Put a price on carbon emissions or my administration will regulate them without you.
That's what President Barack Obama told Congress in his State of the Union speech Tuesday night.
"If Congress won't act soon to protect future generations, I will," Obama said. "I will direct my cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change and speed the transition to more sustainable sources of energy."
Obama is making use of his second-term advantage on an issue that didn't go well for him in his first term. Then, a long-negotiated cap-and-trade bill the House of Representatives passed to limit emissions of gases scientists say are warming the climate failed in the Senate in 2010.
Obama said the 12 hottest years on record globally have come in the last 15 years. Heat waves, droughts, wildfires and flood have increasingly posed a threat to human existence.
"We can choose to believe that Superstorm Sandy, and the most severe drought in decades, and the worst wildfires some states have ever seen were all just a freak coincidence," Obama said. "Or we can choose to believe in the overwhelming judgment of science – and act before it's too late."
When it comes to regulating greenhouse gas emissions, many may prefer the "market-based" approach the president called on Congress to pass. That could be cap and trade, which would set a cap on emissions that ratchets down over time and would create a framework for trading emissions allowances, letting the market decide the most efficient solution. Or it could be, as some prefer, a straightforward tax on carbon emissions.
For those concerned about climate change and other environmental effects of fossil fuel extraction, the president's echoing of the commitment to climate made in his inaugural address was encouraging. Michael Brune, executive director of the Sierra Club, applauded Obama's commitment to reducing carbon dioxide emissions, but he also called for more restrictions on oil and gas development.
"The obligation to address climate disruption has become so urgent, and the opportunity to attain clean energy prosperity so real, that we have a moral duty to act," Brune said.
Limiting carbon dioxide emissions, however, comes with a price. In a state that leans heavily on coal, the industry that would suffer most from restrictions on carbon dioxide, West Virginia may find itself under pressure as the nation moves toward energy with lower emissions.
Limiting carbon dioxide
Already, the administration has taken action to limit vehicle emissions and put a cap on new coal-fired plants. The industry has said Obama's actions have essentially guaranteed a new traditional coal-fired power plant cannot be built under the new 1,000 pounds of carbon dioxide per megawatt-hour limit.
For existing coal-fired plants, which make up most of the nation's generation fleet, technologies to capture carbon emissions and use them or lock them away — carbon capture, utilization and storage, or CCUS — are needed.
But development of those technologies has been halting, at best.
"It's going slow," said MIT engineer and CCUS researcher Howard Herzog. "And the fundamental reason is, there's no policy driving it."
After cap and trade failed in the Senate in 2010, regulatory and industry momentum on projects that would demonstrate carbon capture from existing power plants shriveled up — highest profile among them AEP's retrofit carbon capture and storage project at the Mountaineer plant in Mason County.
The project was hailed as leading edge. It had federal funding behind it and needed only ratepayer participation. But without looming caps on carbon emissions, West Virginia and Virginia regulators couldn't justify shouldering ratepayers with that burden. The project was shelved in 2011.
A year and a half later, only two projects that would retrofit existing power plants for carbon capture are under way, Herzog said.
He hopes Congress will act and the administration won't have to.
"To me, anything besides market mechanisms are second best — they'll be more expensive and also run the risk of being ineffectual," he said.
"If the coal industry's game is to have no limits, they're going to lose," he added. "I think their best chance is to trust themselves, trust the technology, trust their inventiveness, and trust the markets as opposed to trusting politicians (to prevent regulation). … The good companies will figure out how to do it and be okay. But times change and you've got to change."
Chris Hamilton, vice president of the West Virginia Coal Association, said he found the complete omission from the president's speech of one of the largest sources of U.S. power disappointing. Others might have found it perplexing that the president went after greenhouse gas emissions without mentioning by name one of the largest sources of carbon dioxide.
"This president just seems to be determined to utilize his powers in the office of the presidency to determine winners and losers in the energy spectrum," Hamilton said. "It would be patently unfair to, by virtue of administrative action and policy, elect to slow down or retard the growth of coal and in the same time open the valves … to oil and gas."
Hamilton said that though coal eventually made it into the campaigning Obama's "all of the above" energy plan, he believes it was mostly rhetoric to appeal to coal-region voters.
"He injected coal very strategically in his campaign in some areas where it resonated well," Hamilton said. "I think if you followed his campaign and the rhetoric, I think you'll find that coal wasn't included consistently, but selectively."
