With his new energy plan
that was announced on August 3, President Barack Obama appears to making good on a promise he made in 2008. Speaking with the San Francisco Chronicle
editorial board, Obama said “Under my plan … electricity rates would necessarily skyrocket.” His opponents, included failed Republican presidential candidate Mitt Romney, who have cited the quote ever since.
When Obama represented coal-producing Illinois in the U.S. Senate, he averred that he was no “coal booster.” He added, “What I’ve said is that for us to take coal off the table as an ideological matter, as opposed to saying ‘if technology allows us to use coal in a clean way, we should pursue it,’ that I think is the right approach.” At the time, Obama’s cap-and-trade program would have used coal-plant pemission fees to accelerate carbon capture technology. “So if somebody wants to build a coal-fired power plant, they can. It’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted,” he said in the Chronicle interview, with the fees providing billions of dollars for investment in alternative energy.
“When I was asked earlier about the issue of coal, under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket,” he added. “Regardless of what I say about whether coal is good or bad, because I’m capping greenhouse gases, coal-powered plants … would have to retrofit their operations. That’ll cost money; they will pass that money on to consumers,” Obama said about his cap-and-trade plan.
While the cap and trade deal is now dead, coal-fired power plants are powering down all over the country and the blame is being directed against the Environmental Protection Agency under Obama. Critics of the Obama administration say that regulations designed to reduce carbon monoxide and other so-called greenhouse gases are actually designed to kill the coal industry. Republicans point to Obama’s remark, and to Energy Secretary Steven Chu’s 2008 demand to “figure out how to boost the price of gasoline to the levels in Europe” — as evidence that jacking up energy prices and killing King Coal have always been on Obama’s mind.
During the 2012 campaign, candidate Romney said of Obama, “There’s one promise he’s kept. One promise he’s kept…When he campaigned, he said he wanted to raise the price of gasoline. He said that under him, energy costs would skyrocket. And then he brought in a trio of people to help him implement those policies.” Also in 2012, congressional Republicans saw what was coming. Rep. John Shimkus (R-IL) said at a hearing at the House Subcommittee on Energy and Power, “This administration promised before the election that they were going to bankrupt coal.” Writing in the Washington Times, Matt Patterson of the Competitive Enterprise Institute opined about Obama’s “bankrupt” quote: “Well, we can’t say we weren’t warned.” He charged that new greenhouse gas rules will “virtually destroy the coal industry, just as President Obama once promised he would do.”
Obama’s Clean Power plan
aims to reduce greenhouse gas emissions from U.S. power plants by 32 percent by 2030, compared to 2005 levels. The plan would also place emphasis on developing wind, solar, and renewable energy. Speaking boldly at the announcement of the plan, Obama said "I'm convinced no challenge provides a greater threat to the future of the planet," adding, “There is such a thing as being too late."
The BBC's Washington correspondent Tom Bateman said that Obama is seeking to establish a political legacy with the most recent announcement. Bateman said that the plan would give Obama the moral authority needed to argue for reductions in greenhouse gases when he attends the Paris conference on the environment later this year. "We are the first generation to feel the impacts of climate change, and the last generation to be able to do something about it," Obama claimed. He said that Americans have a “moral obligation” to limit climate change. Any notion that his plan will likely cause unemployment, he said, is “scaremongering.” "If we don't do it nobody will. America leads the way forward... that's what this plan is about. This is our moment to get something right and get something right for our kids," he said.
In a video released in advance of the announcement, Obama claimed that the new guidelines are justified by decades of data that show increasingly extreme weather patterns as well as escalating health issues. "Climate change is not a problem for another generation. Not any more," Obama said. "My administration will release the final version of America's Clean Power Plan, the biggest, most important step we have ever taken to combat climate change."
“Hard coal is the most important primary energy source in power generation, with 36% of globally generated power relying on this fuel. Its significance varies by world region. In countries with large resource endowments such as China or South Africa, the share of hard coal power generation is more than 80%. In rather import‐dependent regions such as Europe or Japan, the share is lower, but with 15% and 25%, respectively, hard coal plays a significant role in power generation as well. Irrespective of hard coal’s share of power generation in a region, the influence of coal prices on electricity prices is nearly always considerable.”
“Hard coal is the dominant fuel in global power generation because full generation costs are well below those of oil, gas or renewables. In regions where power prices are based on full costs due to regulation, low full costs of coal plants directly imply low electricity prices. When power prices are based on short‐run marginal costs (the merit order principle), the fuel costs of the price‐setting plant matter. Therefore, inexpensive coal serves to decrease the price of electricity, when the price‐setting plant is a coal‐fired one.”
“Given future expansion of renewables, coal power generation in certain regions might decline. However, the coal price impact on power prices can nonetheless increase, as coal plants are likely to increasingly become the price‐setting power units. Therefore, future security of coal supply is necessary to keep wholesale electricity prices stable.”
The study noted that in the U.S., 42% of electricity was produced by coal over the 2009-2013 period. Moreover, said the report, “States with higher shares of coal‐fired generation exhibit lower power prices.” It also noted that, historically, coal and electricity prices have been related to each other; coal prices exhibit less volatility than natural gas prices, thus fostering power price; and the U.S. is self‐sufficient with respect to hard coal consumption."
