Obama Sets Limiting Carbon as Priority in Climate Plan

Photographer: Charles Dharapak/AP Photo

President Barack Obama wipes his face as he speaks about climate change, on June 25, 2013, at Georgetown University in Washington. The president is proposing sweeping steps to limit heat-trapping pollution from coal-fired power plants and to boost renewable energy production on federal property, resorting to his executive powers to tackle climate change and sidestepping the partisan gridlock in Congress. Close

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Photographer: Charles Dharapak/AP Photo

President Barack Obama wipes his face as he speaks about climate change, on June 25, 2013, at Georgetown University in Washington. The president is proposing sweeping steps to limit heat-trapping pollution from coal-fired power plants and to boost renewable energy production on federal property, resorting to his executive powers to tackle climate change and sidestepping the partisan gridlock in Congress.

President Barack Obama declared that limiting carbon emissions is in the national interest, setting a standard that will affect almost every sector of the economy, from power plants to the proposed Keystone XL pipeline.

The package of initiatives announced in an address in Washington today mark the president’s first detailed plan for confronting what he’s called a central global challenge of the 21st century.

Saying that science had put to rest the question about whether the planet was warming, Obama vowed to use his executive powers to act, arguing that limiting emissions would spur technological advancement and new jobs.

“I don’t have much patience for anyone that denies that this challenge is real,” Obama said in the speech at Georgetown University. “Sticking your head in the sand might make you feel safer but it’s not going to protect you from the coming storm.”

The president briefly addressed TransCanada Corp (TRP).’s Keystone XL pipeline, which is opposed by environmentalists who have been among his biggest political backers. The activists have made the pipeline decision, due from the State Department later this year, a litmus test for Obama on environmental issues.

“Our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution,” the president said. “The net effect of the pipeline’s impact on our climate will be absolutely critical to determining whether this project is allowed to go forward.”

Photographer: Andrew Harrer/Bloomberg

A mock oil pipeline is carried during a Keystone XL oil pipeline protest near the White House in Washington, D.C. Close

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Photographer: Andrew Harrer/Bloomberg

A mock oil pipeline is carried during a Keystone XL oil pipeline protest near the White House in Washington, D.C.

Pipeline Analysis

While Obama didn’t indicate whether he favored approval, a draft State Department analysis, released March 1, said that the pipeline would have minimal impact on climate change because the oil sands would be mined and developed with or without Keystone XL.

Obama’s comments on Keystone XL were “neutral” for the project because of the earlier State Department assessment, Juan Plessis, an analyst at Canaccord Genuity Corp. in Vancouver, said in phone interview today.

“It’s politics. He didn’t say ‘no,’ he didn’t say ‘yes,’ he just said the State Department is evaluating it,” said Plessis, who said he expects the project will be approved. “I didn’t see anything that led me to believe he’s not going to approve it or that he’s changing his mind on it.”

The centerpiece of the president’s plans, which require no congressional input, are the first-ever limits on carbon emissions from all power plants, a move that has been fought by utilities such as Southern Co. (SO) and American Electric Power Co. (AEP) and coal producers including Peabody Energy Corp. (BTU)

Power Plants

By focusing on power plants, Obama’s administration is confronting one of the largest contributors to greenhouse gas emissions. Forty percent of U.S. carbon dioxide emissions, and one-third of all greenhouse gases, come from electric power plants, according to the U.S. Energy Information Administration.

There are about 6,597 power plants in the U.S., 589 of which are coal-fired, according to the Energy Information Administration. Last year, coal plants accounted for 38 percent of electricity produced in the U.S., followed by natural gas and nuclear power which produced 29 percent and 20 percent, respectively.

Actual reductions under Obama’s plan are unlikely to begin until 2018, given the amount of government and legal review required, according to Kevin Kennedy, director of the climate initiative at the World Resources Institute.

“There really is a need to be able to move ahead with a regime of solutions throughout the economy,” he said. “But starting now with power plants is going to be a big first step.”

Carbon Capture

The president’s plan also includes $8 billion in new loan guarantees for carbon-capture projects, as well as proposals to promote renewable energy development on federal lands, the construction of more climate-resilient infrastructure, and energy-efficiency standards for appliances and federal government buildings.

Obama administration officials wouldn’t put a price on the package.

As the administration rolled out pieces of the plan, the proposals reignited battles with industry groups and Republicans.

“Taking America’s most significant source of electricity offline would have disastrous consequences for our nation’s economy,” Mike Duncan, the president of the American Coalition for Clean Coal Electricity, said in a statement.

Economic Impact

Senate Republican Leader Mitch McConnell of Kentucky, who represents the nation’s largest coal-producing state after Wyoming and West Virginia, said he would tell Obama at a meeting today that the emissions plan would hurt jobs.

“Declaring a ‘War on Coal’ is tantamount to declaring a ‘War on Jobs,’” McConnell said in a statement. “It’s tantamount to kicking the ladder out from beneath the feet of many Americans struggling in today’s economy.”

The National Republican Senatorial Committee today sent statements about Obama’s “radical climate change agenda” to news organizations in coal states where Democratic senators including Mark Pryor of Arkansas, Mary Landrieu of Louisiana and Kay Hagan of North Carolina face re-election in 2014.

“Kay Hagan worked to help elect Barack Obama and is responsible for the liberal policy agenda that will destroy jobs, raise energy costs, and hurt working families in states like North Carolina,” according to one release.

Growth Debate

Obama argued today that Americans don’t have to choose between economic growth and cutting carbon pollution by pointing to jobs that will be created through the development and use of renewable and more efficient energy technology.

The president’s plan is helped by a recent change in the government’s calculation of the social cost of carbon emissions, a measure that’s used to determine the costs and benefits of climate rules. The U.S. government now assumes it is worth about $36 per ton to avoid emitting carbon, an increase from the $22 per ton price previously used.

“The EPA could generate a rule that is 60 percent more expensive then it would have been prior to the change in the social cost models and still claim that it is cost beneficial,” said Scott Segal, a lobbyist for coal-fired utility companies. “That’s the kind of back of the envelope accounting that would make Enron smile.”

Delayed Rules

Rules for new power plants proposed by the EPA, under authority granted by the Clean Air Act, have been indefinitely delayed. Obama plans to put new mandates on the agency, setting a deadline of Sept. 20 for new power plants and the release of a proposal for existing plants by June 2014.

The president pledged more than three years ago to cut U.S. carbon-dioxide emissions 17 percent below 2005 levels by the end of the decade. An administration-backed effort to pass a market-based system to price carbon dioxide failed in the Senate during Obama’s first term, after the White House prioritized votes on the health care law. The collapse of that bill bitterly disappointed environmentalists, who’d pushed the president to take up the issue sooner.

To contact the reporters on this story: Lisa Lerer in Washington at llerer@bloomberg.net; Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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