Hamilton called a potential carbon tax, expected to be proposed this week, a regressive tax that allows government to pick winners and losers.
Any limit placed directly or indirectly on domestic coal production could economically threaten coal-producing regions. The effect could be especially difficult in Appalachia where little other work is available.
In an e-mail following the speech, the National Republican Congressional Committee said West Virginia would be a "sacrificial lamb" in Obama's climate change initiative.
Hal Quinn, president and CEO of the National Mining Association, said he was pleased to hear talk of strengthening the nation's economy. Referencing the promise to speed oil and gas permits, Quinn said he hopes the same courtesy would be extended to the mining industry.
"U.S. mineral and coal producers and their equipment suppliers provide resources that will make these aspirations a reality," Quinn said. "If the American economy is to be rebuilt on a stronger footing, America's miners will be an indispensable part of that effort."
"We produce more natural gas than ever before – and nearly everyone's energy bill is lower because of it," Obama said. "And over the last four years, our emissions of the dangerous carbon pollution that threatens our planet have actually fallen."
The news excited some in the natural gas industry who were thankful for the nod from the president.
"We also appreciate the president's commitment to streamlining the permitting process aimed at further increasing domestic energy development," said Kathryn Klaber, president and CEO of the Marcellus Shale Coalition. "Our industry looks forward to continuing to work with the Obama administration, and Congress, toward the shared goal of ensuring that we fully and responsibly leverage the generational opportunity associated with safe, job-creating American natural gas production."
Jack Gerard, president of the American Petroleum Institute, said the nation will need all sources of energy and called for the administration to do even more than what it promised Tuesday night.
"Unfortunately, 83 percent of the land and offshore areas controlled by the federal government are still off-limits to oil and natural gas development," Gerard said. "President Obama must follow through by implementing a national energy policy, lifting existing restrictions in support of responsible development of our vast energy resources, approving the Keystone XL pipeline and standing up against unnecessary and burdensome regulations that chill economic growth."
Corky DeMarco, executive director of the West Virginia Oil and Natural Gas Association, said "the proof is in the pudding and we'll have to wait and see" if the Obama administration will really support the gas industry.
"He said the right things as it pertains to energy, but as far as his record, they are for the development of wind and solar over coal and oil and gas," DeMarco said. "I think between the Department of Energy and the EPA, the rhetoric is there, the sound bites are there, but I haven't seen anything to indicate that they are committed to any type of extraction industry."
DeMarco said West Virginia and the region around it is a "Mecca of natural resources" and use of those resources is essential to national economic security.
"It all sounds good, let's see what the deliverables are," DeMarco said. "The actions so far are pretty scary if you're in the extraction industries."
While natural gas emits much less carbon dioxide into the atmosphere when it is burned, methane leakage has been raised as a concern. Methane is a much more potent greenhouse gas, but estimates of leakage rates have varied.
Obama said his administration will encourage the "cleaner power and greater energy independence" of natural gas.
"That's why my administration will keep cutting red tape and speeding up new oil and gas permits," Obama said. "But I also want to work with this Congress to encourage the research and technology that helps natural gas burn even cleaner and protects our air and water."
Obama's support of the gas industry, he said, would do "in the meantime" while the country works to develop its wind and solar industries.
Both of the state's major electric utility companies, AEP and FirstEnergy, argued that much already is in the works.
"Progress is already being made on CO2, with overall U.S. energy-related CO2 emissions in 2012 being the lowest in 10 years," said FirstEnergy spokesman Mark Durbin.
"We … need to consider, as a nation, the greenhouse gas reductions that will be achieved in the next few years through the retirement of a significant number of coal-fueled power plants," said AEP spokesperson Melissa McHenry, referencing the industry's response to cheap natural gas and to new federal regulations on mercury and other pollutants.
Utilities are in the process of handling a recent wave of regulation on power plants by investing in a variety of new emissions controls; McHenry pointed out that those investments could be stranded if regulation of greenhouse gas emissions makes any of the upgraded plants economically unviable.
Durbin cautioned about the cost of further greenhouse gas emissions reductions in jobs, in work for vendors and in local taxes.
AEP prefers congressional over EPA action.
"AEP supported a more comprehensive legislative approach ... and still believes that well-designed legislation is the best vehicle to address GHG emissions because of their pervasive nature and the need for flexibility to avoid potentially severe economic impacts," McHenry said.