy’s sluggish recovery and increase energy costs for American families.”

Percentage Reductions

The states that face the steepest percentage reductions are a hodge-podge, ranging from Washington to Arizona, South Carolina to New Jersey. Some states, such as New York and Georgia, have already taken action to reduce greenhouse gases, and so may now need to redouble efforts.

“I have a real problem with them pretending it’s not going to have an effect on electric rates,” said Chuck Eaton, the Republican chairman of the Georgia Public Service Commission. “They make the rules and I’m the one having to hand Georgians the bill.”

While the overall cut in Texas is steep, booming natural- gas production in the state and large increases in wind energy mean coal’s place in the economy is already slipping. Energy Future Holdings Corp., the largest power generator in Texas, filed for bankruptcy on April 29 after a collapse in gas prices cut into revenue at the company’s coal-fired and nuclear power plants. Owners KKR & Co., TPG Capital and Goldman Sachs Capital Partners took the former TXU Corp. private in the largest-ever leveraged buyout seven years ago.

Texas is the nation’s top wind-power producer.

Making steep reductions would mean shuttering only a few of the state’s largest, dirtiest coal plants, said Al Armendariz, the former top EPA official in Texas and now a regional official with the Sierra Club.

“Luckily, we have more renewable resources than anyone else,” Armendariz said in an interview. “We just need to do what Texans know how to do: roll up our sleeves and get to work.”


© Copyright 2014 Bloomberg News. All rights reserved.

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