A personal report: “Remaking American Power” and the continued importance of Natural Gas.

On June 2, 2014, the Environmental Protection Agency proposed the Clean Power Plan (CPP) to battle carbon emission levels. The EPA called for a plan which would cut carbon emissions from power plants, the biggest source of carbon pollution, by 30 percent by 2030. As expected from anything relating to the EPA, the proposal has been supported and attacked. The National Review noted the importance of coal to the global economy and pointed out America’s efforts to reduce carbon emissions. On the other hand, the Natural Resources Defense Council discussed the potential health benefits.

Today, the Center for Strategic and International Studies paired up with the Rhodium Group and released a study detailing the possible effects of the CPP. One thing that the report discussed is the fact that states like Texas and Oklahoma actually could benefit the most from the EPA’s proposal. Texas would have to work harder than every other state to reduce carbon emissions to acceptable levels. However, they would be able to compensate by increased national demand for natural gas. The report actually stated that Texas could earn around $17 billion from the plan, while coal-based states like West Virginia and Wyoming would suffer. The New York Times and the Huffington Post have already used this to castigate those states for their lack of support for the Clean Power Plan.

However, that was not everything covered in the report. In a presentation which was entitled “Remaking American Power: The Economic and Energy Impacts of Power Plant Emission Standards”, a few things that I observed today:

  • The EPA may prattle about renewables all it wants, but CSIS made it clear that shale gas is going to be front and center if the Clean Power Plan is going to succeed. It should be noted that while the price of natural gas had been decreasing since the beginning of the shale oil boom, the price of natural gas has not decreased since April 2012. In fact, it has increased. Despite the continual pressures on coal, it still remains significantly cheaper than natural gas.
  • CSIS listed four “building blocks” at the beginning which the states would need to use to fulfill the CPP: Coal efficiency, switching from coal to gas, switching from fossil fuels to renewables, and efficiency. Despite these blocks, I doubt that CSIS spent more than five words on renewables afterwards. As noted above, the overwhelming focus was on shale.
  • Electricity rates will increase under the CPP; that much is a fact. How much will depend on factors like state cooperation with the CPP and changes in the shale market over time. Despite that, CSIS claims that America will benefit from reduced health expenses and other ways. They did not submit details of these benefits.
  • CSIS deflected questions about whether the states will even submit plans, something that is a legitimate political threat. As a think tank, they stated that they were not interested in wading into the political battle that follows the EPA.
  • One question at the end I found particularly relevant: A Swiss reporter stated that natural gas does NOT reduce greenhouse gases. He claimed that while natural gas may emit less carbon emissions compared to coal, the risks of methane leaks means that gas is no better than coal. CSIS presenters Trevor Houser, Sarah Ladislaw, and John Larsen admitted that methane is currently not a priority of the Administration compared to carbon dioxide. However, subsequent research indicates that the reporter was exaggerating.
  • It should be noted that this report is preliminary. CSIS stated that they were unable to detail all possible scenarios which could result from the CPP. The full report will be released in October 2014.

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