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Why the World Not Excited about Obama’s New Power Plan?

Jan 15, 2015
  • Qi Ye

    Professor, Tsinghua University

China and the United States made a ground-breaking announcement on climate change and clean energy when the two Presidents met in Beijing. The two countries would take ambitious targets and actions on reducing greenhouse gas emissions. This was shortly after the European Union released its climate and energy target for 2030 to cut greenhouse gas emissions by 40% from its 1990 level. It is only five months after the EPA announced its New Power Plan, a center-piece for Obama’s Climate Action Plan. But the world responded quite differently back then. Why?

I was in Washington the week before the release in June 2014. Many climate advocates I talked to were very excited expecting the delivery of the biggest climate regulation proposal by the Obama administration, or by the government of the United States, of all time. Indeed, this had been considered the cornerstone of Obama’s Climate Action Plan, and indeed provides a clear indication as the country’s climate target for the Paris Agreement next year. After all, the power sector emits about 40% of the carbon dioxide in the country, equivalent to the carbon emission of India and Brazil combined. Nevertheless, the proposal has not generated much enthusiasm elsewhere in the world.

The proposal is meant to set the emission standard for the exiting power plants. In September 2013, the EPA set a very high standard for new power plants. Considering that an average coal-fired power plant currently emits twice the standard (even the current best practice would emit 50% higher), no coal-fired power plant could be ever built under such regulations without a carbon capture technology. Stringent? Sure, but, who cares? Nobody would build a coal-fired power plant anyway, now that gas is cheap, and clean. So, it was not a problem, politically or technically.

Yet, the emission standard for new power plants must be taken seriously, for it sets a limit to ensure the future of the power industry. The standard, given enough time, will eventually reshape the US power sector. This standard also has triggered imagination about how stringent the regulation for existing power plants could be, which is more than a technical issue: it is political. It will quickly pick the winners and losers and draw clear line between them. The political resistance had promised to fight back.

The EPA has skillfully managed to get around some of the anticipated political obstacles through a smart regulation design. Instead of setting a universal emission standard for all power plants nation-wide, the EPA delegates its power and responsibilities to individual states. It sets an emission rate target – the amount of emission per unit of electricity generated – for each state, and the state is given the authority and responsibility to choose appropriate policy tools to achieve that target. Since each state is assigned a different target considering the current installation, energy mix and power transmission and consumption, the political resistance from otherwise less advantaged states is effectively minimized. The main opposition comes from the power and coal industry. A lower target would help appease the opposition.

The new regulation sets to cut the overall emission from power sector by 30% of the 2005 level by 2030. It is indeed a significant reduction, and biggest ever promised by the US government. Despite the claimed political difficulty, this target could be achieved with little technical challenge. By 2012, the power sector reduced its carbon emission by about 16% from 2005, or almost 2.5% per year in seven years. Another 14% reduction is left for the remaining 13 years to fulfill. Roughly one percentage point a year of reduction will finish the job. Of course it will be harder than it sounds, considering that the demand for power supply is expected to grow in the coming decade. But the arithmetic is simple and clear. Yes, it is a burden and a cost to the coal-fired power plants, but not unbearable. And most would consider it justifiable.

The EPA set an overall target of 30% reduction of 2005 levels, consistent with the US pledge at the Copenhagen Accord, while most other developed countries stuck to their Kyoto base year of 1990. The choice of base year of comparison makes a major difference. According to the EPA, the emissions from the US power industry grew by nearly one third from 1990 to 2005. In this context, Obama’s New Power Plan would bring the sector’s emissions closer to the 1990 levels if successfully implemented. And that is a big IF. Meanwhile, The European Union is well on track to cut its total emissions by 20% by 2020, and another 20% by 2030, compared not to the 2005 level, but to the 1990 level! The gap across the Atlantic is certainly growing bigger.

Considering the fact that many are even unhappy with the EU target, how can they be excited about Obama’s new climate regulation? Unfortunately, Obama is caught between the domestic political reality and an urgent global demand. Accommodation of the domestic politics compromises the ambition to address to the global climate challenges.

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