Trump EPA finalizes rollback of key Obama climate rule that targeted coal plants

WASHINGTON - The Trump administration finalized its biggest climate policy rollback Wednesday, requiring the U.S. power sector to cut its 2030 carbon emissions 35 percent over 2005 levels - less than half of what experts calculate is needed to avert catastrophic warming of the planet.

The Affordable Clean Energy rule, issued by the Environmental Protection Agency, demands much smaller carbon dioxide reductions than the industry is already on track to achieve, even without any federal regulation. As of last year the U.S. power sector had cut its greenhouse gas emissions 27 percent compared with 2005.

Addressing an audience of supporters, including coal miners from Pennsylvania and West Virginia, EPA Administrator Andrew Wheeler said the new policy will overturn a climate policy that would have imposed higher costs on low and middle-income Americans.

"That means cleaner and more affordable energy for the American public," he said.

The new rule comes as many companies and dozens of states wrestle with how to curb greenhouse gas emissions, despite President Trump's rejection of the scientific consensus that burning fossil fuels is already triggering major climate impacts, including increased droughts, wildfires and intense storms. It reverses the Obama administration's 2015 regulation, Clean Power Plan, that would have forced the power sector to switch from coal-fired generation to lower-carbon fuels such as natural gas, solar and wind.

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Several of the industry’s biggest players have pledged to cut emissions anywhere between 40 percent and 60 percent by 2030, including American Electric Power, DTE, Duke Energy and Southern Company.

"It's just not relevant," said BloombergNEF analyst Ethan Zindler, whose firm projects that U.S. utilities will reduce their carbon output 55 percent by 2030 due to market forces alone.

But Zindler added that it will be difficult for these same companies to make much deeper cuts after 2030, since they will already have retired their dirtiest coal-fired plants and many of the aging nuclear plants providing the United States with carbon-free electricity will be taken offline.

Making steeper reductions would be required to meet the goal of keeping global temperatures from rising more than 2 degrees Celsius above preindustrial levels, a pledge the United States and most of the world's other nations first made in 1992 and have reaffirmed each year, including in the 2015 Paris agreement.

The U.S. electricity sector needs to cut its emissions 74 percent over 2005 levels by 2030 to avoid hitting the 2-degree mark, according to the International Energy Agency. Overall, the country must slash greenhouse gas emissions 48 percent by 2030, according to the IEA's Brent Wanner, with the deepest cuts coming from the power sector because cheap alternatives to coal are readily available.

"We expect it to be very much in the vanguard of any decarbonization strategy," said Wanner, a top analyst at IEA's World Energy Outlook team.

Jason Bordoff, founding director of Columbia University's Center on Global Energy Policy, said in an interview that his group had found that more aggressive action by U.S. officials such as a nationwide carbon tax of $50 per ton could cut the country's greenhouse gas emissions by 40 percent over the next decade.

"Market forces don't do that by themselves," Bordoff said. "You need regulations."

But current and former Trump administration officials said the new rule represents a more restrained approach that would allow state regulators rather than Washington bureaucrats to determine the right energy mix for their region. It requires utilities to make efficiency improvements and curb the amount of carbon dioxide released from power plants, but does not dictate specific emissions targets the way the Obama administration did in the Clean Power Plan.

Twenty-eight states and a host of energy companies had challenged the Obama rule, which would have cut the power sector's emissions 32 percent by 2030. They argued that the EPA exceeded its authority by allowing state regulators to reach their climate target by compelling emissions cuts beyond a utility's physical plant such as through energy efficiency measures or the deployment of renewable power. The Supreme Court stayed the rule in 2016 in a 5 to 4 decision but did not rule on the merits of the case, which is still pending before the U.S. Court of Appeals for the D.C. Circuit.

Mandy Gunasekara, who served as principal deputy assistant administrator for EPA's air and radiation office until February and now runs a pro-Trump advocacy group called Energy45, said in an interview that the agency was adhering to the confines of the Clean Air Act.

"We're well on our way to paring back the offensive overreaches of the last administration's climate policies," she said. "The role of EPA is not to turn a coal plant into a wind farm or a solar field. It's to look at a coal plant and look at how to make it more efficient or environmentally friendly, however you want to look at it."

Critics, however, said it could keep some coal plants in business and make it harder for companies to pass on the cost of carbon-free investments to consumers.

A paper published earlier this year by researchers at Harvard, Boston University and Syracuse University, as well as Resources for the Future, said that the agency's new rule might increase efficiency at individual coal plants, but then they might end up operating more frequently and for a longer period of time.

The researchers found that as many as 28 percent of the plants affected could actually produce higher overall emissions in 2030 than if there was no federal policy in place. They also estimate that emissions of sulfur dioxide and nitrous oxide could rise in nearly two dozen states by 2030 compared with having no new federal regulation.

Some state regulators might not be willing to allow power companies to pass on the cost of investing in renewable projects to customers if there's no federal mandate to cut emissions, said Josh Price, a senior analyst at Height Capital Markets' energy and utilities team. In an interview, he noted that last year, the Texas Public Utility Commission rejected American Electric Power 's proposed $4.5 billion Wind Catcher project, after questioning whether the benefits justified its cost.

John McManus, AEP's senior vice president for environmental services, said the company was working to build multiple wind projects "on a smaller scale" to take the place of Wind Catcher.

"We still believe renewables make economic sense for our customers, and we're still pursuing them," said McManus, whose company has already cut its carbon emissions 53 percent compared with 2005 levels. "Will this make it harder for them to get approved? I don't know."

DTE Chairman and CEO Gerry Anderson, whose Detroit-based utility has pledged to cut its carbon output 50 percent by 2030 and 80 percent by 2040, said the new regulation won't affect his company's decision to shutter 14 of its 18 coal-fired units by the end of the decade,

"The industry's in motion, and it's got its own life," Anderson said in an interview. "That's certainly true for DTE. We're moving on, and the rest of the industry is, in a similar direction."

Some segments of the electricity sector haven't moved as swiftly.

Members of the National Rural Electric Cooperative Association have cut their carbon output 12 percent between 2005 and 2017, according to the group. The association's chief executive Jim Matheson praised the new rule Wednesday, saying in a statement that it "represents a more flexible path forward that will minimize the cost to consumers and preserve the reliability of the electric grid as electric co-ops work to promote a healthy environment and vibrant rural communities."

Environmentalists are already threatening to challenge the administration in court, on the grounds that it cannot defend such a radical about-face by the EPA.

"It can't be justified from the standpoint of the public interest," said Andres Restrepo, a staff attorney at the Sierra Club's Environmental Law Program. "It is really a dereliction of duty - moral, ethical, but also legal."

But Jeff Holmstead, a partner at Bracewell LLP who headed EPA's air office under President George W. Bush, said there is little chance that environmentalists would succeed.

“Some rules coming out of the Trump administration may be legally vulnerable, but the ACE rule is on very solid ground,” Holmstead said in an email. “I think there’s very little chance of it getting overturned in court.”