Climate advocates signal EPA mercury rule is a step toward carbon reductions

Source: Joel Kirkland • E&E • Posted: Friday, December 23, 2011

The U.S. EPA final rule yesterday to cut toxic air pollutants will force the retirement of some of the nation’s dirtiest electricity generators, including coal-fired power plants that produce tons of greenhouse gas emissions.

“We are maintaining our view that the most likely outcome is 50 gigawatts of coal retirements by 2016,” said a team of FBR Capital Markets energy analysts led by Benjamin Salisbury.

Public health groups say the toxic air pollution rule will prevent thousands of premature deaths. In the works for more than a decade amid intense political and legal scrutiny, the rule will force power plants to reduce their mercury emissions by 90 percent, acid gases by 88 percent and sulfur dioxide by 42 percent.

Environmental groups have railed against the Obama administration for not putting the full weight of the presidency behind slashing carbon dioxide emissions tied to global warming. But the combination of federal actions like this one to curb conventional pollutants, slumping electricity demand and existing plans to shut down the oldest U.S. power plants will mean lower greenhouse gas emissions as coal plants are replaced.

Aging smokestacks that aren’t retrofitted with expensive scrubbers and other technology to cut mercury emissions will be replaced with natural gas-fired generators or wind turbines.

Activists claim climate and job benefits

For the past several months, electricity giants like Southern Co. and American Electric Power (AEP), and organizations funded by major coal producers and users, have increased pressure on the White House to extend the deadline for installing pollution controls. They have also sought maximum flexibility to apply for extensions and waivers based on the how difficult it could be to meet standards once the rule is fully implemented in 2016.

Climate groups tied the environmental policy win to the far more constrained push for a policy to address rising global greenhouse gases before President Obama leaves office.

“In addition to the health benefits, the new standards may yield significant climate benefits if power companies meet them by replacing old, inefficient plants with cleaner technologies,” said Eileen Claussen, president of the Center for Climate and Energy Solutions. The center was created in November as the successor to the Pew Center on Global Climate Change.

“This is more likely,” she continued, “if EPA moves forward with carbon dioxide emission standards for power plants, and if Congress continues to fund R&D and deployment for renewable energy, nuclear power, and technologies that capture and store carbon dioxide from fossil fuel-fired power plants.”

Programs explicitly tied to climate change are in increasing danger of facing GOP-led budget cuts, but so is money flowing to the Department of Energy to boost clean energy research.

Other climate advocates spun the pollution rule to mean more jobs in the clean energy sector.

“Hands down, clean air is a boon to us all, and putting this new air pollution rule into effect at a time when new jobs and economic growth are desperately needed is the right thing to do,” said Mindy Lubber, president of Ceres, a Boston-based coalition of public and private investment funds and environmental groups.

Utilities maintain job losses to come

White House surrogates were out in force linking regulation, the environment, energy security and jobs. It comes on the eve of an election year during which Obama will be hit by Republicans opposed to regulation and left-leaning groups unhappy the White House hasn’t gone further to address climate change. EPA regulators are in the process of drafting rules that would start the United States down the road toward limiting carbon emissions, but they face stiff opposition in Congress.

“In less than three years, President Obama has reduced harmful air pollution from two major sources: power plants and vehicles,” said Carol Browner, former director of the White House Office of Energy and Climate Change Policy. Her statement pointed to vehicle fuel economy standards that will require significant upgrades to engines and potentially help usher electric-gas hybrid vehicles into a car market married to oil.

Yesterday, the main critics in the power sector reiterated their warning that ordering power plants to install the “maximum achievable control technology” to reduce pollution would result in 1.4 million job losses through 2020.

“While some jobs are created by complying with the new rule, the number and quality of those jobs is far less than those destroyed,” said Scott Segal, director of the Electric Reliability Coordinating Council, a coalition of utilities that oppose most EPA efforts to cut power plant emissions. Investor-owned power companies that spend millions of dollars lobbying Congress oppose air quality standards they warn will force consumers to swallow higher electricity bills.

The utility industry is expected to spend about $10 billion a year upgrading U.S. power plants. While electricity rates are projected to go up, that will probably mean bigger returns for power generators in the eastern United States. FBR analysts predicted that Georgia-based Southern, North Carolina-based Duke Energy and Progress Energy, and New Jersey-based Public Service Enterprise Group “would likely receive a boost from tightening power markets by 2015.”

All along, energy analysts tracking demand for coal and natural gas have been guessing at the contours of the mercury rule. This summer, President Obama sidelined tougher ozone restrictions amid mounting pressure from the business community, but many expected Obama and his EPA to be tougher on the toxic air pollutants rule.

Lawsuits on the horizon

Natural gas is expected to be a major beneficiary. Technology fitted on the smokestacks of coal-fired power plants to separate out and clean emissions runs in the hundreds of millions of dollars. While coal will still be a major source of baseload power, gas plants will come online to replace some of that. Gas turbines slash harmful pollutants and produce about 40 percent less carbon emissions.

FBR analysts predicted that gas demand could increase by up to 4.2 billion cubic feet a day.

Still, the rule is expected to be mired in litigation. “As investors have become increasingly aware, final regulations are only one (very important) step in a process that invariably leads to the courthouse,” said the FRB analysts in a note to investors. “We expect the MACT rules to be litigated over the next few years, including challenges to the methodology, pollutant-by-pollutant approach.”

Likewise, they noted, Congress is looking into legislation to ensure power plant upgrades don’t impact electricity reliability.


Sen. Lisa Murkowski (R-Alaska) is considering legislation to ensure plant closures won’t become a problem for keeping the lights on. Murkowski has urged the Federal Energy Regulatory Commission to play a bigger role.