Obama to propose rules to sharply curb power plants' carbon emissions

WASHINGTON — President Barack Obama’s new global warming regulation will cut carbon pollution from the nation’s coal-fired power plants by up to 20 percent, according to people familiar with the rule, and will pave the way for the creation of state cap-and-trade programs across the country.

The proposed regulation, written by the Environmental Protection Agency and set to be unveiled Monday by Obama at the White House, would be the strongest action ever taken by a U.S. president to tackle climate change and could become one of the defining elements of Obama’s legacy.

Cutting carbon emissions by 20 percent — a substantial amount — would be the most important step in the administration’s pledged goal to reduce pollution over the next six years and could eventually shut down hundreds of coal-fired power plants across the country. The regulation would have far more impact on the environment than the Keystone pipeline, which many administration officials consider a political sideshow, and is certain to be met with opposition from Republicans who say that Obama will be using his executive authority as a back door to force through an inflammatory cap-and-trade policy he could not get through Congress.

People familiar with the rule say that it will set a national limit on carbon pollution from coal plants, but that it will allow each state to come up with its own plan to cut emissions based on a menu of options that include adding wind and solar power, energy-efficiency technology and creating or joining state cap-and-trade programs. Cap-and-trade programs are effectively carbon taxes that place a limit on carbon pollution and create markets for buying and selling government-issued pollution permits.

Coal plants are the nation’s largest source of the greenhouse gases that scientists say are the chief cause of global warming.

In his first term Obama tried to push a cap-and-trade bill through Congress but it died in the Senate in 2010. Republicans, Tea Party groups and the coal industry attacked Democrats who supported it, criticizing the legislation as a “cap-and-tax” that would raise energy prices. Cap-and-trade is now seen as political poison in Washington. But Republicans said that the new rule has created a back door for Obama to force through a politically inflammatory policy by reviving it in the states. “This EPA regulation will breathe life into state-level cap-and-trade programs,” said Peter Shattuck, director of market initiatives at ENE, a Boston-based climate policy advocacy and research organization.

Many states are already researching how to join or replicate the nation’s two existing state-level cap-and-trade plans, both of which bear the signatures of prominent Republicans: Mitt Romney, the 2012 presidential nominee and former Massachusetts governor, and Arnold Schwarzenegger, the former California governor.

As governor of Massachusetts, Romney was a key architect of a cap-and-trade program in nine northeastern states, the Regional Greenhouse Gas Initiative. He worked closely at the time with a top Massachusetts environmental official, Gina McCarthy, who today is immersed in the Obama administration’s new rule as the administrator of the EPA. Romney later disavowed the regional cap-and-trade program.

Despite the fierce Republican opposition, a number of officials at electric utilities say they welcome cap-and-trade programs because they offer an affordable and flexible way to comply with the new regulation. “By trading on carbon credits, we’ll be able to achieve significantly more cuts at a lower cost,” said Anthony J. Alexander, president and CEO of FirstEnergy, an electric utility with power plants in Maryland, New Jersey, Ohio, Pennsylvania and West Virginia. “The broader the options, the better off we’re going to be.”

John McManus, vice president of environmental services at American Electric Power, which has coal-fired power plants in 11 states, agreed. “We view cap-and-trade as having a lot of benefits,” he said. “There’s important design considerations that would have to be factored in, to consider each state’s circumstances. But we think it’s definitely worth looking at. It could keep the cost down. It would allow us to keep coal units running for a more extended period. There are a lot of advantages.”

Cap-and-trade was born in 1990 during the administration of President George Bush as a centerpiece of amendments to the 1970 Clean Air Act. Conceived as a business-friendly way to cut pollution without heavy-handed regulation, the idea was that the cap would ratchet down each year, allowing less pollution while market forces drive up the price of permits, creating an incentive for industries to invest in lower-polluting sources of energy. In 2006 in California, Schwarzenegger signed a pioneering state cap-and-trade law. As the Republican presidential nominee in 2008, Sen. John McCain of Arizona pledged to implement a nationwide cap-and-trade law.

Officials with the northeastern regional cap-and-trade program that Romney initially endorsed have played a significant role in shaping the new rule. In frequent trips to Washington over the last several months they have consulted with McCarthy and other top EPA officials.

People familiar with the drafting of the rule said that after it is unveiled they expect many states to comply by joining the northeastern program, in part because the system has already been designed and tested.

“It’s a plug-and-play,” said Kelly Speakes-Backman, a commissioner of the regional program. It’s already designed. ”We’re finding that’s attractive to people. We’ve had states from all over the country calling up and asking, ‘How does this work, and how can it work for us?’“ The regional program has proved fairly effective: Between 2005-12, according to program officials, power-plant pollution in the northeastern states it covered dropped 40 percent, even as the states raised $1.6 billion in new revenue.

But many Republican governors said they do not see the benefits.

Gov. Chris Christie of New Jersey, a possible candidate for the 2016 Republican presidential nomination — whose state was an original member of the Northeastern cap-and-trade program — has since withdrawn from it. In Ohio, a heavily coal-dependent state where the Republican governor, John Kasich, has also been mentioned as a possible 2016 presidential candidate, officials are clear that cap-and-trade will not be welcomed. ”We think it’s an unnecessary regulation,“ said Craig Butler, head of the Ohio Department of Environment. States with Democratic governors think differently. Energy officials in Illinois, which ranks as one of the nation’s top ten producers of both coal and coal-fired carbon pollution, have in the past considered joining either the northeastern program or starting up a similar program in the Midwest.

”We’ve also looked at our own go-it-alone Illinois cap-and-trade plan,“ said Douglas Scott, chairman of the Illinois Commerce Commission, which regulates the state’s electric utilities. ”But joining a larger, multistate program, we’ll be able to spread out the risk, to mitigate the economic impact.“

Coral Davenport,

The New York Times