Obama to unveil rule to cut greenhouse gas emissions

President Obama will unveil a rule Monday intended to confront climate change by cutting carbon dioxide emissions from power plants, the nation’s greatest source of the heat-trapping gas.

Obama plans to bypass Congress and use his authority under the Clean Air Act to achieve greenhouse gas reductions. Power generation accounts for about 40% of such emissions.

The 3,000-page rule is expected to spark lawsuits, claims of job losses and charges by critics that Obama has launched a new “war on coal.”

In some coal-reliant states, however, power companies and regulators are expected to take a more pragmatic approach, planning for a future they assume will include carbon dioxide limits.

“Carbon policy is going to impact our business, and we have to be prepared for that,” said Robert C. Flexon, chief executive of Houston-based Dynegy. “It can be a threat or an opportunity. I’d rather make it an opportunity.”

Which approach prevails - a legal fight or a political compromise - will help determine how quickly the U.S. will begin to reduce its greenhouse gas emissions.

As it seeks to reduce pollution, the administration must ensure that electricity supplies remain reliable and consumer rates do not increase significantly.

Some potential approaches are on display in Illinois, which relies heavily on coal, including nine plants operated by Dynegy. Additional power comes from nuclear plants and renewable sources, especially wind.

Although some older coal-fired plants have closed, power executives, regulators and some environmentalists say many need to keep running for now, although at less capacity. The reduced output could be made up through energy efficiency and renewable power, they say.

“We’re pretty consistent with what you’re hearing from other states, that you can’t have a one-size-fits-all approach, but a suite of tools instead to use to cut emissions,” said Lisa Bonnett, director of the Illinois Environmental Protection Agency.

Much of the wrangling over the new rule will probably center on its stringency: What baseline will be used to determine how much states have to reduce their emissions?

Will states have different standards to meet depending on how much coal generation they have? Will states get credit for cuts they already have made to emissions?

The Obama administration wants the rule in place by the end of 2016, just before the president leaves office, but given the likelihood of legal challenges, when the cuts might take effect is unclear.

In the past, the federal Environmental Protection Agency has ordered individual power plants to cut specific pollutants by set amounts. But that doesn’t work for carbon dioxide because the technology that would allow coal plants to cut those emissions is not currently cost-effective.

Instead, the EPA is expected to propose a rule that sets overall pollution reduction targets for states and gives them considerable flexibility on how to meet those goals.

In effect, the rule would enact some features of the so-called cap-and-trade plan that passed the House early in Obama’s first term but died in the Senate.

States would have an overall ceiling on the amount of greenhouse gases their power plants could emit - the cap. They could allow utility companies to trade in the hope of finding efficient, low-cost ways to achieve those goals.

Many energy companies have a mix of plants that use different fuels, and some could run cleaner units powered by natural gas or wind and reduce the use of coal-fired generators.

For the gigantic Prairie State plant in the southern Illinois town of Marissa, however, coal is all there is.

The largest U.S. coal plant built in the last three decades, Prairie State was erected in 2012 at the mouth of a coal mine by a consortium of utilities from several states. Its 14-story generation complex can produce 1,600 megawatts of power to serve about 2.5 million customers.

Thanks to $1 billion in technology, it emits less pollution, including mercury and sulfur dioxide, than other coal plants.

Still, Prairie State’s carbon dioxide output is greater than 90% of the country’s power plants, according to EPA data, and it cannot cut emissions enough to rival cleaner electricity generation.

The power it generates is more expensive than electricity from some natural gas plants, a gap that has generated complaints from communities that buy its output.

Plant executives have met with EPA officials on several occasions to argue for more time, said Ashlie Kuehn, Prairie State’s general counsel. The company has considered several options to offset the plant’s emissions.

“Do we install solar panels in our parking lot? Plant trees? Do we partner with a renewables company?” Kuehn asked. “I’m confident EPA heard our concerns. But we’re on pins and needles.”

Chicago-based Exelon owns the state’s six nuclear plants, which do not emit greenhouse gases.

Utility officials have considered closing as many as five of the plants, however, because electricity prices make recouping the cost of the reactors impossible. A rule that would limit coal-generated electricity would help Exelon’s bottom line.

“There’s a lot of talk about how greenhouse gas rules would negatively affect coal plants, and that’s true,” said Joseph Dominguez, senior vice president of regulatory affairs at Exelon. “At the same time, not having greenhouse gas rules negatively affects the expansion of clean energy. The rule could help us. Right now, nuclear isn’t compensated for its zero-emission profile.”

Environmentalists like Howard Learner, executive director of the Environmental Law & Policy Center, a Chicago-based advocacy group, hope the rule will foster greater energy efficiency and renewable energy use.

In 2007, Illinois passed a law to require power companies to reduce electricity consumption by 2% every year through energy efficiency programs and incentives.

“I think the focus of a new rule can’t just be about coal as the bad guy,” said Anne Evens, chief executive of Elevate Energy, a Chicago-based nonprofit that improves energy efficiency in affordable housing and other large buildings.

In many cities, she said, energy consumption from housing accounts for two-thirds of greenhouse gas emissions. The problem is especially acute in parts of the Midwest, where older housing is more common.

Other potential offsets to coal emissions are already taking root because of a state law, similar to those in several other states, that calls for 25% of Illinois’ power to come from renewable energy by 2025.

Along a 17-mile stretch in central Illinois, 240 wind turbine towers rise from corn and soybean fields by the towns of Ellsworth, Arrowsmith and Saybrook. The strong winds that blow through McLean County all winter drew Houston-based EDP Renewables to the area eight years ago.

The new greenhouse gas rule could prompt the company and others to build more wind turbines.

Sitting in an office at the back of his Doyle Oil shop in Ellsworth, Jack Doyle, 85, said he isn’t up to speed on the power plant rule, but if he could lease more of his land for wind turbines, he would.

He researched the issue on vacation in California, sneaking through a fence into a wind farm and talking to an employee. Now, Doyle has seven turbines on this land and half of one that straddles a neighbor’s land.

“I don’t know about all that stuff in Washington,” Doyle said. “But the wind is up there doing nothing, so why not use it to make electricity?”