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5 Things You Need to Know About Obama’s Clean Power Plant Rule

Climate

Thursday and Friday the U.S. Environmental Protection Agency (EPA) will hold the final in its series hearings on its proposed rule to clean up carbon pollution from coal fired power plants. There will be a lot of theater, and a lot of opposition as well as support. Some of the opposition comes from workers from coal mining communities or those with power plants fired with coal; their livelihoods are at risk from the changes sweeping the utility industry, including the declining dominance of coal. Others are ideologically motivated, clinging to the view that for society to limit pollution is merely another disguised form of socialist collectivism—it is not the role of government to protect people from the risks of industrialism, doing so saps the “rugged individualism” that made America great. 

What we really need is a broader power sector reform program—because the Clean Power Rule is a small chunk of the change sweeping America’s utilities. Workers and communities who relied on the old, fossil fuel, centralized utility model need to be part of the decentralized, clean energy future—rather than being left behind, as a rigid approach risks.
Photo credit: Shutterstock

But much of the organizing fervor behind the protests is purely partisan—this rule is bad because President Obama developed it. Indeed, if the rule were actually in place, John Boehner might have had a hard time deciding whether Obamacare or Clean Power would be the focus of his newly announced lawsuit against the President, or the Tea Party’s planned impeachment follow up.

So you may encounter intense controversy around the idea of cleaning of America’s electricity sector for any one of these three reasons: genuine economic risk, ideology or partisanship. Here are five things to remember as you do.

1. Obama’s rule was originally George Bush’s idea.

When he ran for President in 2000, Bush boasted of his efforts to clean up “grandfathered” coal power plants as Governor of Texas, and pledged as President to do the same with a “four pollutant” EPA clean up regulation–mercury, sulfur, particulates and, yes, carbon. Bush’s first EPA Administrator, Christy Todd Whitman, went to Europe and pledged EPA regulation as America’s way to fight global warming. While Whitman was promising, carbon right columnist Robert Novak blasted Bush for daring to regulate CO2, making it clear that Bush's right-flank would take his Presidency down if he persisted. The President caved; his campaign pledges promises were voided. The infamous Obama "war on coal" is, substantively, nothing more ambitious than the fulfilling—ten years late—of George Bush's 2000 campaign pledge—with the difference that this time the President is determined. 

2. Appalachian coal communities are at risk, but their big challenges are the price of mining their coal and unfair competition, not pollution regulations.

Central Appalachia has been mined for long time; the best and cheapest coal is gone, the remaining seams are thinner, deeper or harder to get at. Production peaked in 1997; in Tennessee it had already dropped by more than half before any Obama Administration pollution regulations. The number of hours required to mine a ton of coal has almost doubled in West Virginia since 1999—the price, correspondingly, has soared. Central Appalachian coal now costs seven times as much at the mine mouth as a ton of Powder River Basin coal from Wyoming.

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Geology is driving up the price of Appalachian coal. But Powder River Basin coal competes unfairly, because the owner, U.S. government, gives it away. In spite of lawsuits the Department of the Interior refuses to use competitive bidding in the Basin, and according to the Department of the Interior’s Inspector General, the government sells the coal for much less than fair market value. This has cost the taxpayers tens of billions of dollars so far—but it has also deprived coal miners in Appalachia of market and income.

3. States overly dependent on coal don’t get lower electricity bills in exchange – coal fired power is no longer necessarily cheap.

If you look at the most coal dependent states, some of them have cheap electric bills—New Mexico, Wyoming and Utah in the West. But so do some of the least coal dependent states—Idaho, with no power from coal at all, California, Maine, Washington and the District of Columbia. The most coal dependent state of all, West Virginia, ranks 20th, while the second most dependent, Kentucky, is 32d in electricity affordability.

Iowa, with the nation’s highest percent of renewable electrons has cheaper electric bills than either of the two coal leaders. Those states whose coal power is cheap are almost all using locally strip-mined coal under sweetheart leases with either the Federal Government or Indian nations—the rest of us subsidize their electric bills.

4. The costs of cleaning up carbon pollution—the way Obama proposes to do it—will be barely measurable by electricity consumers.

