Climate Bill Analysis Part 15: EPA Projects Coal Will Expand Under Waxman-Markey

Electricity generation from coal will grow if Waxman-Markey climate legislation becomes law, according to a Los Angeles Times investigation. The Times notes that "coal-fired power plants are the largest source of heat-trapping gases that cause global warming," and yet the EPA projects [pdf] (p. 23) that conventional (not CCS) coal power generation will increase from 2013 TWh in the year 2005 to 2030 TWh in 2020.

Waxman-Markey may actually reduce barriers to the expansion of electricity generated from coal, according to a new Breakthrough Institute's analysis. This is due to several factors. First, provisions in Waxman Markey weaken the New Source Review provisions of the Clean Air Act and preempt EPA regulation of carbon dioxide as a pollutant. Environmentalists have used those provisions to halt or slow dozens of coal plants in recent years; those plants would likely move forward under Waxman Markey. Second, the high levels of offsetting allowed in Waxman-Markey and the substantial allocation of emissions allowances to coal-burning utilities and energy companies may make it more cost-competitive to build new coal plants. Third, having further increased capital investments in coal over the first decade of the program, policymakers may choose after 2020 to increase offsetting or just raise the emissions cap outright as the cap starts to exert price pressure on coal generation.

Coal advocates do not seem to believe coal will decline after 2020. Rep. Rick Boucher, a leading proponent of coal power on the House Energy and Commerce committee, told the L.A. Times, "We've ensured a role for coal [in the nation's energy future]." Joe Lucas, senior vice president of communications for the industry-funded American Coalition for Clean Coal Electricity said, "there's just been a fundamental shift" in environmental efforts away from using "climate policy as a wedge to take coal out of the energy mix."

The EPA's projected increase in coal generation under Waxman Markey is consistent with recent developments in Europe, where carbon caps failed to reduce coal generation or deter European economies from approving new coal plants, even with the carbon price reaching $40 per ton. By contrast, the EPA carbon price estimate of $12 - $20 per ton between 2012 and 2020 is well below the European carbon prices, which failed to slow coal expansion.

EPA projects that overall power sector emissions will decline due to reduced natural gas emissions displaced by nuclear power. But EPA acknowledges that the expansion of nuclear power is a key uncertainty; the public may oppose new nuclear plants. The EPA analysis does not project potential coal generation levels if new nuclear plants fail to materialize. But if that occurs, both natural gas and coal would likely grow, with correspondingly higher emissions.

Moreover, the EPA analysis was based on an earlier review draft of Waxman-Markey that allowed firms to use fewer offsets than does the current legislation. Due to subsequent changes -- the abandonment of the 5:4 offset to emissions ratio, the increase in the maximum allowable use of international offsets from 1 billion tons annually to 1.5 billion tons, and the reduction of the carbon price triggers for the release of additional allowances in the strategic reserve fund -- EPA's projections, even with a major expansion of nuclear and wind power, likely understate the growth of coal generation in the first two decades of the program's implementation.