Experts debate whether Bush's Clear Skies plan on power plant emissions clears the way for better emissions technologies.
"Weak." "Bold departure from past policies." "Rollback of power plant pollution rules." "An ambitious program." Yes, it's another environmental proposal aimed at power plant emissions, this time with the moniker of "Clear Skies." The only thing that's clear about it, though, is that the energy industry likes it, and environmentalists don't.
The Bush administration has yet to deliver a detailed plan of its Clear Skies program-no legislation has been introduced. Instead, broad outlines of the plan, released Feb. 14, call for cuts on power plant emissions of 73 percent for sulfur dioxide (SO2), 67 percent for nitrogen oxides (NOx), and 69 percent for mercury, all by 2018. The plan also calls for interim targets in 2010 for SO2 and mercury, and in 2008 for NOx. The key feature of the Clear Skies plan is a radical shift to a cap-and-trade regime, and away from the much-hated (by industry) new source review (NSR) and best available control technology (BACT) aspects of the Clean Air Act. Even without many details, there's plenty to argue about. At the top of the list is whether a cap-and-trade program will truly reduce emissions more than the current command-and-control regime.
The Acid Rain Paradigm
The administration argues that not only will the Clear Skies proposal reduce emissions, it will do so at a lower cost to consumers and to the power industry. In touting Clear Skies, the administration relies heavily on the success of the acid rain cap-and-trade program to demonstrate the effectiveness of such programs generally. Under the acid rain program, instituted under the 1990 Clean Air Act (CAA) amendments, SO2 emissions dropped between 43 and 49 percent by 1999, depending upon geographic area.
While acknowledging that the allowances program itself worked well, Patricio Silva, Midwest activities coordinator, Natural Resources Defense Council, says that the administration's reliance on the acid rain program is somewhat misplaced. He notes that the Clear Skies' executive summary comparison of actual emissions with the acid rain cap stops in 1999. Yet, according to Silva, if the emissions comparison were carried out to 2000, it would have shown actual emissions exceeding the 2000 cap by 2 million tons per year. What happened, Silva says, is that many utilities were able to bank a large number of allowances early on in the acid rain program by exceeding targets. Now, generators are drawing down that bank, and generating more SO2. The result is, he says, no net benefit. "We're not meeting the cap that was originally envisioned in the acid rain program. So for us, the lesson is pretty clear for the acid rain program. There was too little reduction, the reduction targets were too high, and that's why there was so little cost, and why it's so attractive to participants."
There's no doubt a cap-and-trade strategy is attractive to many. Denny Ellerman, executive director of the Center for Energy and Environmental Studies at the Massachusetts Institute of Technology, favors just such an approach. He says the acid rain trading program was undeniably successful. "Just look at the data, there has never been a reduction of emissions as swift, as great as what we've observed under Title IV [the acid rain program]. I just think the facts speak for themselves." As for the Bush Clear Skies plan, he says "it is a very aggressive proposal by any stretch of the imagination," and one that will reduce emissions.
The critical element to the Clear Skies plan, Ellerman says, is the new source review. "[T]hat's what all the argument is about. You've got industry willing to support these deep cuts, if in fact we can fix new source review." According to Ellerman, disputes over NSR, including lawsuits and administrative wrangling, is impeding re-powering plants, and putting more power in the same footprint as old plants. "It should be understood, I don't think the administration or industry will support these caps without NSR reform."
The costs to achieving such reductions will be significant, he says. "You have to think that the existing emissions reduced SO2 emissions 50 percent from what they were, so you're really ratcheting down these, and it is going to cost more."
As Duke Energy spokeswoman Becky McSwain says, most people "assume that most of the low-hanging fruit has been picked, and that every increment of reduction gets harder and harder to do."
But Silva disputes industry claims that emission reductions outlined in the Clear Skies plan will take 16 years, and that tougher standards implemented more quickly are beyond realistic reach. Currently, utilities emit around 5 million tons of NOx annually. According to an EPA analysis on multi-pollutant control strategies released in Sept. 2001, the agency anticipated that industry could affordably reduce NOx emissions to around 1.2 million tons by 2010.
EPA has since backed away from those September numbers, saying that they were not intended to be projections. Instead, officials said that the numbers were meant to compare a multi-pollutant strategy with the current piecemeal regulatory approach to emissions control.
Indeed, EPA's new posture on its September numbers hints at conflicts within the administration over the proper reduction targets. Silva says the administration appears conflicted. "This is a schedule, and these are reduction targets and timelines dictated by the industry to the DOE, which in turn carried the water on behalf of the industry within the administration, and made over this approach."
But David Mitchell, public affairs for Duke Energy, disagrees. "There has been a lot of good, sound debate between the Department of Energy and the EPA, but I think that the proposal the President announced on Feb. 14 is the consensus result of those internal debates within the administration," he says.