What EPA Administrator Gina McCarthy has proposed is a rule which requires each state to reach a CO2 emission reduction target based on its opportunities—but to craft as clever and cheap a strategy for doing so as it can devise. McCarthy knows that every state has lots of waste it can cut—and in doing so, make meeting the carbon goals EPA has set virtually free

We’ve seen an advance version of how this works in Omaha. The Omaha Public Power District agreed, under pressure from its owner-customers to shut down three units of its dirtiest coal plant, invest in efficiency and renewables, clean up and eventually convert its remaining coal boilers to gas: net impact, “over the next 20 years, OPPD expects its plan to reduce emissions of nitrous oxides by an average of 74 percent, sulfur dioxide by an average of 68 percent, mercury 85 percent and carbon by 49 percent...” Total cost? “A minimal effect on customer rates, ranging from zero to 2 percent over a 20-year period.” This plan, adopted voluntarily, cuts twice as much carbon pollution as EPA is requiring of Nebraska!

Compare this affordability story with the results when the Prairie State coal fired energy campus opened two years ago in Southern Illinois: massive cost-overruns over a three state region, kilowatt hour charges 50 percent higher than market, and huge negative impacts on local businesses.

5. Obama was ordered by the U.S. Supreme Court to regulate carbon pollution. The lawsuits and challenges being planned by Obama’s opponents won’t stop the clean-up; instead they would actually increase electricity costs far more. Instead of lawsuits to limit utility options, the U.S. needs a broader—not a narrower—plan to manage the evolution to clean electricity and power.

Remember, Obama issued this regulation after states sued EPA and got a Supreme Court ruling that, “If carbon pollution changes the climate EPA must regulate it.” Not may, must—that’s what the Clean Air Act says.

You may hear that those fighting Obama want to keep power rates low. No way. They don’t object to the rule EPA drafted—in fact after EPA released it they had to redo their legal pleadings because EPA didn’t come up with a rigid set of requirements they expected. They object to the fact that EPA did what the Supreme Court ordered, period. They would have sued over any version of the rule.

Their new legal theories, therefore, are going to complain about the very flexibility given the states, claiming it is not allowed under the Clean Air Act. (Don’t laugh—that is exactly the legal argument underlying the pending House Republican Obamacare lawsuit—that Obama ought to have been more rigid and punitive in the way he implemented the Affordable Care Act).

But the Supreme Court just again upheld EPA’s obligation to regulate. So if the Courts go along with the opponents of the Clean Power Rule, and throw out the flexibility they lament, the result will be the same carbon clean up at a higher, not a lower cost. That is actually what the Koch’s and Big Coal want—they want to make the price of carbon clean up as high as possible so the public is reluctant to ask for more.

What we really need is a broader power sector reform program—because the Clean Power Rule is a small chunk of the change sweeping America’s utilities. Workers and communities who relied on the old, fossil fuel, centralized utility model need to be part of the decentralized, clean energy future—rather than being left behind, as a rigid approach risks. Jobs, school funding, health care and pension plans, community vitality and futures are all at stake—and in the ideological warfare being launched this week against the Clean Power Rule, we are all in danger of losing sight of the big picture.

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Ola Elvestrun, Norway's environment minister, announced Thursday that it is freezing its contributions to the Amazon Fund, and will no longer be transferring €300 million ($33.2 million) to Brazil. In a press release, the Norwegian embassy in Brazil stated:

Given the present circumstances, Norway does not have either the legal or the technical basis for making its annual contribution to the Amazon Fund.

Brazilian President Jair Bolsonaro reacted with sarcasm to Norway's decision, which had been widely expected. After an official event, he commented: "Isn't Norway the country that kills whales at the North Pole? Doesn't it also produce oil? It has no basis for telling us what to do. It should give the money to Angela Merkel [the German Chancellor] to reforest Germany."

According to its website, the Amazon Fund is a "REDD+ mechanism created to raise donations for non-reimbursable investments in efforts to prevent, monitor and combat deforestation, as well as to promote the preservation and sustainable use in the Brazilian Amazon." The bulk of funding comes from Norway and Germany.

