President Obama recently presented the latest version of his Climate Policy. In addition to expanding on the scope of previous plans that would increase clean energy supplies, energy efficiency, and reduce high global warming potential gases, the President now recommends better preparing the country for future climate impacts, and has directed the EPA to reduce carbon emissions from existing power plants. While the current plan covers a very broad range of climate related strategies, the question is: how successful can this new proposed policy be in actually reducing U.S. carbon emissions in the future?
History of the Current Administration’s Climate Policy
The Democratically controlled House developed and passed the American Climate and Energy Security Act (ACESA) in 2009. Besides creating a U.S. carbon cap-and-trade program, ACESA 2009 would have established an initial carbon emission target of reducing 2005 levels by 17% in 2020. Despite the apparent strong support by the Democratic Party and the President, the Democratically controlled Senate failed to consider any form of ACESA 2009.
Prior to the recent Copenhagen Summit negotiations the President announced his Climate Policy plans to possibly commit the U.S. to carbon reductions identical to ACESA 2009. Once again the Democratically controlled Senate did not support the Copenhagen Summit due to issues concerning the economy (and political?).
The Administration’s next round of developing a Climate Policy was to incorporate different elements into a combined Energy-Climate Policy proposal. Besides including many yet to be realized ‘all of the above’ energy strategies, the policy covered diversifying energy sources including renewable power, clean coal and nuclear. Clean coal development was somewhat sidelined by the EPA’s new ‘mercury and toxic standards’ (MATS) that effectively prevented the construction of new coal power plants. Due to a combination of the Japanese Fukushima nuclear disaster and historic anti-nuclear opposition, U.S. nuclear power capacity has stagnated and possibly peaked in recent years.
On June 27, 2013 President Obama presented a speech on his most recent version of a Climate Policy. Besides proposing the U.S. become more involved internationally, the issue of controlling carbon emissions from power plants has clearly become a new priority.
Recent U.S. Carbon Emissions Performance
U.S. carbon emissions (from consumption of fossil fuels) peaked in 2007 at 6023 million metric tons per year (MMT/yr.) and total emissions have since declined by about 12% in 2012. This reduction in carbon emissions has been due primarily to reduced coal and petroleum consumption. Natural gas consumption actually increased by almost 10% 2007-12.
The reduction in overall U.S. carbon emissions has been due to a number of factors. The largest contributing factor is due to recent increases in domestic production and decline in natural gas prices. This development led to substantial ‘fuels switching’ from more expensive coal to cheaper natural gas. The second largest contributing factor is due to increased light vehicle fuel efficiency standards (CAFE) put in place by past Administrations and recently updated by the current Administration. The third largest carbon emission reduction factor is due to a combination of general energy efficiency upgrades and the 2007-09 economic recession. The combination of these top-3 factors accounted for about 83% of reduced U.S. carbon emissions 2007-12.
Wind and solar power generation capacities have increased by 600% and 300% respectively over the past five years. Expansion of these renewables have accounted for about 13% of total reduced U.S. carbon emissions 2007-12.
Current Projected U.S. Carbon Emissions
The DOE/EIA routinely develops projections for U.S. energy consumption and associated carbon emissions. These projections include the impacts of all significant regulations and market factors that can affect energy production and consumption. The latest projection, ‘Annual Energy Outlook 2013’ (AEO 2013), includes the impacts of the latest new CAFE standards, increased oil & gas production, further recovery from the most recent economic recession, and growth in population and GDP.
The AEO 2013 (reference case) report projects that total U.S. carbon emissions are expected to increase 2013-20. This increase is due to projected growth in natural gas and coal consumption over the next 7 years. These results are somewhat surprising considering the recent progress made since 2007 in reducing U.S. carbon emissions, particularly in the growth of renewables and improved energy efficiency. While the EIA projects that renewables and energy efficiency will continue to grow significantly through 2020, the full recovery of the economy and growth in population are anticipated to more than off-set these gains in clean energy and efficiency.
Feasible Actions to Achieve Obama’s Climate Policy Carbon Emission Target
President Obama’s current Climate Policy addresses a number of factors not included in the AEO 2013 report. The most significant missing factors appear to be the carbon target of reducing 2005 levels by 17% in 2020 and limiting power plant carbon emissions. Achieving such a carbon reduction target would reduce U.S. total emissions to 4,979 MMT/yr. in 2020. Since 2005 actual U.S. carbon emissions have been reduced from 5,999 MMT/yr. to 5,290 MMT/yr. in 2012. This 709 MMT/yr. reduction in U.S. carbon emissions was due to the combination of fuels-switching, efficiency upgrades and the economic recession. As the U.S. more fully recovers from the recent economic recession how can the current level of U.S. carbon emissions be feasibly reduced to 4,979 MMT/yr. in 2020?
The AEO 2013 currently predicts that U.S. total carbon emissions will increase to 5,455 MMT/yr. in 2020. Achieving Obama’s published Climate Policy target by 2020 means reducing current U.S. total carbon emissions by 476 MMT/yr. While this reduction over the next 7 years only represents 2/3rds of the reduction achieved over the past 5 years, the challenge will likely be quite significant as the overall economy fully recovers from the 2007-09 economic recession and GDP annual growth returns to normal historic average levels.