“Coal is the foundation of US electricity production and its abundance, distribution, affordability and reliability are correlated with socio‐economic growth. Throughout the last century in the United States, GDP expanded twenty‐fold, the population increased by 220 million people, life expectancy increased 26 years and coal provided more than 50% of the nation’s electric power."
"Over the last decade alone, coal produced over 18 800 terawatt‐hours (TWh) of electricity – more than gas, nuclear, oil, wind, and solar combined. The U.S. Energy Information Administration (EIA) projects that by 2020, annual electric power consumption will increase by 314 TWh and coal will still be the nation’s leading source of electricity. Such beneficial electricity is the key to more people living better and living longer.”
As for the costs of Obama’s new energy plan, the Heritage Foundation has estimated that about 500,000 jobs will be lost jobs and $100 billion a year in output lost (about half a percentage point of GDP), besides more than $1,000 a year in higher costs to families.
As for political fallout, the seven states that derive at least 70 percent of their electric power from coal are solidly Republican in orientation. The cost borne by the various states because of the Obama plan will not be uniform. States ruled by Democrats, e.g. California, Connecticut, New Jersey, New York, Oregon, Rhode Island, and Vermont, will bear a lesser burden. States such as Colorado, Indiana, Ohio and Wisconsin, where Democrats and Republicans battle to wrest control, will see their utility rates skyrocket since they each derive more than half their electricity from coal-fired plants. Coal producing states such as Kentucky, West Virginia and Wyoming fear lay-offs and an economic downturn.
America’s Natural Gas Alliance said it was “disappointed and discouraged” by the new rules. The World Coal Association claimed it “will significantly increase the cost of electricity to American consumers.” However, the Solar Energy Industries Association said the rules were “historic” and “critically needed.”
Writing at The Telegraph of the UK, Dr. Richard Wellings wrote: "With the US recovery still sluggish, President Obama is taking an enormous risk with his tough line on climate change. Low energy prices have played an important part in making American businesses competitive during the global downturn. They also helped keep living costs relatively low in a period when the real incomes of poorer Americans have been falling."
"Cheap energy isn’t just the result of the shale-gas boom. In much of the US, the power industry continues to rely on coal. Consumers in Kentucky, where over 90% of electricity is generated from coal, enjoy electricity prices roughly 50% lower than in the UK – an indication of the huge potential cost of Obama’s plans." Wellings is an analyst at the UK-based Institute of Economic Affairs.
Solar power rules
The new rules will give a “give a head start to wind and solar deployment”, according to a White House fact sheet. “Drive more aggressive investment in clean energy technologies than the proposed rule, resulting in 30% more renewable energy generation in 2030 and continuing to lower the costs of renewable energy,” it said.
Among those benefiting from Obama plan are Wanxiang America — a U.S. subsidiary of Chinese auto-parts manufacturer Wanxiang Group —which has invested $12.5 million to build a solar panel manufacturing plant in Illinois. Others are Xinjiang Goldwind Science and Technology Company — a manufacturer of wind turbines — that is developing and financing a 20-megawatt wind farm in Montana. In 2012, Hanergy of China acquired MiaSolé and promises to hire more employees and expand its research and development operations in California.
Hillary Clinton came to the defense of the Obama plan and said that she would keep it in place if elected to the presidency. "It will need defending. Because Republican doubters and defeatists - including every Republican candidate for president - won't offer any credible solution," she said. "The truth is, they don't want one."
Republican Sen. Marco Rubio, who is also running, said Obama’s plan is “catastrophic," while former Florida governor Jeb Bush said the plan was "irresponsible and over-reaching."
Obama is calculating that Federal courts will uphold the authority of the Environmental Protection Agency to regulate carbon emissions under the Clean Air Act, as they have done recently. According to a BBC analysis, Obama is also gambling on the long lead time the regulations have to take effect and that Republican governors will finally knuckle under. Obama visualizes his plan as part of his policy to secure a global treaty on climate change at Paris this year. Once the deal is signed, Obama’s successors will have a very difficult time in undoing Obama’s legacy in enacting the Clean Power Plan.
Germany hedges its bets
By contrast, Germany – Europe’s biggest economy – has embarked on building brand new coal-fired power plants. By the end of 2015, Germany will open 10.7 GW of new coal fired power stations. This is more new coal capacity than was constructed since 1989. The expected annual electricity production of these power plants will far exceed that of existing solar panels and will be approximately the same as that of Germany's existing solar panels and wind turbines combined. Solar panels and wind turbines have expected life spans of no more than 25 years, while coal power plants typically last 50 years or longer.
Germany’s labor unions are threatening mass demonstrations and strikes should the government continue on its current path towards decarbonization, nevertheless. According to the Guardian newspaper of the UK, the European Trades Union Confederation is calling for a just transition to a low carbon economy. Change in the production of energy, according to the confederation, should be fair and not leave workers and communities behind. Government programs would need to be put in place to train workers for low carbon industries. Opposition to Germany’s current energy plan is concentrated in eastern Germany, as well as among members of Chancellor Angela Merkel’s ruling coalition of Christian Democrats and Social Democrats.