The annual transfer of funds from developed world donors to the Amazon Fund depends on a report from the Fund's technical committee. This committee meets after the National Institute of Space Research, which gathers official Amazon deforestation data, publishes its annual report with the definitive figures for deforestation in the previous year.

But this year the Amazon Fund's technical committee, along with its steering committee, COFA, were abolished by the Bolsonaro government on 11 April as part of a sweeping move to dissolve some 600 bodies, most of which had NGO involvement. The Bolsonaro government views NGO work in Brazil as a conspiracy to undermine Brazil's sovereignty.

The Brazilian government then demanded far-reaching changes in the way the fund is managed, as documented in a previous article. As a result, the Amazon Fund's technical committee has been unable to meet; Norway says it therefore cannot continue making donations without a favorable report from the committee.

Archer Daniels Midland soy silos in Mato Grosso along the BR-163 highway, where Amazon rainforest has largely been replaced by soy destined for the EU, UK, China and other international markets.

Thaís Borges.

An Uncertain Future

The Amazon Fund was announced during the 2007 United Nations Climate Change Conference in Bali, during a period when environmentalists were alarmed at the rocketing rate of deforestation in the Brazilian Amazon. It was created as a way of encouraging Brazil to continue bringing down the rate of forest conversion to pastures and croplands.

Government agencies, such as IBAMA, Brazil's environmental agency, and NGOs shared Amazon Fund donations. IBAMA used the money primarily to enforce deforestation laws, while the NGOs oversaw projects to support sustainable communities and livelihoods in the Amazon.

There has been some controversy as to whether the Fund has actually achieved its goals: in the three years before the deal, the rate of deforestation fell dramatically but, after money from the Fund started pouring into the Amazon, the rate remained fairly stationary until 2014, when it began to rise once again. But, in general, the international donors have been pleased with the Fund's performance, and until the Bolsonaro government came to office, the program was expected to continue indefinitely.

Norway has been the main donor (94 percent) to the Amazon Fund, followed by Germany (5 percent), and Brazil's state-owned oil company, Petrobrás (1 percent). Over the past 11 years, the Norwegians have made, by far, the biggest contribution: R$3.2 billion ($855 million) out of the total of R$3.4 billion ($903 million).

Up till now the Fund has approved 103 projects, with the dispersal of R$1.8 billion ($478 million). These projects will not be affected by Norway's funding freeze because the donors have already provided the funding and the Brazilian Development Bank is contractually obliged to disburse the money until the end of the projects. But there are another 54 projects, currently being analyzed, whose future is far less secure.

One of the projects left stranded by the dissolution of the Fund's committees is Projeto Frutificar, which should be a three-year project, with a budget of R$29 million ($7.3 million), for the production of açai and cacao by 1,000 small-scale farmers in the states of Amapá and Pará. The project was drawn up by the Brazilian NGO IPAM (Institute of Environmental research in Amazonia).

Paulo Moutinho, an IPAM researcher, told Globo newspaper: "Our program was ready to go when the [Brazilian] government asked for changes in the Fund. It's now stuck in the BNDES. Without funding from Norway, we don't know what will happen to it."

Norway is not the only European nation to be reconsidering the way it funds environmental projects in Brazil. Germany has many environmental projects in the Latin American country, apart from its small contribution to the Amazon Fund, and is deeply concerned about the way the rate of deforestation has been soaring this year.

The German environment ministry told Mongabay that its minister, Svenja Schulze, had decided to put financial support for forest and biodiversity projects in Brazil on hold, with €35 million ($39 million) for various projects now frozen.

The ministry explained why: "The Brazilian government's policy in the Amazon raises doubts whether a consistent reduction in deforestation rates is still being pursued. Only when clarity is restored, can project collaboration be continued."

Bauxite mines in Paragominas, Brazil. The Bolsonaro administration is urging new laws that would allow large-scale mining within Brazil's indigenous reserves.

Hydro / Halvor Molland / Flickr

Alternative Amazon Funding

Although there will certainly be disruption in the short-term as a result of the paralysis in the Amazon Fund, the governors of Brazil's Amazon states, which rely on international funding for their environmental projects, are already scrambling to create alternative channels.

