Will the Clean Power Plan Kill the Coal Industry?

The EPA's newest energy plan could crush the coal industry -- but it's not set in stone, yet.

Aug 16, 2014 at 1:55PM

Coal

Source: Wikimedia Commons; wy.blm.gov 

The Obama Administration has it out for coal. The EPA's new Clean Power Plan is cutting coal's cost advantage to push power beyond dirty fossil fuels. But states and corporations are fighting back, and it's still unclear who will win this bureaucratic battle. Here's what you need to know.

Cutting out coal
On June 2, the U.S. Environmental Protection Agency (EPA) announced a "commonsense plan to cut carbon pollution from power plants." While other plans have beat around the climate change bush by imposing limits on arsenic or mercury emissions, this is the first time the EPA has directly targeted carbon, the primary greenhouse gas culprit behind climate change.

Rather than impose direct caps or limits on emissions, the EPA has developed an algorithm that allows each state to balance carbon emissions with their current power generation portfolio. The Brookings Institute visualized the new plan in a series of simple equations pitting emissions rates per MW against total current generation:

Brookings Equation

Source: Brookings Institute; "E" is emissions rate and "G" is current generation

Number crunching aside, the new policy pits clean energy against dirty energy like never before. The message is clear: Start cleaning up your act by 2020 or face federal wrath.

The good, the bad, and the ugly
The proposed plan has been both lauded and loathed. For environmentalists, the Clean Power Plan marks a major win. Power plants are the single largest greenhouse gas polluters, accounting for around one-third of our nation's total emissions.

Epa Poll

Source: EIA.gov 

If all goes as planned, "steady and responsible steps" (quoted from the EPA's press release) will put the U.S. in a significantly cleaner position by 2030:

  • Power sector carbon emissions cut by 30% from 2005 levels
  • A concurrent 25% cut in particle pollution, nitrogen oxides, and sulfur dioxide
  • An estimated $93 billion in climate and public health benefits via reduced premature deaths, child asthma attacks, and fewer missed work or school days
  • An approximately 8% drop in electricity bills due to increased energy efficiency and reduced overall electricity demand

Not a bad list -- but not everyone's elated. States and corporations are leveling lawsuits at the EPA, challenging the legal right and economic validity of such an unprecedented plan. Among the challengers are Alabama, Indiana, Kansas, Kentucky, Louisiana, Nebraska, Ohio, Oklahoma, South Dakota, South Carolina, West Virginia, and Wyoming, as well as Murray Energy, the U.S.'s largest privately held coal mining company.

West Virginia, the 38th poorest state in the U.S., has taken an especially hard line against the Clean Power Plan. Attorney General Patrick Morrisey issued a press release:

This lawsuit represents another effort by our office to invalidate the EPA's proposed rule that will have devastating effects on West Virginia's jobs and its economy. Our Office will use every legal tool available to protect coal miners and their families from the Obama Administration and its overreach.

The announcement came a day after Alpha Natural Resources announced 1,100 potential layoffs and reduced production at 11 West Virginia coal mines.

Other states and corporations are worried that their own new standards will force similar cutbacks. According to the Bureau of Labor Statistics, the coal industry directly employs 80,030 Americans with an average hourly wage of $26.15. The West Virginia Coal Association estimates that in their state alone, coal creates 20,000 direct jobs, 70,000 indirect jobs, and over $6 billion of economic growth.

Coal ain't cut yet
The EPA's new policy is well-intended. With the right push, our nation's energy portfolio can clean up its act. But critics suggest that the plan asks for too much, too fast. But with unclear legal precedent, contentious benchmarks, and corporate backlash, the plan isn't set in stone, yet.

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Justin Loiseau has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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