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IssueAlert for  March 15, 2001 

President Bush Reverses Position on CO2 Emissions

by Will McNamara 
Director, Electric Industry Analysis

[News Item from The Washington Post, March 14] President Bush has decided not 
to seek reductions in the carbon dioxide (CO2) emissions of the nation's 
power plants, reversing himself on a campaign pledge after encountering 
strong resistance from the coal and oil industries and from Republican allies 
on Capitol Hill. In a letter to four Republican senators, Bush cited a recent 
Energy Department study showing that restrictions on CO2 emissions would 
result in a shift from coal to natural gas and lead to higher energy costs. 
"I do not believe(that the government should impose on power plants mandatory 
emissions for carbon dioxide," Bush said. 

Analysis: The sudden change in President Bush's position on CO2 emissions 
naturally has elicited strong reactions from both sides of the debate. The 
extent to which CO2 contributes to the nation's pollution, and whether or not 
the government should take an active role in restricting CO2 emissions, has 
become an intensely politicized issue. Democrats and environmental groups 
responded with outrage to what they perceive as a betrayal by the president, 
while coal and oil industry officials believe that Bush's decision will 
ensure a more balanced energy and environmental policy. 

I won't attempt to debate the political aspects of the president's decision. 
Rather, I will analyze Bush's current position impacts the energy industry, 
and whether or not the lifting of CO2restrictions does indeed contribute to a 
sound energy policy.  

It is true that during his campaign, the president made promises to limit CO2 
emissions. In a speech in late September, Bush said, "With the help of 
Congress, environmental groups and industry, we will require all power plants 
to meet clean air standards in order to reduce emissions of sulfur dioxide, 
nitrogen oxide, mercury and carbon dioxide within a reasonable period of 
time." Yet, while many critics have claimed that Bush's refusal to place 
limits on CO2 is a philosophical turnabout, White House spokesman Scott 
McClellan said that carbon dioxide "should not have been included as a 
pollutant" in Bush's campaign position because it is not classified as one in 
the Clean Air Act. Further, the White House has said that Bush's original 
promise was a "mistake" inconsistent with the president's broader goal of 
increasing domestic energy production. 

In fact, although many scientists believe that CO2 is a key contributor to 
global warming, it has not been proven to have any direct effect on human 
health. Consequently, CO2 has never been classified as a pollutant under the 
Clean Air Act because, in the eyes of those determining Clean Air 
classifications, it has no detrimental human health or environmental impact, 
except as it applies to concerns about global warming. In his decision to 
abstain from placing any restrictions on CO2 emissions, Bush noted "the 
incomplete state of scientific knowledge of the causes of, and solutions to, 
global climate change and the lack of commercially available technologies for 
removing and storing carbon dioxide." The president maintains that he is 
committed to an energy policy that would seek to improve air quality 
emissions of NOx, SO2 and mercury, which are already regulated as pollutants, 
but not CO2. Bush also said that he would work with Congress to reduce 
emissions from power plants specifically, but that any such strategy would 
include phased-in reductions and market-based incentives to help the industry 
meet the targets.  

Moreover, the president apparently cannot reconcile any possible restrictions 
on CO2 emissions with ramifications that the restrictions might have on 
domestic power supply. Clearly, any limits on CO2 emissions would have 
tremendous impact on coal-burning power plants. By some estimates, coal, a 
relatively cheap and plentiful fuel which accounts for more than 50 percent 
of the electricity generated in the United States, produces about 40 percent 
of the nation's CO2 output (more than any other fuel). Yet, industry 
officials have warned the president that any effort to restrict CO2 emissions 
would compromise efforts to increase domestic energy production. Since Bush 
took office as president in January, it has become increasingly clear that a 
major component of the president's imminent energy plan will be efforts to 
increase domestic power supply through a diverse fuel mix that includes coal, 
natural gas and nuclear. The president has maintained that he sees a 
supplemental role for renewable energies such as wind and solar. However, 
according to reports out earlier this week, Bush is proposing to cut the 
DOE's renewable fuels and energy efficiency budget by 30 to 40 percent. In 
any case, establishing this diverse fuel mix will take time, and the 
president realizes that the country faces an immediate energy crisis 
resulting from a growing supply / demand imbalance.  