In a press release issued yesterday Helder Barbalho, the governor of Pará, the state with the highest number of projects financed by the Fund, said that he will do all he can to maintain and increase his state partnership with Norway.

Barbalho had announced earlier that his state would be receiving €12.5 million ($11.1 million) to run deforestation monitoring centers in five regions of Pará. Barbalho said: "The state governments' monitoring systems are recording a high level of deforestation in Pará, as in the other Amazon states. The money will be made available to those who want to help [the Pará government reduce deforestation] without this being seen as international intervention."

Amazonas state has funding partnerships with Germany and is negotiating deals with France. "I am talking with countries, mainly European, that are interested in investing in projects in the Amazon," said Amazonas governor Wilson Miranda Lima. "It is important to look at Amazônia, not only from the point of view of conservation, but also — and this is even more important — from the point of view of its citizens. It's impossible to preserve Amazônia if its inhabitants are poor."

Signing of the EU-Mercusor Latin American trading agreement earlier this year. The pact still needs to be ratified.

Council of Hemispheric Affairs

Looming International Difficulties

The Bolsonaro government's perceived reluctance to take effective measures to curb deforestation may in the longer-term lead to a far more serious problem than the paralysis of the Amazon Fund.

In June, the European Union and Mercosur, the South American trade bloc, reached an agreement to create the largest trading bloc in the world. If all goes ahead as planned, the pact would account for a quarter of the world's economy, involving 780 million people, and remove import tariffs on 90 percent of the goods traded between the two blocs. The Brazilian government has predicted that the deal will lead to an increase of almost $100 billion in Brazilian exports, particularly agricultural products, by 2035.

But the huge surge this year in Amazon deforestation is leading some European countries to think twice about ratifying the deal. In an interview with Mongabay, the German environment ministry made it very clear that Germany is very worried about events in the Amazon: "We are deeply concerned given the pace of destruction in Brazil … The Amazon Forest is vital for the atmospheric circulation and considered as one of the tipping points of the climate system."

The ministry stated that, for the trade deal to go ahead, Brazil must carry out its commitment under the Paris Climate agreement to reduce its greenhouse gas emissions by 43 percent below the 2005 level by 2030. The German environment ministry said: If the trade deal is to go ahead, "It is necessary that Brazil is effectively implementing its climate change objectives adopted under the [Paris] Agreement. It is precisely this commitment that is expressly confirmed in the text of the EU-Mercosur Free Trade Agreement."

Blairo Maggi, Brazil agriculture minister under the Temer administration, and a major shareholder in Amaggi, the largest Brazilian-owned commodities trading company, has said very little in public since Bolsonaro came to power; he's been "in a voluntary retreat," as he puts it. But Maggi is so concerned about the damage Bolsonaro's off the cuff remarks and policies are doing to international relationships he decided to speak out earlier this week.

Former Brazil Agriculture Minister Blairo Maggi, who has broken a self-imposed silence to criticize the Bolsonaro government, saying that its rhetoric and policies could threaten Brazil's international commodities trade.

Senado Federal / Visualhunt / CC BY

Maggi, a ruralista who strongly supports agribusiness, told the newspaper, Valor Econômico, that, even if the European Union doesn't get to the point of tearing up a deal that has taken 20 years to negotiate, there could be long delays. "These environmental confusions could create a situation in which the EU says that Brazil isn't sticking to the rules." Maggi speculated. "France doesn't want the deal and perhaps it is taking advantage of the situation to tear it up. Or the deal could take much longer to ratify — three, five years."

Such a delay could have severe repercussions for Brazil's struggling economy which relies heavily on its commodities trade with the EU. Analysists say that Bolsonaro's fears over such an outcome could be one reason for his recently announced October meeting with Chinese President Xi Jinping, another key trading partner.

Maggi is worried about another, even more alarming, potential consequence of Bolsonaro's failure to stem illegal deforestation — Brazil could be hit by a boycott by its foreign customers. "I don't buy this idea that the world needs Brazil … We are only a player and, worse still, replaceable." Maggi warns, "As an exporter, I'm telling you: things are getting very difficult. Brazil has been saying for years that it is possible to produce and preserve, but with this [Bolsonaro administration] rhetoric, we are going back to square one … We could find markets closed to us."

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