U.S. coal co's cringe as Obama tightens climate change rules
As if Monday couldn't get any worse, on the same day Alpha Natural Resources filed for bankruptcy, U.S. President Obama unveiled new rules designed to impose more costs on the battered and bruised United States coal industry.
The rules are an amendment to a historic climate change strategy introduced by the Obama administration a year ago. However the final version announced on Monday imposes even stricter limits on states than was previously expected: a 32 percent cut to carbon dioxide emissions by 2030 compared to 2005 levels, versus the 30 percent cut mentioned in June of 2014. States however were given two more years to implement the changes, with the deadline extended from 2020 to 2022.
The rules assign customized targets to each state, which can determine how it plans to meet them. Some states led by Republican governors have said they won't comply. If that happens, the EPA could impose its own plan on them. Opponents of the plan say they plan to sue, seeking an order from the courts to block the rules, even temporarily.
The original proposal, which was the first time that greenhouse gas limits were ever imposed on U.S. coal-fired power plants, triggered a year-long review and according to Yahoo, 4 million public comments. The plan is controversial not only for the costs it could impose on an already struggling U.S. industry, but the overall costs to implement it. The administration estimates that meeting the emissions targets would cost $8.4 billion annually by 2030. The issue has become front and centre in the 2016 U.S. presidential election, with Democratic frontrunner Hilary Clinton vowing to defend the plan, while Republican president candidate Marco Rubio predicts a "catastrophic" rise in electricity bills.
But the out-going president, who has just one year and five months left in his term, has made the 645-page document, developed by the Environmental Protection Agency, a key plank in his administration's environmental policy.
“Power plants are the single biggest source of the harmful carbon pollution that contributes to climate change. But until now there have been no federal limits on the amount of that pollution those plants can dump into the air. Think about that,” he said in a video address.
However the National Association of Manufacturers argues the plan will severely hurt American competitiveness. And the United Mine Workers of America (UMWA) argues the regulations will financially cripple coal’s economy, kicking miners to the curb.
The EPA fires back, saying the regulations could yield over $90 billion dollars in climate and health benefits.
From a public health perspective, smog and pollution drops that would also be achieved through the plan, would translate into a $7 health benefit for every dollar invested in the plan, says EPA head Gina McCarthy.
For now, the plan is expected to be a boon for renewable energy, since the plan contains more incentives than originally expected. According to a White House fact sheet, the new rules will “[d]rive more aggressive investment in clean energy technologies than the proposed rule, resulting in 30% more renewable energy generation in 2030 and continuing to lower the costs of renewable energy.”
Paul Patterson, a New York-based utility analyst for Glenrock Associates LLC, told Bloomberg, “The renewable energy sector should be a clear winner while merchant coal-fired generators could end up the big losers,” adding: “Given the rules’ complexity and controversy, those who could likely stand to benefit the most in the end might be the lawyers.”
A report released today by BB&T Capital Markets Inc. shows the highest-cost coal producers will be hit hardest.
“We think higher-cost producers, especially those with leverage, would be wiped out,” Mark Levin, an analyst at BB&T, said in the report, via Bloomberg. “Lower-cost producers would also be impacted by less overall demand and higher fixed costs.”
Along with coal, natural gas also loses from Obama's climate change plan. The earlier proposal had envisioned an increased use of natural gas as a "bridge fuel" to replace the shuttering of coal-fired power plants. The new rules would keep the share of natural gas in the power mix of the nation at current levels, Yahoo reported Monday.