With the EPA officially making a formal statement and releasing their new carbon emission regulations in early June, companies that operate in the energy production industry have a clearer picture of the requirements, and how that will impact their businesses.
The purpose of the new proposed emission guidelines are designed for states to follow in developing plans to address greenhouse gas emissions from existing fossil fuel-fired electric generating units.
Outlined in the drafted guidelines are state-specific rate-based goals for carbon dioxide emissions from the power sector, as well as specific steps for states to follow in developing their plans to reach those levels.
The goal of the directive is to cut 30% of carbon emissions by 2030.
Given the magnitude of the guidelines, there are several areas of direct and indirect impact that people are evaluating in the days after the announcement.
One area of the announcement of that is receiving a lot of attention is the state-by-state approach that was taken in creating targets.
Each state was given an objective to achieve in their emission rate, which is expressed as the weight of carbon dioxide that a state’s existing power plants are allowed to emit for every megawatt hour of electricity they generate.
The thought process behind taking a state-by-state approach was to avoid crippling states that are heavily dependent on coal power.
This article by Ed Crooks in the Financial Times takes a closer look at how emission rate goals vary between different states and some of the goals they have to reach. Time will be needed to see if the administration accurately assessed the capabilities of each state and their ability to reduce carbon emission rates.
One of the biggest reveals of the EPA’s new guidelines, which was hinted at a couple days before the announcement, was that there would not be a requirement for natural gas plants to use carbon capture and storage technology.
There are relatively few plants equipped with carbon capture technology and they are much more expensive to build and maintain than traditional plants. If there would have been a mandate to include carbon capture, power companies could have faced billions in construction costs to achieve compliance.
Without these additional costs, many of the feared employment cuts and price increases passed on to consumers may not materialize.
One last major area of impact is the political impact of the new guidelines. On a smaller scale, it has become an issue domestically with democrats in coal-rich states distancing themselves from the White House and Republicans trying to gain political capital from the move.
More importantly, since reducing our carbon emissions will only make a minor dent in the global carbon emissions that are released annually, many see this move as an attempt for President Obama to gain ammunition to affect change in India and China.
If other major players in the global energy market implement similar guidelines, then that would have a major impact on the mining and energy industry worldwide.
We’ll be closely following these developments as the consequences of the EPA guidelines become clearer over time.