NRDC’s Lashof discusses new data on economic, climate impacts of existing source proposal

Source: Monica Trauzzi, E&E • Posted: Tuesday, March 25, 2014

As U.S. EPA nears its June 1 deadline for releasing regulations to curb greenhouse gas emissions from existing power plants, stakeholders are aggressively pitching the agency on how best to craft its rule. During today’s OnPoint, Dan Lashof, director of the Climate and Clean Air Program at the Natural Resources Defense Council, discusses an updated analysis of the climate and economic impacts of NRDC’s widely publicized existing source recommendations.Click here to watch today’s OnPoint.Monica Trauzzi: Hello and welcome to OnPoint. I’m Monica Trauzzi. With me today is Dan Lashof, director of NRDC’s Climate and Clean Air Program. Dan, thank you so much for coming on the show.

Daniel Lashof: Oh, thanks for having me, Monica.

Monica Trauzzi: Dan, NRDC has released an updated analysis of your 2012 proposal for how EPA should move forward with its existing power plant proposal. Before we get into the new data, let’s sort of review for a moment what you originally proposed in a nutshell.

Daniel Lashof: Well, what we proposed is standards for reducing carbon pollution from existing power plants — that’s America’s biggest source of global warming pollution — that vary from state to state reflecting states’ original or existing mix of coal- and gas-fired generation. So it would take into account where states are starting. And then it would set a specific emission rate target for each state that reflects that starting point and then gives states a maximum flexibility — and power companies — how they can implement that by not only reducing emissions inside the fence line of individual plants, but looking at the electricity system as a whole and finding the most cost-effective ways to reduce emissions by shifting generation from dirtier sources to cleaner ones, as well as expanding reliance on renewable energy and energy efficiency, which reduced the need to generate with the dirty fossil fuel units.

Monica Trauzzi: OK, and so now you’re saying through this new analysis that the initial reductions that you had outlined could be even greater and that there could be even less of an economic cost. How did you get there?

Daniel Lashof: Right, so it’s a very good news conclusion that we can get bigger reductions at lower costs. Why is that? Well, first of all, we updated our analysis to reflect recent trends. Looking at what’s happened over the last couple of years and current projections, total demand for electricity in 2020 is now projected to be considerably less than what it was expected to be. We’ve already seen a number of coal-fired power plants retire and other announcements are there, so we take that into account. So the starting point, the reference case without new carbon policy is a little bit — is significantly lower than what we had before.

In addition to that, we’ve updated our assumptions around the cost of wind generation, which has been making a lot of improvements over the last few years. So there’s a lower starting point, more options that we account for in current trends, and then in addition to that we’ve looked at a wider variety of compliance options and scenarios in the new analysis.

Monica Trauzzi: Coal states are the ones who have the most to lose, they would argue, with this existing source rule. Do you have any further clarity through this new analysis on what the impacts would be on those specific states that are coal heavy?

Daniel Lashof: Well, our original proposal, and this carried through here, differentiates the standards so that coal states don’t have to meet the same target that a state that has more natural gas in its system today. They will have to make reductions. One thing we found here that’s quite interesting and was a bit of a surprise is that under scenarios where energy efficiency is somewhat constrained so that states don’t necessarily implement the full potential that they have available, it is cost-effective in some cases to retrofit existing coal plants with carbon capture. So that’s an option that states that have a lot of coal plants could take advantage of, and it turns out that that can be cost-effective because the CO2 that’s captured can be sold for use in enhanced oil recovery, which is a revenue stream that offsets some of the investments that would take place.

Monica Trauzzi: Right, but there’s still a big question there about the feasibility and when we’re actually going to see carbon capture and storage technology and how expensive it is going to be to implement.

Daniel Lashof: Right. Well, we took quite conservative assumptions about the cost of doing it. The oil industry is already using large volumes of CO2 for enhanced oil recovery. There have been several demonstrations of the capture technique. So really all of the individual components have been demonstrated, and it’s just a question of putting a system together. There just hasn’t been an incentive to do that before; that’s why we haven’t seen it.

Monica Trauzzi: So the NRDC proposal has gotten a lot of attention already. We’ve heard that EPA has taken a look at it. What have you heard from the administration on the role that this proposal could potentially play in that rule that we see from the agency in June?

Daniel Lashof: Well, we know that EPA and the Obama administration is kind of in the final stages of putting their proposal together for release in early June, and we don’t know what they’re going to do. It’s not going to be identical to NRDC’s proposal. But I think what we have been able to do is shape the debate, show that big reductions are possible. Our new analysis shows that even bigger reductions are possible. So we hope that this informs the decisions that the administration is in the process of making and that they will take an ambitious approach that gets at least a 25 percent reduction in carbon emissions relative to 2012 levels from what they’ve put together.

Monica Trauzzi: But they need to consider how legally defensible their rule is. How legally defensible is your proposal?

Daniel Lashof: Well, we think it’s well within the discretion of EPA to adopt an approach like this that looks at the full range of options. We’ve put out an analysis, legal analysis showing that, and recently Harvard Law School has put one out as well. They reached the same conclusion. So we think they’re on very solid ground.

Monica Trauzzi: All right, Dan, we’ll end it there. Thank you for coming back on the show.

Daniel Lashof: Thank you.

Monica Trauzzi: And thanks for watching. We’ll see you back here tomorrow.

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