EPA carbon rules could speed U.S. shift from coal

The Obama administration's historic proposal to reduce carbon emissions from U.S. power plants, expected Monday, could accelerate the nation's shift from coal to natural gas and renewable energy.

Aimed at fighting climate change, the Environmental Protection Agency rules will require states to develop and implement plans to cut power plant emissions of heat-trapping carbon dioxide. They will give states a range of options to comply, including the trading of pollution credits. Critics, however, say they could drive up electricity prices and shutter plants nationwide.

"This is a colossal proposal that should achieve the biggest carbon pollution reductions ever undertaken by the United States," says Daniel J. Weiss of the Center for American Progress, a liberal-leaning think tank with close ties to the White House. "No president has ever proposed a climate pollution cleanup this big."

Thwarted by Congress' inability to pass a bill to lower U.S. carbon emissions, President Obama is pushing forward his own approach that could become one of the signature achievements of his administration.

Last June, he asked the EPA to use its power under the Clean Air Act to craft rules limiting CO2 emissions from existing power plants. These rules would go far beyond an EPA proposal last year to limit emissions from new plants, and their impact will also exceed the administration's 2011 requirement that new cars and light trucks double fuel efficiency by 2025.

The reason? Power plants account for the largest share, nearly 40%, of U.S. greenhouse gas emissions, and Obama has already pledged to slash emissions 17% from 2005 levels by 2020. Coal-fired facilities will be hardest hit because they emit more CO2 than other power plants.

Here are five things you need to know about the controversial rules:

1. They will not happen overnight. Opponents, including business groups and Republicans, will likely cast them as a costly "war on coal" and file lawsuits to challenge EPA authority. Recent legal rulings, though, have largely sided with the EPA. .

Obama has asked the EPA to finalize the rules in June 2015, after which states would have at least a year to submit plans for how they would achieve the reductions. The agency would then review those plans and, if states refuse to submit them, it could create its own plan.

"It will be a few years before we see changes from this rule," says Kyle Aarons, a senior fellow at the Center for Climate and Energy Solutions, a nonprofit group.

2. They will be flexible. The rules are expected to give a range of emission-reduction targets with varying deadlines and options to meet them.

So, states could comply by requiring plants to install pollution-control technology; setting up energy efficiency programs to reduce energy demand; or using more carbon-free energy such as solar and nuclear or cleaner-burning fuels like natural gas. They could also follow California and nine northeast states, which have created cap-and-trade programs that cap overall emissions but allow polluters to buy government-issued credits from clean-energy producers.

Obama's senior counselor, John Podesta, said the reductions will be made "in the most cost-effective and most efficient way possible." A key factor will be the baseline year or years that are used to set them, because U.S. carbon emissions were lower between 2008 and 2012 than in the early 2000s or last year.

3. They accelerate the shift away from coal. As natural gas prices have fallen, the coal industry has seen its share of U.S. electricity generation plummet from 52% in 2000 to 37% in 2012. In contrast, natural gas has seen its share double, from 16% in 2000 to 30% in 2012.

Even without the EPA carbon rules, the EIA projects coal's share will drop further and 60 gigawatts of coal-fired power — about one-fifth of the total U.S. coal capacity in 2012 — will retire by 2020. In recent years, dozens of old coal-fired plants have closed or announced their retirements.

"This rule would accelerate that shift" away from coal, says Aarons.

The carbon limits could lead to "draconian changes" in the U.S. energy mix, says Karen Harbert, president of the U.S. Chamber of Commerce's Institute for 21st Century Energy.

4. Their impacts could vary by state. Harbert's group released a study that warns the rules could hike consumer electricity prices, reduce jobs and slow economic growth, adding the South will see the biggest increases in power costs.

"The Chamber has a long record of releasing reports that cry wolf (about EPA rules) and is invariably wrong," says David Doniger of the Natural Resources Defense Council, an environmental group. The NRDC's analysis says the rules could create hundreds of thousands of energy-efficiency jobs and, by lowering energy use, reduce consumer utility bills.

Some states that rely heavily on coal could struggle more than others to meet the EPA limits. Kentucky, Wyoming, West Virginia, Indiana and North Dakota have the highest carbon emission rates while Idaho, Vermont , Washington, Oregon and Maine have the lowest, according to a May report co-authored by Ceres, a non-profit research group that promotes corporate sustainability.

5. Their influence extends beyond the U.S. "This is clearly a pivotal moment that the world will be watching closely," says Mindy Lubber, Ceres' president, noting a new round of United Nations climate talks will take place next year in Paris.

Doniger says the EPA rules will show the United States is "in the game" and will help nudge other countries to make reductions.