President Obama and the Environmental Protection Agency (EPA) recently announced new restrictions on carbon dioxide emissions from new coal and natural gas plants. A current state-of-the-art coal plant emits about 1,800 pounds of CO2 for each megawatt-hour of electricity it produces, but new plants will be required to emit less than 1,100 pounds per megawatt-hour (1,000 pounds per megawatt-hour for new natural gas plants)(1). The president and the EPA expect new plants to achieve this drastic reduction in emissions using carbon capture and sequestration (CCS) technology. CCS technology involves “scrubbing” carbon dioxide from smokestack emissions and then injecting that CO2 into reservoirs underground or beneath the ocean. The technology is relatively young, with few industry-scale projects (75 in the world, according to the Global CCS Institute(2)) and slow growth. This latest announcement is a part of the administration’s climate action plan to reduce the emissions of greenhouse gases, which are the likely cause of global climate change. Power plants account for around 40% of greenhouse gas emissions in the United States(1). But what are the actual consequences of these restrictions going to be? There are many potential answers to that question.
The coal industry claims that these restrictions will essentially destroy demand for coal (3). Although currently operating plants do not have to abide by these restrictions, the administration has made it clear that they will not be safe for long. With CCS technology still in a young stage of development, it is expected to be very expensive. Coal and natural gas are currently inexpensive fuels for electricity production, but if CCS needs to be installed in plants the cost of electricity associated with the new plants will increase. If the cost of CCS remains prohibitive, new coal plants may not be built at all. In the future, when currently existing plants are also required to limit emissions, the price increases will affect all coal (and likely, gas) electricity prices.
In fact, some are arguing that the new restrictions are so prohibitively expensive and the technology is so unproven (it is still hotly debated whether sequestration will be adequate in keeping CO2 out of the atmosphere), that the requirements violate the Clean Air Act(3). The Act stipulates that new technology requirements cannot be unreasonably costly to industry and need to be demonstrated adequately at a large-scale. The EPA stands by its announcement, claiming that CCS is viable as a technology.
Increased prices of electricity from coal and natural gas might make production of electricity from renewable sources (i.e., wind, solar, tidal, biomass) cost-competitive with the fuels that are currently significantly cheaper. While this is bad news for the coal industry, environmentalists and the renewable energy industry are very excited about this prospect. Cheap coal and natural gas are difficult to compete with but the costs do not account for the environmental externalities (i.e., greenhouse gas emissions, air pollution, and ecosystem destruction associated with mining). Increased costs from the installation of CCS will at least provide a fairer playing field for other technologies.
Another possible outcome of the new restrictions could be a minimal reduction in carbon emissions due to a legal technicality. Brian Potts writes that the Clean Air Act allows the EPA to create standards for either entire industries (e.g., the coal electricity industry) or on a case-by-case basis for single power plants (4). The Act requires that the case-by-case standards be more stringent than those for all sources. However, the EPA has recently imposed case-by-case standards on existing and proposed coal plants which required very low reductions in emissions (around 5%) and generally just required improvements in efficiency and fuel type (higher quality coal) rather than the installation of expensive technologies like CCS. This could mean that the new restrictions will not go into effect. On the other hand, Potts writes that carbon emissions have been and will continued to be reduced naturally through the regulation of other pollutants, such as mercury, and due to low natural gas prices leading to the shutdown of older coal plants that cannot compete.
It is yet unclear how these new restrictions on carbon emissions will affect the electric industry, but with the power of the coal industry and the continued attractiveness of this cheap and abundant fuel (as long as externalities are disregarded) it seems as though coal will remain king for quite some time (5). However, these new policies from the administration may be the first step to reining in our dangerous emissions levels and helping renewable sources of electricity become cost competitive with the currently cheap fossil fuel sources. Additionally, if the new restrictions lead to the implementation of CCS, economies of scale will hopefully work to lower the cost of the technology and allow the use of abundant coal resources to produce electricity somewhat more sustainably. We will see what direction this story takes over the next several years.

(1) http://www2.epa.gov/carbon-pollution-standards/2013-proposed-carbon-pollution-standard-new-power-plants
(2) http://www.globalccsinstitute.com/publications/global-status-ccs-2012/online/47976
(3) http://www.reuters.com/article/2013/09/18/us-usa-energy-coal-idUSBRE98H0ZD20130918
(4) http://www.nytimes.com/2013/09/20/us/politics/obama-administration-announces-limits-on-emissions-from-power-plants.html?pagewanted=all
(5) http://thehill.com/blogs/congress-blog/energy-a-environment/315527-obamas-climate-plan-for-power-plants-wont-significantly-lower-emissions
(6) http://www.reuters.com/article/2013/09/18/us-usa-energy-coal-idUSBRE98H0ZD20130918