Obama's ambitious standards for power sector just not ambitious enough

It is projected that even in 2030, two-thirds of electricity in the US will be produced from fossil fuels (more gas and less coal); renewables will contribute only 10 per cent to the total electricity production

On June 25, last year, Barack Obama gave his most important speech on climate change wherein he outlined his action plans for reducing emissions. The next day I wrote my opinion on Obama’s grand plan in which I argued that this so-called grand plan was nothing more than what the US had already pledged at Cancun climate summit few years back—a mere 3 per cent reduction over 1990 levels by 2020. I had also argued that Obama’s climate plan will not lead to an ambitious global action on climate change and that, on the contrary, it will push countries to reduce their ambition.

The centrepiece of Obama’s climate plan was putting carbon emission standards on power sector. Obama had directed the US Environment Protection Agency (USEPA) to set these standards. Yesterday, USEPA came out with its draft standards which has been hailed by the environmentalists in the US. The global media has termed these draft standards as a move by Obama to push countries like India and China to take on emissions reduction targets.  So what is this standard all about?

In summary, the draft standard proposes to cut carbon emissions from the power sector by 30 per cent nationwide below 2005 levels by 2030.  It gives choices to the states to meet this target. States can use different fuels, technology and efficiency measures to fulfill their obligations.

Too little compared to Europe

On the face of it, this looks like a real deal. But is it?

A 30 per cent emissions reduction in the power sector over 2005 levels by 2030 actually is about 15 per cent reduction over 1990 levels. Under the Kyoto Protocol, US had to cut its economy-wide emissions by 7 per cent below 1990 levels during 2008-2012 period. Of course, US never signed the Kyoto Protocol and never met these targets. But if we compare the draft standards with the Kyoto Protocol obligations, then in reality the power sector in the US will cut its emission only by about 8-10 per cent over and above its Kyoto targets and take another 18 years to do so. This, frankly, will not be acceptable to anyone who really wants to solve the climate challenge. This will certainly not be acceptable to the Europeans who would be cutting their emissions by at least 30 per cent by 2030 from 1990 levels. Germans are taking about cutting their emissions by about 50 per cent by 2030.

But there are other reasons to worry. Currently, about 37 per cent of electricity in the US is produced from coal; an additional 30 per cent comes from gas and renewable energy (excluding hydropower) contributes only about 5 per cent to the total electricity mix. In other words, currently about two-thirds of electricity is produced from fossil fuels.

The US has now hit a jackpot in the form of shale gas. The shale gas revolution in the US has meant that it is cheaper to produce electricity from gas than from coal. In addition, gas has about 20-30 per cent lower carbon emissions (if they can control fugitive emissions of methane from the gas wells) than coal. The US electricity producers are swiftly moving to shale gas and shutting down coal plants. In reality, therefore, what the US companies will do to meet these targets is to move from one fossil fuel to another. It is projected that even in 2030, two-thirds of electricity in the US will be produced from fossil fuels (more gas and less coal); renewables will contribute only 10 per cent to the total electricity production.

Race to the bottom
 
Now the big question: what will be the implications of these standards on the global deal due to be signed in 2015 in Paris?

The fact is, with cheap shale gas, coal will become history in the US. In fact, the US is likely to see significant reduction in energy prices because of this transition. But the same will not be viable in countries that import gas at a very high price. This will make US businesses out-compete manufacturers in other countries. How then would other countries respond to such a situation? They, too, will dig for gas and oil—whatever is cheaper.
 
The result of all this—we will see use of more fossil fuels, not less. All this will have huge impact on the renewable energy sector. With cheap gas, we should forget about mainstreaming renewable energy.

With increasing global population and economic prosperity, and a gas and oil future (even if we get rid of all coal, we should ready ourselves for real scorching heat.

By announcing its 2030 (unambitious) ambition level for the power sector, the US has virtually put the stage for an unambitious post-2020 deal at Paris. If the richest, the most technologically advanced country in the world will continue to rely on fossil fuels, we should not expect others to do any better. It is now a race to the bottom.
 

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