Why Obama’s push for climate means trouble ahead for coal

President Obama signals he'll push forward with tougher regulations on carbon-heavy fuels, like coal, in his bid to reduce climate change and create green jobs. That means tough times ahead for coal.

While President Obama did not mention coal Tuesday night, it nevertheless played a central role in his State of the Union address. You could tell by the way he talked about climate change. "The debate is settled," he said. "Climate change is a fact.”

It wasn't just what he said. It was the tone he used – confident (or strident, depending on your point of view). In Mr. Obama’s world, a progressive federal government bent on cleaning the air and the water is not just healthy for the environment but is a net positive for the economy, where new jobs will be built around the technologies to achieve his aims.

Perhaps the central element to such aims is the curbing of carbon pollution from coal plants, since they produce about a third of all manmade carbon dioxide emissions. The president has already directed his Environmental Protection Agency to write new rules regulating those future power facilities, which would require them to be as clean as combined cycled natural gas plants.

“Over the past eight years, the United States has reduced our total carbon pollution more than any other nation on Earth,” Mr. Obama said last night. “But we have to act with more urgency – because a changing climate is already harming western communities struggling with drought, and coastal cities dealing with floods. That's why I directed my administration to work with states, utilities, and others to set new standards on the amount of carbon pollution our power plants are allowed to dump into the air.”

That's what worries US lawmakers from coal-producing states. The administration proposes to curb carbon emissions from current levels of roughly 1,700 pounds per megawatt-hour to 1,100 pounds for future coal plants. Similar plans are expected by summer for existing coal units.

To do that, they would have to employ carbon capture and sequestration, which is expensive, not yet commercially available, and economically unfeasible for most coal plants today.

“In a puzzling paradox, President Obama decried income inequality, while touting progress on his climate change initiative – bypassing the fact that increased energy costs place an outsized burden on lower and fixed income families and make it more difficult for businesses to succeed,” says Mike Duncan, chief executive of the American Coalition for Clean Coal Electricity, in a statement responding to Tuesday’s address. “Regulations spearheaded by his own Environmental Protection Agency aimed at coal-fueled electricity will weaken our economy and our energy security.”

Coal has allies, especially among coal-burning utilities, but they're less interested in supporting coal and more interested in cheap fuel, which is natural gas, for now. Thanks to the boom in unconventional shale gas – which is both abundant and relatively cheap compared with coal – utilities are switching to natural gas. Domestically, coal’s share of the of electric generation market has fallen from 50 percent in 2007 to 40 percent now. Natural gas-fired generation has increased from 16 percent in 2000 to an expected 27 percent in 2020, says the US Energy Information Administration. Meantime, coal reserves in the Appalachian region are thinning.

The impact: 8,800 megawatts (MW) of utility coal capacity was retired in 2012 while an approximate 5,781 MW was taken off line in 2013, according to SNL Energy, a market research firm. SNL adds that roughly 28,000 MW of coal capacity will go by 2022. Of the total that will be eliminated, 11,000 MW will get converted to other types of fuels. Most of that will be natural gas, and to a lesser extent, biomass, it adds. 

The objective is not to eliminate coal, says Obama’s Energy secretary, Ernest Moniz. Rather, it is to push its leaders to invest in best-available technologies, which in turn will create new opportunities within that sector and which might be publicly assisted.

To that end, Mr. Moniz points to an $8 billion loan-guarantee program created in 2005 to reduce emissions from fossil fuels. The focus has been on carbon capture and sequestration, which is at least a decade away. But if the technology is to be ultimately commercialized, it would reenliven the coal industry while cutting pollution levels. Utilities such as Southern Company and Duke Energy are developing and operating carbon capture and coal gasification technologies, respectively.

“The shift to a cleaner energy economy won't happen overnight," Obama said in his address. "But the debate is settled. Climate change is a fact. And when our children's children look us in the eye and ask if we did all we could to leave them a safer, more stable world, with new sources of energy, I want us to be able to say yes, we did.”

Obama's original campaign slogan, "Yes, we can," seems awfully outdated given the bumpy ride his administration has had politically and economically. But in climate change, at least, the president is sounding newly confident to fulfill his earlier campaign promises – with or without the help of Congress.