It looked like a reverse make-me-do-it – President Obama in his State of the Union address saying don’t-do-that-again to some of his most committed supporters. An array of groups had written to him just two weeks earlier about the failings of an “all of the above” energy policy, and the first words in his speech regarding energy and the environment were, “The “all of the above” energy strategy I announced a few years ago is working…”
This high-visibility affirmation came after Presidential counselor John Podesta had already sent a response to the groups that never mentioned “all of the above.” It touched on the subject only in a single phrase, saying the President “understands the need to consider a balanced approach to all forms of energy development, including oil and gas production.”
What kind of balance was he talking about – volumes, BTU’s, dollars, carbon? Balanced is good in concept, much better than unbalanced, but otherwise undefined. A default generic meaning, seen in much media coverage, is equal treatment of all sides. But presenting as equal things that are most definitely not is not good policy, news or energy. In a market where individual fuels cover vastly different portions of their costs, a strategy to treat them all the same is highly biased. It lets climate-forcing fossil fuels into the mix without regard to their earth-transforming impacts.
US climate policy is unfolding under the Clean Air Act. Mobile source and construction permitting regulations are in place. The US Environmental Protection Agency (EPA) has developed draft final rules for the performance of new power plants. Most important, EPA and the states will soon determine the form and stringency of the regulations for existing power plants responsible for roughly 40 percent of the nation’s carbon dioxide emissions.
Achieving President Obama’s 2020 emissions goals will depend largely on how regulations for existing power plants are designed and implemented under the Clean Air Act. Recently, the president asked EPA to seek out a regulatory system that, “to the greatest extent possible,” incorporates market-based instruments, performance standards, and regulatory flexibility. This flexibility could be accomplished in a number of ways.
Renewable power retailer Clean Currents will no longer provide electricity to its 15,000+ customers, as it had reliably done since 2005. Co-founders Gary Skulnik and Charlie Segerman announced on Friday that the company has shut its doors forever. Why? In a blog post to its customers, the duo explains that the recent severe cold weather is to blame:
“[T]he recent extreme weather, which sent the wholesale electricity market into unchartered (sic) territories, has fatally compromised our ability to continue to serve customers.”
Their reasoning piqued my curiosity. (And I’m not the only one—the Washington Post followed up with the firm’s co-founders yesterday.) What does it mean for the wholesale electricity market to go “into uncharted territories”? Could a few days of record prices put the entire company out of business?
Energy and climate in the State of the Union
Last week’s State of the Union address emphasized gains made in the energy sector as well as future promises of development and change. Below are highlights of recent analysis by RFF researchers on the various policy ideas mentioned in President Obama’s address.
On energy independence:
On natural gas:
- Richard Morgenstern, Arthur Fraas, and Winston Harrington on the use of natural gas for light-duty vehicles.
- Stephen Brown and Alan Krupnick on natural gas as a bridge to a low-carbon future.
- Alan Krupnick on whether natural gas vehicles will become a fuel choice for America’s vehicle fleet.
On fuel efficiency standards for cars and trucks:
- Joshua Linn on how vehicle manufacturers respond to tightening fuel economy standards.
- Virginia McConnell on implications of the new CAFE standards and complementary policies (and the dual goals of reducing fuel consumption and greenhouse gas emissions).
On renewable energy:
- Joshua Linn and Clayton Munnings on designing renewable electricity policies that reduce emissions.
- Results from a survey by RFF University Fellow Jon Krosnick on the public’s attitudes on climate change and clean energy.
On greenhouse gas regulations:
- Dallas Burtraw and Matt Woerman on the importance of flexibility in greenhouse gas regulation.
- Nathan Richardson on the impact of the US Environmental Protection Agency’s new source performance standards for coal plants.
- Dallas Burtraw, Joshua Linn, Karen Palmer, and Anthony Paul on analyzing the costs and consequences of regulating power plant emissions.
On climate change:
- Survey results from RFF, Stanford University, and USA Today on assessing American attitudes toward global warming.
- Brian Flannery on negotiating a post-2020 climate agreement.
On issues not mentioned in the speech:
- Joel Darmstadter and Alan Krupnick on the consequences of the Keystone XL rejection.
- Survey results from RFF, Stanford University, and USA Today on American opinions regarding the proposed Keystone pipeline.
RFF Librarian Chris Clotworthy. Check out this week’s highlights below:
Pathways to Near-Zero-Emission Natural Gas Heavy Duty Vehicles
The “Pathways to Near-Zero-Emission Natural Gas Heavy Duty Vehicles” report, authored by GNA on behalf of Southern California Gas Co. (SoCalGas), showcases the technologies currently under development that could deliver near-zero-emission heavy-duty natural gas engines by the end of this decade… — via Gladstein, Neandross & Associates for the Southern California Gas Co.
