Saturday, May 19, 2012

Regulation-Induced Fuel-Switching

A story in today's New York Times (here), explains that EPA's new regulations of CO2 emissions from power plants is unlikely to have much of an impact because, instead of installing expensive carbon capture and storage (CCS) technologies (which can cost up to $380 million or more) to meet the standards, utilities are switching to less expensive natural gas. EPA, in fact, anticipated and may have intended this response to its regulations (see my earlier explanation of the new rule here). Natural gas emits far less carbon dioxide than coal (see here), which means that power plants can meet EPA's CO2 standards simply by fuel-switching. However, burning natural gas can increase methane emissions, and methane is a far more powerful greenhouse gas than carbon dioxide. Indeed, according to some studies (see, e.g, here), a large-scale switch from burning coal to burning natural gas for electricity will have little impact on climate change. For the time being, at least, EPA seems to have concluded that controlling emissions of CO2 from coal is more important than controlling methane emissions from natural gas. Building an effective climate policy is, of course, a tricky business, which EPA is approaching incrementally. Others will disagree, but I think this is a sensible approach.

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