US moves to cut CO2 from power

US President Barack Obama seeks to impose CO2 cuts on America's existing fleet of power plants of 30% by 2030 (on a 2005 baseline), in a move with potentially major implications for renewables – in the US and beyond.

Announced Monday, the proposal does not require approval by the fiercely partisan US Congress, as it would be overseen by the Environmental Protection Agency (EPA), part of Obama’s executive branch of government.

Among other hoped-for changes, the move could jolt states into creating Renewable Portfolio Standards (or bolstering existing ones), joining or creating regional cap-and-trade schemes, or embracing energy-efficiency initiatives.

The EPA will spend the next year refining its proposal, and formally issue the regulations in June 2015 -- though changes to the headline numbers are not expected. States will then have one more year – until June 2016 – to detail their plans for meeting the new regulations.

While the US power sector has had months to brace itself for today’s EPA announcement, the final target and the baseline year were kept under wraps for longer than is typical for such a significant proposal, underscoring its controversial nature and Obama's interest in seeing it through to execution.

The selection of 2005 as the baseline year is disappointing to some climate hawks, who had hoped for a more recent year. US carbon emissions have declined significantly since 2005, and particularly in the power sector thanks to the natural gas boom – meaning the country is effectively already halfway to meeting its 2030 target.

Nevertheless, the proposal will be warmly welcomed by the US wind and solar sectors, and was immediately praised by climate advocates around the world.

Many describe it as the single most important step a US president has ever taken in the fight against climate change.

The proposal is unusual for the EPA in that it would not regulate individual power plants, but rather sets an overall target for the country. Within that overall target, different targets will be set for different states – with the states left to formulate their own compliance strategies, similar to the EU’s 2020 Renewables Directive.

From the perspective of the renewables sector, one of the most important aspects is the “beyond the fenceline” provision – which allows states to offset carbon pollution from existing fossil-fuel plants by adding renewables capacity, joining cap-and-trade schemes, or other alternatives.

Both the wind and solar sectors are already making the case for states to boost their use of their technologies under the proposed regulations. Eleven states are currently emitting at least 10% less CO2 than they otherwise would be thanks to their installed wind capacity, the American Wind Energy Association claims.

The US presently has 61GW of installed wind capacity, and 13GW of installed solar.

The use of coal for electricity generation varies widely across the US, accounting for just 3% of the mix in New England, but two-thirds of generation across sections of the Great Plains.

The proposal comes as part of a major second-term offensive from the Obama administration on climate and energy issues, seen as one of the few areas in which the president can still make considerable progress in the teeth of obstructionism from the Republican-controlled House of Representatives.

Late last year the EPA proposed new rules for future power plants, which would essentially make it impossible to build new coal-fired power stations – although few utilities were planning to anyway, given the US gas boom. As such, the rules for existing power plants are seen as being far more important.

The EPA’s announcement, and the political battles that it will spark, will be closely watched around the world, from Beijing to Brussels, and will give Obama a stronger hand heading into next year’s critical UN climate talks in Paris.

As an interim target, the new EPA proposal calls for a 25% cut to existing power plants' emissions by 2020, which should keep the US well under the 17% cut for 2020 (on a 2005 baseline, and for overall emissions) it pledged five years ago at the failed UN climate talks in Copenhagen.

The EPA estimates that the proposal would add 1-2% to the cost of generating electricity by 2030, but says the savings to the climate and the public's health would be far greater.

The power sector is the single largest generator of carbon dioxide in the US, followed closely by transporation.