The Clean Power Plan

August 12, 2015

Washington, D.C.

Wayne Pan

Yesterday, for the first time since President Obama announced the Clean Power Plan at a White House press conference last week, EPA Administrator Gina McCarthy stepped out into the public to discuss the new regulations and their potential impacts on the US economy, public health, and global climate change.

After a sober update on the on-going problems in the Animas River in Colorado, McCarthy launched into a spirited and enthusiastic talk about the long road the EPA has taken to arrive at the Clean Power Plan. In particular, she lauded the process, which she described as one of “unprecedented engagement” with stakeholders from across the spectrum. Many years of work went into the drafting of this plan, and it was clear from her remarks that she was confident that the regulations would both be challenged in court, and upheld in court – at one point slyly noting that the lawyers in the room could happily begin to sift through the EPAs responses to the thousands of public comments received during the review period.

The Plan puts in place carbon emission limits on power plants for the first time in US history. The EPA has determined target reduction rates for each state based on their own energy mix, and each state will have the flexibility to determine their own path to achieving those reductions. When all is said and done though, the Plan puts the country on a path to reducing carbon emissions by 32% in 2035, using 2005 as a baseline.

While these reductions fall well short of what many scientists see as necessary, is still clearly a major step forward for the US. Not only does it finally set down a line in the sand that says the country is serious about tackling climate change, it also returns legitimacy to the US’ role in international negotiations. The path forward in Paris is looking increasingly clear and the outlook is positive, although if history serves as any guide, getting an agreement that truly moves the needle on global greenhouse gases will still surely prove to be a mighty struggle.

Ironically, the staunchest environmentalists are only giving the Clean Power Plan a tentative and rather unenthusiastic thumbs-up. Naomi Klein, in an interview on resilience.org says, “there is a huge gap between what Obama is saying about this threat, about it being the greatest threat of our time… but the measures that have been unveiled are simply inadequate.” She goes on to note that limiting global warming to less than two degrees will require America to reduce annual carbon output by 8-10 percent a year, but that this plan maxes out at 6 percent. It is a “carbon gap” and it’s “huge.”

That has not stopped the opposition from coming out in full force against the Clean Power plan. Much of the initial opposition has come, without surprise, from the right and, more understandably, from coal-dependent states. States where coal still plays a large role in the energy mix, or where coal extraction plays a major role in the local economy, like West Virginia, Kentucky, and Indiana, have all announced they will challenge the law in court and not submit plans to meet the new mandates.

For many, the Clean Power Plan is an all-out assault on coal, and while this is not technically true – McCarthy pointed out that many means exist for states to determine how best to cut their emissions, including credit trading or energy efficiency – it is true that any low-carbon energy plan that can address climate change will necessarily be made up of much less coal electricity. This is precisely because coal is an extremely polluting source of energy – one that still accounts for nearly 40% of America’s electricity.

When asked pointedly what people living in coal dependent communities could expect, McCarthy referenced the President’s hopes that coal communities will receive injections of aid in order to transition away from coal. Her answer revealed as much in what she didn’t say as what she did. The truth is that coal is not an industry of the future. Across the world, countries are moving away from coal and towards less polluting sources of energy. BP’s Energy Outlook notes that coal will be the slowest growing source of energy by 2035, growing at under 1% per year. While the coal industry will most certainly not disappear overnight – China’s energy mix is still projected to contain at least 50-60% coal twenty years from now – it is an industry that will inevitably go away.

Contrary to critics, this will not happen because of the Clean Power Plan. Michael Bloomberg points out in a recent op-ed that Big Coal has been steadily declining for over a decade, due largely to a general public aversion to the highly polluting industry and the fact that the transition away from coal has not caused energy prices to spike or a net loss of jobs.  

McCarthy mentioned a number of times that the EPA had developed the Plan in light of ongoing changes in the industry. She said that states and utilities knew the mandates were doable because many of them were already in the process of shifting away from the most polluting forms of power. Indeed, McCarthy and the EPA sees the new regulations as a form of common currency for industry, providing a long term signal for where the country (and industry) is moving in terms of energy. Some may kick and scream, but there are already some who are already successfully embracing change.

Far from what detractors say about government regulation, this type of national clarity is exactly what drives innovation and growth. Opportunities are created when new parameters for an industry are developed and disseminated. Businesses with the greatest foresight have been demanding more clarity on carbon and the economy for years now because they understand that knowing where the goalposts are will allow them to best position themselves for the future.

Changing a complex system with entrenched interests is never easy, but good regulations with sufficient market freedom can jump-start systemic change. There will no doubt need to be modifications to the Plan as feedback loops adjust to the new conditions, but in light of America’s tenacious unwillingness to make any meaningful federal-level changes to our carbon economy, the Clean Power Plan is a welcome step in the right direction.