Meeting the Renewable Fuel Standard Mandate for Cellulosic Biofuels: Questions and Answers
The Renewable Fuel Standard (RFS) was expanded under the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140) in an effort to reduce dependence on foreign oil, promote biofuel use, and stabilize transportation fuel prices, among other goals. Over 15 years, the RFS requires that increasing amounts of biofuels—36 billion gallons by 2022—be used in transportation fuel. The mandate is to be accomplished in part with advanced biofuels, including cellulosic biofuels… — via Congressional Research Service
Drilling California: A Reality Check
Written by PCI Fellow J. David Hughes and published in partnership by Post Carbon Institute and Physicians, Scientists & Engineers for Healthy Energy, this report provides the first publicly available empirical analysis of actual oil production data from the Monterey Formation, including from wells that have undergone hydraulic fracturing and acidization. It lays out some of the play’s fundamental characteristics compared to other tight oil plays… — via Post Carbon Institute
Development of Unconventional Hydrocarbon Resources in the Appalachian Basin: Workshop Summary
Development of Unconventional Hydrocarbon Resources in the Appalachian Basin is the summary of a workshop convened by the National Research Council to examine the geology and unconventional hydrocarbon resources of the Appalachian Basin; technical methods for producing unconventional hydrocarbons and disposing of wastewater; the potential effects of production on the environment… — via National Academy Press
The Impact of Environmental Regulation on Productivity: the Case of Electricity Generation Under the Clean Air Act Amendment
This paper measures the impact of the 1990 Clean Air Act Amendment on the productivity and output of US coal- red power generating units. The Act led to power units adopting a number of different pollution abating behaviors, one of which was an input change to lower SO2 emitting coal. A key feature of coal generating units is each one is designed to burn a particular variety of coal, with signi cant deviations from the targeted coal characteristics resulting in productivity loss. — via University of Wisconsin, Madison, Dept. of Economics
For more from the RFF Library blog, click here.
Bill McKibben makes an impassioned argument in Politico about the dangers to the economy and the environment of building a facility for liquid natural gas (LNG) exports at Cove Point, MD. His case, however, rests heavily on the inaccurate assumption that the benefits of the exports will be limited only to the natural gas industry while the rest of us will foot the bill, both financially and in terms of environmental damage. In fact, the economic costs of the facility are zero to the American public, as they are covered by buyers of gas abroad through long-term contracts. Indeed, large tax revenues (larger than the Ravens Stadium he references) would be generated. Any incremental environmental costs will be small as well, since the footprint of this existing facility, built to import rather than export gas, is not to be expanded. Furthermore, the idea that natural gas prices will rise significantly if exports of LNG are permitted doesn’t hold water. Respectable studies of the effect of adding exports to US demand show that price increases would be minimal, because of both highly elastic gas supply and limitations on how much LNG the US can export in light of world supply and demand. And remember, it is the shale gas revolution that cut prices dramatically in the first place. So our cheaper home heating and electricity bills are owed to that. Indeed, McKibben’s stated agenda in the article of keeping the gas in the ground is what would dramatically raise domestic prices.
There are other benefits from converting Cove Point (and other plants) to LNG export. At the moment, these plants are close to useless because they were built on the premise of a growing US dependency on foreign natural gas. Aside from additional tax revenues from LNG exports and greater production, cheaper gas abroad reduces prices worldwide, including on energy-intensive goods we import. While domestic prices may rise a bit, increased prices for natural gas stimulate more drilling, which actually increases the supply of natural gas liquids (which are sometimes found along with the natural gas), and it is these liquids that companies use as feedstock to make chemicals and other products. So more drilling lowers the price of feedstock, which benefits feedstock-dependent domestic manufacturers. In addition, to the extent our exports make gas prices in Europe and Asia lower, that may enable more fuel substitution away from coal, lowering greenhouse gas emissions.
McKibben’s best argument for limiting exports, indeed, for keeping the gas and oil in the ground in the first place, is the effects on climate change. Here, let me focus only on his claim that the lifecycle emissions of natural gas (including most importantly, fugitive methane emissions) make it equivalent from a global warming perspective to the coal it is replacing. The fact is that nobody knows yet how this comparison will turn out. But, unlike coal, which would need complex and expensive technology to get greenhouse gas emissions down, stopping leaks is mainly what is required for natural gas. Between future regulatory actions and the companies’ own best practices, it is safe to say that fugitive methane leaks will be headed down, maybe even to where the environmental community will see gas as a bridge to a low carbon future.
Greenhouse gas emissions need to come down. But fighting exports of gas and oil is way down the list of actions that will be effective and economically sensible.
RFF ON THE ISSUES: EU goals and the post 2020 climate negotiations; Regulating power plant emissions; Philanthropy for parks
EU Goals and the Post 2020 Climate Negotiations
While many nations (including the United States) have had little public discussion regarding the post-2020 climate agreement to be adopted in Paris next year, public debate has been ongoing in Europe for some time. Last week, the European Commission announced new targets, recognizing that approaches should accommodate “the need for economic growth and industrial competitiveness.”
