Did U.S. EPA go far enough in its proposed rule for regulating carbon emissions from existing power plants? During today's OnPoint, Conrad Schneider, advocacy director at the Clean Air Task Force, explains how he believes the assumptions used by the agency in creating the rule could be strengthened. He also weighs in on whether a lack of congressional support for the rule ahead of the midterms could impact the Obama administration's ability to sell the plan to Americans.
Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Conrad Schneider, advocacy director at the Clean Air Task Force. Conrad, thanks for coming back on the show.
Conrad Schneider: Thank you very much for having me.
Monica Trauzzi: Conrad, a week since EPA released its emission standards for existing power plants, and now that everyone's had the opportunity to look through the document in its entirety we're hearing from some environmental groups that the agency didn't go far enough. What's your assessment of the rule?
Conrad Schneider: Well, we're generally pleased. We judge the rule based on what the emission reductions that it will achieve, and the overall emissions reductions of 30 percent by 2030 of 2005 levels is a very substantial first step. We see it as a great opening bid in this discussion. EPA's laid out a variety of things that they're asking for comment for and we see ways that the rule could be strengthened, but in general it's a great first step.
Monica Trauzzi: All right, so talk to me about what those ways are that you see the rule being strengthened.
Conrad Schneider: Sure. EPA has laid out sort of four building blocks for the rule: heat rate efficiency at the units, switching from coal to gas, more renewables, and more energy efficiency. And they have certain assumptions that go into the proposal about how much each state can do, and we're looking very closely at those assumptions. For example, they put a lid on how much additional gas generation could happen per state. Our analysis from earlier this year suggests that perhaps more of that can happen. So if we're able to convince the agency that that's correct and there wouldn't be negative economic impacts from that, then perhaps they'd be willing to strengthen, say, that block. Similarly on renewables and energy efficiency -- I know a lot of groups are looking at the assumptions there to see whether those can be strengthened.
Monica Trauzzi: Some states are already taking aim at the proposal, though. Is it as flexible as Administrator McCarthy made it out to seem during her announcement?
Conrad Schneider: From our initial read the answer is yes, and I think that there actually has been a lot of good reaction from states and companies so far commending EPA for the amount of flexibility that's extended here. EPA laid out those four building blocks in terms of what it would use to set the targets, but it made it clear in the proposal that states have flexibility even beyond that to use a variety of different methods to meet the standards.
Monica Trauzzi: Which states do you identify as the most vulnerable to the rule?
Conrad Schneider: You know, we're taking a look at that right now. States have different targets, and the targets as I understand it were based on their potential to be able to take advantage of these four different building blocks. You know, how much renewables potential is there? How much energy efficiency potential is there? Do they have underutilized natural gas plants -- something we pointed to in our proposal? And how much headroom do they have to be able to ramp up those plants? That differs by state. So the rule is carefully tailored to be able to set a target that states can achieve, so it's not clear to us yet that there are states that are particularly vulnerable or at risk from that, that EPA tried to tailor it to what they could achieve.
Monica Trauzzi: They tried, but is it a fair formula that they used?
Conrad Schneider: Well, as I said we're trying to take a look at some of the individual building blocks and it may be, for example, that there's more natural gas that can be taken into account in some places. And if that's true, the overall standard could be strengthened. But there's a consistent national formula that they used which takes into account the various opportunities that states have. So yes, I think it is fair in that sense.
Monica Trauzzi: How should states be planning at this point for their compliance mechanism proposals that they'll need to eventually submit if we get to that point?
Conrad Schneider: Right. I mean, I think that's pretty simple. I think they need to look at where they are today and where they would be under business as usual, where the target that EPA has proposed would take them, and then look at the whole suite of measures that are available to them to meet those targets. And they'll have their own unique set of policy challenges and values and so forth that they want to put as an imprint on this. Some states, if they're in a regulated market, may use their resource planning processes to be able to do this. States that have renewable portfolio standards may look at that and say, "Well, we want to strengthen that; that's going to be our best route." Other states that have a lot of underutilized natural gas may say, "That's going to be our best route." So one guideline will be of course what's the cheapest, what's the least economically impactful, but there are other values that states may try to unlock here as well. So -- but the touchstone here is are the emissions being reduced from where they would be otherwise to the target rate, and that's -- filling that delta with cost-effective emission reductions is going to be the challenge the state faces.
Monica Trauzzi: You mentioned the incorporation of natural gas. How much pressure could this rule put on natural gas prices?
Conrad Schneider: Well, and it's an interesting question. You know, we looked at a policy that was really very heavily reliant on natural gas. EPA's policy really spreads the responsibility for the reductions between natural gas, renewables and energy efficiency. We saw about 3 tcf more gas under our proposal; they're only seeing 1 to 2 tcf, and they're not seeing a lot of increases in both gas prices or electricity prices as a result of that. I think some of this is cushioned, I would say, by their use of energy efficiency and renewables. So there's a lot of gas out there. We're in the middle of a shale boom. I think there is plenty of gas and I think there will be -- there's plenty of time here for the gas industry to respond to the challenge, to deliver that gas to where it needs for the generation. So, you know, we didn't see gas price increases or electricity price increases under a policy that was more heavily reliant on gas than the EPA's is; we shouldn't see it with theirs.
Monica Trauzzi: Let's talk about politics. Ahead of the midterms many vulnerable Democrats are steering away from supporting EPA's measure. Does that ultimately cut into the president's ability to sell this plan to Americans?
Conrad Schneider: You know, it's interesting because -- so one Senate race that everybody's looking at is Kentucky, but Kentucky's immediate reaction to this has not been entirely negative. So if that's a touchstone for what we might see, then I'm not sure it does. I'm not sure it does. And if, as is evident on the first glance, at least from the first glance at this, that EPA treated states fairly, it's not clear that it will be a big negative.
Monica Trauzzi: But the candidates in Kentucky are firing away at this proposal.
Conrad Schneider: Right, sure, and they were firing away before they saw it.
Monica Trauzzi: Legislatively there are already talks of efforts to derail the legislation -- the rule. Do those have legs?
Conrad Schneider: You know, I think as people become more familiar with what the rule actually entails, I think they'll have less and less legs. I think it was easier to demonize something before there was something concrete on the table. But the Obama administration has laid out, both with this rule and their rule for brand-new plants, a pathway forward in terms of a clean energy economy. And there are a lot of benefits to that, so ultimately I think we're encouraged that there will be actually building political support behind this as opposed to negative or opposition.
Monica Trauzzi: All right, we'll end it there. Thank you for coming on the show.
Conrad Schneider: Thank you so much.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
[End of Audio]