(Bloomberg) — A new government analysis of President
Barack Obama’s signature effort to fight climate change affirms
what critics suspected: the proposal could further weaken an
already battered coal industry.
Electricity generation from the carbon-intensive fossil
fuel would fall by 90 gigawatts, more than twice the decline
government analysts had predicted as recently as April,
according to a report released Friday by the Energy Information
Administration. There were about 292 gigawatts of coal-fired
generation capacity in 2014, according to EIA.
Most of the coal-plant closures would occur by 2020, when
the Environmental Protection Agency’s proposal to cut carbon
dioxide emissions would kick in. Consumers may also take a hit
as electricity prices would increase as much as 7 percent on
average by 2025, partly because of the costs of building new
power plants.
“In short, EIA confirms EPA’s rule is all pain, no gain —
a symbolic gesture that continues the administration’s policy
path for destroying high wage jobs for generations,” said Hal Quinn, chief executive officer of the National Mining
Association, a lobbying group that represents companies
including Peabody Energy Corp.
Coal, which has served as the backbone of U.S. electricity
generation for decades, is in a steep downturn amid competition
from lower-cost natural gas and pressure to meet tougher
emissions standards.
Economic Benefit
The Obama administration’s proposal, released in June, is
not final. Supporters, including Senator Maria Cantwell, a
Washington Democrat, said the EIA projected the plan would cut
carbon emissions from all U.S. power plants 25 percent below
2005 levels by 2020.
“As proposed, the Clean Power Plan will significantly
reduce carbon pollution that will deliver climate and health
benefits of up to $93 billion,” said Liz Purchia, a spokeswoman
for the EPA.
The EIA analysis doesn’t consider possible health and
environmental benefits. It predicts a minor impact on the U.S.
economy overall. Gross domestic production could fall as much as
0.25 percent by 2040, assuming emissions are further restricted
after 2030, the EIA said.
Purchia said the EPA is reviewing more than 4 million
public comments and working to ensure the plan is affordable.
Coal’s Decline
The EIA analysis found that coal production will decline 20
percent by 2020 and 32 percent by 2035, from a business-as-usual
case.
Coal use has already been dropping, generating 37 percent
of the country’s electricity in February -– down from over 50
percent in 2007, according to the EIA.
The market capitalization of the publicly traded U.S. coal
companies has shrunk to about $19.4 billion from $78 billion in
2011, according to data compiled by Bloomberg.
Patriot Coal Corp. filed for bankruptcy last week for the
second time in three years, joining at least a half dozen other
coal producers that have sought protection amid the downturn.
Murray Energy Corp., the closely held miner that’s rapidly
expanded amid the downturn, is now planning to lay off a quarter
of its staff — about 1,800 people — at nine locations,
according to a person familiar with the situation, who asked not
to be identified Thursday because the information isn’t public.
Peabody spokesman Chris Curran said the U.S. should rely on
technology “not closures” to reduce carbon dioxide emissions
from fossil fuels.
Natural Gas
Natural-gas use initially would replace lost coal, with
wind power and other renewable energy sources taking a greater
share of U.S. electricity production in later years, the EIA
said.
Natural gas generation in April and May is predicted to
have almost reached the level of coal use for the first time
since April 2012, the EIA said in a short-term energy outlook on
May 12.
While retail electricity prices are projected to increase
as much as 7 percent on average from 2020 to 2025, in some
regions the costs begin to recede to the EIA’s baseline levels
by 2030. Electricity costs in the Southwest and Southeast may
remain higher than without the EPA rule, according to the
report.
Steve Clemmer, director of energy research at the Union of
Concerned Scientists, a Cambridge, Massachusetts-based
environmental group, said the analysis shows the cost impacts
from the rule to be modest.
“The increase in natural gas use in early years followed
by a big shift to less polluting renewable energy enables the
country to continue the transition away from coal,” Clemmer
said in a statement.
Representative Lamar Smith, a Texas Republican and critic
of the EPA, requested the analysis from EIA.
To contact the reporters on this story:
Jim Snyder in Washington at
Tim Loh in New York at
To contact the editors responsible for this story:
Romaine Bostick at
Jon Morgan at
Steve Geimann