In a new issue of Resources magazine, RFF’s Brian Flannery writes that “the ultimate climate agreement is more likely to reflect bottom-up pledges based on national priorities and circumstances.” He suggests this approach may foster greater participation and long-term progress than approaches tied to strict, mandatory global outcomes.
Each week, we review the papers, studies, reports, and briefings posted at the “indispensable” RFF Library Blog, curated by RFF Librarian Chris Clotworthy. Check out this week’s highlights below:
Fueling the Future with Natural Gas: Bringing It Home
Low natural gas prices resulting from the development of unconventional gas resources in North America will hold for the long term, creating opportunities to expand the economic benefits and cost savings to consumers through greater direct natural gas use, a new IHS report says. Increased use of natural gas also has the potential to contribute to energy efficiency and emissions reduction goals, the report adds… — via IHS
Economic Implications of Unconventional Fossil Fuel Production
…In a paper released by the National Agriculture & Rural Development Policy Center, the researchers offer guidelines for communities and policy makers to use as they determine whether to encourage or discourage oil and gas production as an economic development strategy. — via National Agriculture & Rural Development Policy Center
Powering Forward: Presidential and Executive Agency Actions to Drive Clean Energy in America
…Its 200 recommendations include many actions the administration is already taking or considering, including new DOE efficiency standards for appliances and more stringent standards for methane leakage from petroleum production sites. — via Center for the New Energy Economy
Flood Insurance: Strategies for Increasing Private Sector Involvement
According to stakeholders with whom GAO spoke, several conditions must be present to increase private sector involvement in the sale of flood insurance. First, insurers need to be able to accurately assess risk to determine premium rates. For example, stakeholders told GAO that access to National Flood Insurance Program (NFIP) policy and claims data and upcoming improvements in private sector computer… — via U.S. Government Accountability Office
The Economic Cost of Global Fuel Subsidies
By 2015, global oil consumption will reach 90 million barrels per day. In part, this high level of consumption reflects the fact that many countries provide subsidies for gasoline and diesel. This paper examines global fuel subsidies using the latest available data from the World Bank, finding that road-sector subsidies for gasoline and diesel totaled $110 billion in 2012. Pricing fuels below cost is inefficient because it leads to overconsumption. Under baseline… — via U.C. Center for Environmental and Energy Economics
For more from the RFF Library blog, click here.
I have a new piece in the Milken Institute Review that looks at EPA’s current and near-future carbon emissions rules. It starts at the beginning of the story and is aimed at a more-or-less general audience, so if you haven’t been following the issue it’s a good place to start. Among other things I point out how the biggest critics and biggest advocates of the Clean Air Act in my view both have it wrong:
Significant climate policy is, in fact, being made today at the federal level, using existing law. But the legal and political limits on executive discretion act as a check on rash, disruptive changes. Moreover, Clean Air Act regulation need not be (indeed, never has been) as rigid as its critics claim. But the bang for a buck possible from regulation under the Clean Air Act is very much in doubt. That’s why decisions made this year and next – above all, about how much flexibility emitters will have in responding to new mandates and how the country’s armada of coal power plants is treated – will be the most significant ones that any president has ever made on climate.
….how flexibility matters a great deal:
The Clean Air Act therefore should make it possible to achieve the country’s short- to-medium-term climate-policy goals, even in the absence of new legislation. There will certainly be obstacles: important parts of the act are untested legally and litigation over new rules is certain. But an overabundance of caution on the part of the EPA would lead to inflexible, unambitious programs that achieved little. And while lawsuits will be costly, they are unlikely to delay implementation, since courts rarely stay regulations during litigation.
…and why I’m cautiously optimistic:
Even if it is designed poorly or undermined by litigation, climate regulation under the Clean Air Act cannot be the costly disaster predicted by its critics. Using the Clean Air Act for climate policy will not destroy the American economy, and if, over time, it destroys the American coal industry, it will not have acted alone. Cheap natural gas and environmental regulation that has nothing to do with climate (and that carries large health benefits) have already dealt coal a serious, and possibly mortal, blow.
On the contrary, there’s every reason to believe that well-designed and, above all, flexible Clean Air Act climate regulation can deliver a lot of emissions cuts for relatively little money and economic disruption. The president’s ambitious emissions goals and his call for flexibility, along with the important role for the states, warrant optimism about smart policy design. There is no other approach to climate policy available today or, given political realities, in the near future, with similar potential.
Sea Level Rise
While scientists continue to study rising sea levels, research has found that land on the densely populated East coast is also sinking, making it a “global hot spot for a rising sea level over the coming century.” Coastal communities are beginning to look for answers, and city planners remain uncertain about how bad it will get—and how fast.
RFF’s Roger Cooke notes that his method for developing “structured expert judgment” can help quantify uncertainty—and it has also been applied specifically to questions about sea level rise. (More on this can be seen in an RFF First Wednesday Seminar, “Ice Sheets on the Move”). In the meantime, RFF’s Carolyn Kousky suggests an option for climate-ready coastal development that “allows us to enjoy all the ocean has to offer, and yet reduces the risks” of oceanfront flooding.