By Potts, Brian H.
Regulation , Vol. 36, No. 4
In September, the Environmental Protection Agency proposed a rule that would require all newly constructed coal power plants in the United States to install carbon capture and storage (CCS) technology. CCS is a new technology that separates the primary greenhouse gas (carbon dioxide) from the power plant's exhaust and pipes it to underground reservoirs for storage. This proposal represents the first major step in President Obama's plan to regulate greenhouse gas emissions from power plants, which are this country's largest emissions source.
At first blush, this policy sounds like a meaningful effort to reduce carbon dioxide emissions from coal power plants, which alone represent about a third of all U.S. emissions. From a legal standpoint, however, the EPA's choice of CCS represents a gamble that could end up significantly delaying emissions reductions.
To understand why, it is necessary to consider three points. First, the future of coal is already bleak. New coal plant construction will likely wane in the coming years regardless of what the EPA does with its rule. Second, the policy is legally risky because CCS is a young and costly technology that the EPA probably does not have the authority to require. And third, if a court overturns the EPA's CCS mandate, the decision will significantly delay the next, more meaningful step in the president's plan: the regulation of existing power plants.
Requiring CCS will not lower emissions / The EPA itself projects that requiring CCS "will result in negligible [carbon dioxide] emissions changes." That is because, even without a CCS mandate, it is unlikely that new coal power plants will be built in the United States for at least the next decade, given market conditions. If anything is built, it will be plants that burn natural gas (which are much cleaner) because natural gas prices are at historic lows and forecasted to stay that way (thanks to, among other things, the revolutionary extraction technique known as fracking). Natural gas prices would need to double or even triple for new coal plants to become viable again, with or without CCS. As such, what the EPA requires for new coal plants won't matter much from an emissions perspective.
Legally risky/ Under the Clean Air Act, the EPA can only require technology that is both adequately demonstrated and can be installed at a reasonable cost. Yet a court could easily find that CCS meets neither of those criteria. In its proposal, the EPA points to a few small-scale pilot projects as proof that CCS is adequately demonstrated. However, there are no large-scale coal power plants using CCS anywhere in the world today. About two dozen large-scale CCS projects are in the planning or very early construction phase worldwide, but none are operational. In fact, Norway just recently abandoned its plan to install CCS at a large oil refinery, citing doubts over its commercial viability.
The EPA's position on cost is also tenuous. The agency has admitted that adding CCS to a new coal power plant would increase the plant's cost by about 80 percent. To put that figure in context, the most expensive environmental control technology the EPA has ever required for a new coal power plant is a sulfur dioxide scrubber, which increases the plant's cost by about 20 percent.
Indeed, the EPA's estimate of an 80 percent cost increase from CCS might be too low. One of the largest U.S. utilities, Southern Company, is working with the Department of Energy to build the first full-scale coal power plant with CCS. The demonstration project, located in Mississippi, is only about 75 percent complete and the project costs have already ballooned to about $5 billion-twice the amount Southern Company originally planned to spend.
Legal challenges to the EPA's proposal must be filed in the U. …