Landmark EPA Action on Carbon Dioxide Emissions

Posted by | April 10, 2012

For decades the United States was the world’s largest greenhouse gas emitter.  However, in 2007 China surpassed the United States and continues to hold the title of world’s largest emitter.   It was also in 2007 that China issued its National Climate Change legislation, which focuses on five key areas:  greenhouse gas mitigation, adaptation, science and technology, public awareness, and institutions and mechanisms (i.e., strengthening institutional innovation as well as mechanisms for renewable energy).  In contrast, the United States lacks a comprehensive policy framework to manage its carbon emissions.  In fact, the U.S. is the only country of the world’s top 16 major economies to lack integrated carbon legislation.

Last month, the Environmental Protection Agency (EPA) issued its first ever rule on carbon dioxide emissions from new power plants, which was met with applause and some skepticism.   Currently the U.S. has no limits on the amount of carbon pollution that future power plants can emit.  The new rule states that any new power plant will be allowed to emit no more than 1000 pounds of carbon dioxide per megawatt-hour.  To offer some perspective on this number--natural gas plants currently average 800 pounds per megawatt-hour, while coal plants can average upward of 1800.  This makes it impossible for any new U.S.-based coal fired power plants to be built unless they capture and store their own carbon emissions, which is a technology that is currently not commercially viable.  With the low cost of natural gas, increased consumer awareness on climate change, preference for low carbon alternatives, declining costs of renewables, and now the new EPA ruling, many consider coal outdated and uneconomical.  From an environmental perspective, this rule is positive.  It also provides assurance to investors and businesses alike that we will not be returning to coal.

The EPA is also crafting carbon regulations for oil refineries and other stationary pollution sources.  According to the World Resources Institute, when the EPA’s carbon rules are fully deployed they could cover approximately three-quarters of the country’s greenhouse gas sources and could reduce U.S. carbon emissions anywhere from 5% to 12% by 2020 (using 2005 as a baseline).  We encourage the EPA to continue its regulatory work and we believe investors would be well served by comprehensive climate legislation.

 

Beth is a Senior Research Analyst with Portfolio 21 Investments.  She has 8 years of environmental and social investing research experience. 

Post categories: energy, externalized costs, greenhouse gas emissions, regulations

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