Coal’s Worst Fear Affirmed in Analysis of Obama Climate Plan

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Emissions Rise at a Coal-Fired Power Plant in West Virginia
Emissions rise as a U.S. flag flies at a coal-fired power plant in Winfield, West Virginia. Photographer: Luke Sharrett/Bloomberg

A new government analysis of President Barack Obama’s signature effort to fight climate change affirms what critics suspected: the proposal could further weaken an already battered coal industry.

Electricity generation from the carbon-intensive fossil fuel would fall by 90 gigawatts, more than twice the decline government analysts had predicted as recently as April, according to a report released Friday by the Energy Information Administration. There were about 292 gigawatts of coal-fired generation capacity in 2014, according to EIA.

Most of the coal-plant closures would occur by 2020, when the Environmental Protection Agency’s proposal to cut carbon dioxide emissions would kick in. Consumers may also take a hit as electricity prices would increase as much as 7 percent on average by 2025, partly because of the costs of building new power plants.

“In short, EIA confirms EPA’s rule is all pain, no gain -- a symbolic gesture that continues the administration’s policy path for destroying high wage jobs for generations,” said Hal Quinn, chief executive officer of the National Mining Association, a lobbying group that represents companies including Peabody Energy Corp.

Coal, which has served as the backbone of U.S. electricity generation for decades, is in a steep downturn amid competition from lower-cost natural gas and pressure to meet tougher emissions standards.

Economic Benefit

The Obama administration’s proposal, released in June, is not final. Supporters, including Senator Maria Cantwell, a Washington Democrat, said the EIA projected the plan would cut carbon emissions from all U.S. power plants 25 percent below 2005 levels by 2020.

“As proposed, the Clean Power Plan will significantly reduce carbon pollution that will deliver climate and health benefits of up to $93 billion,” said Liz Purchia, a spokeswoman for the EPA.

The EIA analysis doesn’t consider possible health and environmental benefits. It predicts a minor impact on the U.S. economy overall. Gross domestic production could fall as much as 0.25 percent by 2040, assuming emissions are further restricted after 2030, the EIA said.

Purchia said the EPA is reviewing more than 4 million public comments and working to ensure the plan is affordable.

Coal’s Decline

The EIA analysis found that coal production will decline 20 percent by 2020 and 32 percent by 2035, from a business-as-usual case.

Coal use has already been dropping, generating 37 percent of the country’s electricity in February -– down from over 50 percent in 2007, according to the EIA.

The market capitalization of the publicly traded U.S. coal companies has shrunk to about $19.4 billion from $78 billion in 2011, according to data compiled by Bloomberg.

Patriot Coal Corp. filed for bankruptcy last week for the second time in three years, joining at least a half dozen other coal producers that have sought protection amid the downturn.

Murray Energy Corp., the closely held miner that’s rapidly expanded amid the downturn, is now planning to lay off a quarter of its staff -- about 1,800 people -- at nine locations, according to a person familiar with the situation, who asked not to be identified Thursday because the information isn’t public.

Peabody spokesman Chris Curran said the U.S. should rely on technology “not closures” to reduce carbon dioxide emissions from fossil fuels.

Natural Gas

Natural-gas use initially would replace lost coal, with wind power and other renewable energy sources taking a greater share of U.S. electricity production in later years, the EIA said.

Natural gas generation in April and May is predicted to have almost reached the level of coal use for the first time since April 2012, the EIA said in a short-term energy outlook on May 12.

While retail electricity prices are projected to increase as much as 7 percent on average from 2020 to 2025, in some regions the costs begin to recede to the EIA’s baseline levels by 2030. Electricity costs in the Southwest and Southeast may remain higher than without the EPA rule, according to the report.

Steve Clemmer, director of energy research at the Union of Concerned Scientists, a Cambridge, Massachusetts-based environmental group, said the analysis shows the cost impacts from the rule to be modest.

“The increase in natural gas use in early years followed by a big shift to less polluting renewable energy enables the country to continue the transition away from coal,” Clemmer said in a statement.

Representative Lamar Smith, a Texas Republican and critic of the EPA, requested the analysis from EIA.

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