Texas Needs Biggest Cut to Comply With Climate Plan

Photographer: F. Carter Smith/Bloomberg

A petrochemical refinery located along the Houston ship channel in Texas. Close

A petrochemical refinery located along the Houston ship channel in Texas.

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Photographer: F. Carter Smith/Bloomberg

A petrochemical refinery located along the Houston ship channel in Texas.

Republican Governor Rick Perry won’t like it, but Texas, along with several other coal-reliant states faces the biggest task in complying with new carbon emissions standards proposed by the Obama administration.

The nation’s top emitter of greenhouse gases, Texas would account for more than a quarter of the total cuts in greenhouse gases that would be required, according to data compiled by Bloomberg Government. Other states facing steep cuts are Louisiana, Florida, Pennsylvania and Arizona.

The plan “is the most direct assault yet on the energy providers that employ thousands of Americans, and fuel both our homes and our nation’s economic growth,” Perry said in a statement. “These rules will only further stifle our economy’s sluggish recovery and increase energy costs for American families.”

The boldest single effort by the U.S. to tackle climate change, announced today by the U.S. Environmental Protection Agency, would create a series of state-by-state targets for 2030 that would average 17 percent from current levels. Once achieved, they would mean the country had cut emissions from power plants 30 percent from 2005 levels.

The proposal set off a flurry of responses from states. Some heavy polluters, such as Louisiana, vowed to fight the rules. Others, such as Washington State, which EPA data show has the biggest percentage cut to make to meet the 2030 target, were more supportive.

Governor Inslee

“We have an obligation to protect our state, our economy and our environment for our children and for future generations,” Washington Governor Jay Inslee said in a statement.

Though the state must cut its emissions by 72 percent to meet the EPA’s preferred target, it has already taken steps to comply. Inslee signed an executive order in April committing the state to “eventually eliminate” the use of coal, according to a statement.

Washington cut carbon emissions from its electricity production 54 percent from 2005 through 2012, according to Bloomberg Government data.

In fact, a number of states have already made progress on the goals. Nationwide, emissions from power plants fell about 15 percent from 2005 to last year.

Health Benefits

By reducing both the risks of climate change, and the pollution associated with coal-fired power plants, the administration said that the plan would lead to $90 billion in climate and health benefits. It would cost utilities and other companies up to $8.8 billion.

Because overall electricity use would fall, the plan will lower customers’ electricity bills, as well, it argues.

What EPA has put forward is “a sensible, state-based plan” President Barack Obama said today in a conference call with health groups.

Critics aren’t convinced, and warned that the effort would stifle the economy and send electricity rates skyrocketing.

The 560 plants that burn coal to make electricity account for about 75 percent of all power-plant emissions. Coal, the most carbon-intensive fossil fuel, provided 39 percent of the U.S. power in 2013, according to Energy Department data. While that’s down from about half, coal is remains the single largest source of electricity generation in the U.S.

Texas has the nation’s second-largest economy and the second-largest population after California, and so it’s large reductions aren’t a complete surprise. Still, its prominence highlights the fact that Obama will be reliant on recalcitrant Republican-led states to achieve the goals he highlighted today.

Power Bills

“These rules will effectively double the cost of electricity nationally,” Eric Skrmetta, chairman of Louisiana’s public service commission, which regulates electric rates in the state.

The states that face the steepest percentage reductions are a hodge-podge, ranging from Washington to Arizona, South Carolina to New Jersey. Some states, such as New York, have already taken action to reduce greenhouse gases, and so may now need to redouble efforts.

The EPA said its reductions aren’t calculated off a baseline, and instead were developed based on its calculation of what states can do in four areas: tune-up coal plants, run gas plants more often in place of coal, boost renewable fuels or pursue energy efficiency to reduce overall demand.

State Tasks

Once those standards are set, a year from now, the individual states will then face the task of coming up with their plans for how to make those cuts. They can do so by mixing and matching policies outlined by the agency.

Emissions from power plants were already down 15 percent from 2005 through 2012, halfway to the goal, according to Vicki Arroyo, executive director of the Georgetown Climate Center. The group compiled a list of reductions by state, which showed that many, including New York, Washington, Virginia and Georgia, have already exceeded cuts of 30 percent.

Still, past improvement doesn’t mean less is expected of those states today. One state needing to cut more than 40 percent is Georgia.

“I have a real problem with them pretending it’s not going to have an effect on electric rates,” said Chuck Eaton, the Republican chairman of the Georgia Public Service Commission. “They make the rules and I’m the one having to hand Georgians the bill.”

Coal Slips

While the overall cut in Texas is steep, booming natural-gas production in the state and large increases in wind energy mean coal’s place in the economy is already slipping. Energy Future Holdings Corp., the largest power generator in Texas, filed for bankruptcy on April 29 after a collapse in gas prices cut into revenue at the company’s coal-fired and nuclear power plants. Owners KKR & Co., TPG Capital and Goldman Sachs Capital Partners took the former TXU Corp. private in the largest leveraged buyout ever seven years ago.

Texas is the nation’s top wind-power producer.

Making steep reductions would mean shuttering only a few of the state’s largest, dirtiest coal plants, said Al Armendariz, the former top EPA official in Texas and now a regional official with the Sierra Club.

“Luckily, we have more renewable resources than anyone else,” Armendariz said in an interview. “We just need to do what Texans know how to do: roll up our sleeves and get to work.”

To contact the reporters on this story: Mark Drajem in Washington at mdrajem@bloomberg.net; Margaret Newkirk in Atlanta at mnewkirk@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net Steve Geimann

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