Many of the newly proposed Climate Policy solutions to reduced U.S. carbon emission, such as increased CAFE, Residential energy efficiency, renewable power, etc., are already included in the current AEO 2013 projections. Added improvements such as new heavy duty vehicle efficiency standards and further biofuels developments are highly uncertain due to lack of currently proven technologies. Future technology innovations and breakthroughs in these areas are possible, but yet to be commercially developed. To most feasibly achieve the 2020 carbon reduction target will likely require building on recent successes in reducing carbon emissions (2007-12) and the EPA’s new mission to substantially reduce power plant carbon emissions.
The largest contributing factor towards reduced carbon emissions over the past 5 years has been fuels-switching from coal-to-natural gas. Since natural gas power generation carbon emissions are only about 40% that of equivalent coal power generation, this strategy will likely be further required in the near future in order to achieve substantial carbon emission reductions by 2020. Such a fuels-switching carbon reduction strategy would also be very consistent with the EPA’s mandate to reduce power plant carbon emissions.
Based on coal-to-natural gas fuels-switching a carbon balance was developed from the AEO 2013 reference case total annual carbon emission data. Refer to the following table.
EIA Reported and Projected Data – 2005/2012 and 2020
Million Metric Tons Carbon Emissions per Year
Data sources – EIA ‘Monthly Energy Reports’ (MER) and AEO 2013 data performance for 2020. The (17%) 2020 data are based on displacing coal power generation with cleaner natural gas power.
The above data shows that by displacing coal power with natural gas power generation capacity total U.S. carbon emission in 2020 could be readily reduced by 17% of 2005 levels. This would effectively reduce current coal power generation capacity by almost half, and, natural gas power capacity would increase by about 2/3rds in 2020.
Obama’s latest Climate Policy includes many strategies that could further reduce carbon emissions or reduce the need for coal-to-natural gas fuels-switching. Further increased wind and solar power generation is a reasonably feasible action. The AEO 2013 projects that wind + solar power will only increase by about 25% during 2012-20. This level of renewable power supply could be possibly quadrupled through increased Government support during the same period. By effectively doubling current wind + solar power generation 2012-20 this would reduce natural gas power plant fuel consumption by an equivalent of almost 40 MMT/yr. of carbon emissions in 2020. Similarly, increasing the energy efficiency of the Residential and Commercial Sectors has the potential to reduce the need for future coal power plant generation and associated carbon emissions by up to another 100 MMT/yr.; depending on efficiency upgrade costs, future energy-power costs and the level of new Government subsidies.
Natural Gas Production Will be Critical to Future Reduced U.S. Carbon Emissions.
In an ideal world high carbon intensity coal could be totally replaced by zero-carbon renewable wind and solar power generation. However, these renewable technologies are still constrained due to their normal variable power generation performance. While wind and solar can displace natural gas peaking and intermediate power plants fuels consumption, these renewable power sources cannot currently displace significant ‘base load’ coal power generation capacity or the level of required natural gas generation capacity required to backup all variable renewable power supplies. Only when industrial scale power storage becomes an economically feasible and available reality, will variable wind and solar be able to displace substantial fossil fuels base load power capacity.
During the interim until industrial scale power storage becomes available, lower carbon natural gas will be required to maintain power grid supply-demand balances, stabilities and overall general reliabilities. Other low-zero carbon power generation alternatives are currently available to displace natural gas including hydropower, geothermal, solar thermal and possibly nuclear. However, a broad range of economic, permitting, environmental impact and political barriers continue to hold back more significant development of these lower-zero carbon alternatives to natural gas.
Domestic Natural Gas Production will be Another Critical Factor
The AEO 2013 projects U.S. domestic natural gas production will only increase by about 1.5% per year 2012-20. This is a relatively conservative forecast based on recent history. Since 2005 U.S. natural gas production (dry) has increased an average of 4% per yr. due to innovative hydraulic fracturing technology. Increasing natural gas power generation as shown in the above data table would increase the Power Sector’s natural gas consumption by about 3.3 Trillion cubic feet per year above the maximum production levels in the AEO 2013 report. If this EIA estimate was accurate, fuels-switching to reduce half of coal power generation could result in a very significant shortage of available domestic natural gas supply and create a new need for imports before 2020. However, if more recent actual increases of domestic natural gas production continue for at least the next several years, supplying the future need for fuels-switching and reduced carbon emissions should not be an issue. This domestic natural gas production-supply concern will also be reduced if proposed Climate Policy strategies to further increase wind + solar power capacity and increased energy efficiency are significantly successful.
Another natural gas supply and disposition issue that will be impacted are the recently approved LNG export projects. The Administration recently approved projects in Pennsylvania and Texas to allow LNG exports in the near future. With the apparent need to reduce coal consumption most likely via fuels-switching, any future approval of LNG export projects could be inconsistent with the proposed Climate Policy carbon reduction target. Substantially increasing the level of coal-to-natural gas fuels-switching may also make it necessary to shutdown approved U.S. LNG exports-facilities in the near future.
Reduced U.S. Carbon Emissions Cost Impacts
Shutting down almost 50% of all existing coal power generation and expanding natural gas power generation capacity by up to 67%, plus some level of further expanded wind + solar power, will require substantial capital and operating cost increases 2014-20. As natural gas consumption rapidly increases, the current excess domestic production-supply market condition could rapidly disappear, leading to substantial increases in future natural gas prices. These added costs to reduce U.S. total 2005 carbon emissions by 17% in 2020 will substantially increase power costs. Consumers could experience on the order of 50%+ increases in future power costs compared to AEO 2013 projections. How much of this increase in power costs will be possibly off-set by the proposed Climate Policy energy efficiency upgrades or further increases of other renewables will likely be strongly debated in the near future as the Obama Administration begins implementing the new policy actions through different Executive Orders.
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