Aside from power supply concerns, the president also acknowledged the current 
high prices for natural gas, and how a reduction in coal-fired generation 
would most likely keep prices at their high levels. In fact, the president 
said that conclusions made in a recent DOE report led to his decision to back 
away from CO2 restrictions, more than any pressure he might have received 
from oil and coal lobbying groups, as has been reported in many recent news 
articles. Bush noted that the DOE study had concluded that regulating CO2 
emissions would have led to "significantly higher electricity prices." The 
translation of this is that, if restrictions were to be placed on 
coal-burning plants, many power suppliers would turn to natural-gas 
production as an alternative. Natural-gas supplies are already compromised in 
this country due to increasing demand, which has driven prices up to 
unprecedented levels. Bush's decision reflects the concern that, if power 
suppliers begin turning from coal to natural gas in larger numbers, this will 
continue to exacerbate the supply shortage and keep prices alarmingly high. 
"This is important new information that warrants a re-evaluation, especially 
at a time of rising energy prices and a serious energy shortage," President 
Bush said.  

The DOE report also indicated that because coal-fired power plants are the 
major power sector emitters of CO2, compliance with the emission caps would 
be expected to have a major impact on coal consumption and production, both 
nationally and regionally. If CO2caps were to be put into place, substantial 
reductions in coal consumption would result, according to the DOE, with 
corresponding drops in the projections for coal production. Further, because 
coal has a carbon content more than 70 percent higher per Btu than that of 
natural gas, the DOE report said that the carbon allowance fees related to 
CO2 caps would make the continued operation of many existing coal plants 
uneconomical. 

In addition to the DOE report, Bush continues to be counseled by an energy 
advisory team, including Vice President Cheney and Energy Secretary Spencer 
Abraham, as well as having the ear of other members of the Republican Party. 
Many Republican senators, including Jesse Helms (North Carolina) and Chuck 
Hagel (Nebraska) expressed alarm over Bush's campaign promises to reduce CO2 
emissions out of concern that the promises were a step closer to ratifying an 
international treaty regarding pollution control. The Kyoto Protocol, 
negotiated and signed by the Clinton administration but still not ratified, 
would commit 38 industrialized countries to ongoing cuts in CO2 (along with 
SO2 and NOx) emissions. Negotiations over the Protocol broke down last 
November, but are expected to resume this July. If ratified, the Protocol 
would limit CO2 emissions below 1990 levels. Currently, CO2 emissions in the 
United States are about 12 percent over 1990 levels. Reportedly, Sens. Helms 
and Hagel oppose ratification of the Kyoto Protocol because they believe it 
could adversely impact the economy and allow American energy policy to be 
directed by an international treaty.  

It is important to note how the president's new stand on CO2 emissions 
relates to the Environmental Protection Agency (EPA). Just two weeks ago, the 
U.S. Supreme Court ruled that the EPA has the power to issue new standards 
designed to reduce the levels of smog and soot in the air. However, the EPA 
does not currently regulate CO2 emissions. EPA Administrator Christine 
Whitman, in a series of public statements, had vehemently defended and 
supported President Bush's previously espoused commitment to controlling CO2 
emissions.  

Meanwhile, the president's change in policy precedes several bi-partisan 
bills that are expected to be introduced in the House and Senate this week. 
The measures reportedly will provide incentives and set requirements to 
modernize power plants and reduce emissions of CO2, SO2 and NOx. Given the 
president's new stance, however, the prospects for these bills gaining much 
momentum may diminish. 

In summary, President Bush apparently felt the need to give priority to 
short-term resolutions to the nation's energy crisis over long-term 
environmental concerns. Given the fact that coal presently generates more 
than half of the nation's energy needs, the fossil fuel*despite its debated 
environmental impacts*is a critical component of the U.S. energy supply. 
Realizing that growing demand continues to compromise the country's power 
supply, it appears that Bush made the unpopular decision to allow the heavy 
reliance on coal to continue, at least for the near term. While some will 
continue to say that the president reneged on his original campaign promises 
and was unduly influenced by oil and gas lobbyists, an argument can be made 
that the nation's supply problems have worsened since last fall when the 
president was campaigning. After examining the mix of current factors*
including consistently high natural-gas prices, demand that remains on the 
rise and a continued reliance on coal, which remains comparatively 
inexpensive*it is understandable that the president would take this position. 
However, the general consensus among scientists is that CO2 emissions 
contribute to global warming, and that a long-term solution to curb CO2 
emissions must be enacted.  As President Bush unveils his energy plan over 
the next few weeks, it will be interesting to see how or if he addresses the 
issue of CO2 emissions from a long-term perspective.  

An archive list of previous IssueAlerts is available at
www.ConsultRCI.com




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