Silva questions assertions that tougher targets will be impossible to meet. "We currently emit around 11 million tons of SO2 today, and [the Bush plan] proposes to reduce that by 2010 to 4.5. And then, a further reduction down to 1.5 million to 3 million by 2018. The Jeffords bill calls for a reduction of 2.2 million tons by 2007. It is quite ambitious, but given the timeline that is proposed in the Jeffords bill, there's ample time, and it's perfectly obvious what the control technology is," he says.
Cap, Trade, and Incent Technology?
Yet it is the existing technology, particularly the BACT standard, that some like Larry Bickle, managing director of venture capital firm Haddington Ventures, think is part of the emissions problem. Bickle is an enthusiastic supporter of cap-and-trade programs, in large part because he believes that the current regulatory regime squelches emissions reduction technology development. "Once you specify best available technology, then you've erected such an enormous barrier to entry, that no new technology can be developed. So cap-and-trade, that allows you to experiment with different technologies and just focus on the result, is clearly far superior to any kind of specific, dictated technology."
Bickle is not alone in his belief. During Congressional testimony in January, Frank Alix, CEO of New Hampshire-based Powerspan, said that "existing regulatory requirements significantly limit the generating industry's compliance flexibility, thereby making the use of lower-cost, multi-pollutant approaches less viable." Powerspan is a clean-energy technology company that develops more cost-effective pollution control technologies.
Despite the relatively low emissions from gas-fired plants and rosy predictions of a 30 Tcf gas market, Bickle said his firm realized a couple years ago that "this country is going to have to burn a lot more coal than anybody else was thinking. That's one reality. And the second reality is, the green movement is real and here to stay, and so there was going to have to be an accommodation to the greens to burn the coal." With those realizations in mind, Haddington commissioned a team to go out and explore what emissions controls were available from a technology viewpoint, and what the barriers were to getting them into the market.
After two years and half a million dollars of searching, the research team found that there were three technologies that from a purely technological viewpoint, would reduce the SO2, NOx, and mercury emissions from a coal-fired power plant to close to zero. "There's a pre-combustion process that we believe would do that, there's a process that occurs during the combustion that we think would do that, and there's a post-combustion process that we believe would do that," Bickle says.
The technologies were invented by largely independent researchers, Bickle says-the stereotypical garage inventors. The technologies have been proven, he says, in a 50 MW environment, but scaling up to 400 MW remains an issue. While the inventors' cost estimates were not reliable, Haddington had its own power plant engineers look at the technology. Those engineers, Bickle says, believe that all three technologies could be scaled up, at a cost that is less than the incremental cost of adding scrubbers to achieve the same level of reductions. "So, there's a good possibility, but far from proven, that you could go to zero emissions for cheaper than the incremental cost of current BACT," he says.
Aside from scalability problems, though, there are serious intellectual property hurdles to commercializing these nascent technologies, Bickle says. "In all three cases, the intellectual property has been totally messed up," he says. Basically, it is not clear who owns the intellectual property rights to the inventions, due to conditions in some of the research grants from the Department of Energy, or sale of some rights in order to get another grant to build a prototype, according to Bickle. "So, as an investor, what do you buy as an investment? You'd like to be buying patents that nobody else can use. But it's not clear that's the case here. So that's a big barrier to entry," he says.
Perhaps the biggest barrier to entry is the current regulatory uncertainty. As Alix testified before Congress, "[u]ntil you require emission reductions, there will never be a commercially available control technology" for pollutants like mercury.
Industry, naturally, worries about the cost of as-yet untested or undeveloped technologies. Alix tried to allay some of those fears when he told Congress that "[t]he cost of achieving environmental compliance is usually significantly less than estimated at the time regulations are developed."
Silva also makes the point that once faced with an immovable regulatory deadline, "the industry actually has a decent record of complying and bringing pollution control technologies online, without significant disruptions to reliability." Bickle maintains that "[r]ight now, the huge impediments to implementing new technology are all political, they're not capital and they're not technology." He estimates that absent regulatory hurdles, the technologies found by his firm could be fully implemented within 18 months.
As Bickle points out, coal-fired plants still make up the majority of generation assets in this country. He says, "we need to quit doing stupid things, we need to quit fighting each other, and figure out a way for the greens and the technologists to come together. We're not talking about making Napalm here, we're talking about making clean air. We need to find a way to come together and use good science to achieve the goal for less pollution."
Bickle, though, is not convinced that the Bush administration can get its plan passed. "Politically, Bush can't get a free market cap-and-trade-Clinton could have done that but Bush can't. So I think we're going to stick to command-and-control for a while, instead of cap-and-trade." Duke Energy's Mitchell is somewhat more optimistic. "There has been a lot of interest in this type of reform," he says, pointing to multi-pollutant proposals from Sens. Bob Smith, James Jeffords, and Congressman Henry Waxman. But in an election year, "I think it will be difficult to pass legislation this year. I think it's more likely in later years."
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