As the war in Ukraine grinds on, a look at the economic battlefield and how the conflict might permanently reshape the global economy. Diane talks to Sebastian Mallaby, senior fellow for international economics at the Council on Foreign Relations.
The Obama administration proposes strong action on climate change: new limits on carbon dioxide emissions. We discuss details of the new rules and implications for global greenhouse gas levels, coal-fired power plants and the price of electricity.
- Coral Davenport Climate and energy reporter, The New York Times.
- Frances Beinecke President, Natural Resources Defense Council; former member of the National Oil Spill Commission.
- Jeff Holmstead Former assistant administrator for air and radiation at the Environmental Protection Agency (2001-05); now heads the environmental strategy section at Bracewell & Giuliani LLP.
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. The EPA turned to a decades-old provision of the Clean Air Act to propose new limits on carbon emissions. The new rules stipulate that by 2030, emission rates must fall 30 percent below those of 2005. Joining me in the studio to talk about the proposed new rules and their possible impact on the environment and the economy: Coral Davenport of The New York Times, Jeff Holmstead, an attorney in private practice whose clients include coal companies.
MS. DIANE REHMAnd joining us from an NPR studio in New York, Frances Beinecke of the Natural Resources Defense Council. I know many of you will want to weigh in. Give us a call at 800-433-8850. Send us an email to email@example.com. Follow us on Facebook or Twitter. Thank you all for joining us.
MS. CORAL DAVENPORTIt's great to be here. Thanks, Diane.
MR. JEFF HOLMSTEADThank you for having me.
MS. FRANCES BEINECKEThank you so much. Great to be here.
REHMGood to have you all. Coral Davenport, President Obama made a promise along these lines back when he was running for president. Why now?
DAVENPORTWell, President Obama tried, in his first term, to pass a sweeping climate change bill that was known as the Cap and Trade Bill. It would have addressed -- it would have been a new law that would have been aimed at carbon pollution nationwide. That failed in the Senate. And so coming into his second term, Obama decided that he wanted climate change to be a legacy issue. He wanted to try to find a way to make a meaningful difference, a serious climate change policy. He also knew that, given the current gridlocked Congress, given the current state of politics around this issue, there was no way he could get a new law through Capitol Hill.
DAVENPORTAnd so they looked at this old existing law, the 1970 Clean Air Act. They put a lot of options on the table. And they said, how can we do something serious about climate change without passing a new law through Congress? They found this sort of obscure, rarely used provision, this little piece of this 1970 law, and they said, we can do a regulation and move this through and take a serious bite out of carbon pollution in the U.S. And this is something that the president wants to get through and done and enacted before he leaves office as a legacy issue.
REHMBriefly explain the proposal for us and how it would hit coal-fired power plants particularly hard.
DAVENPORTSo, as you said, the proposal will cut carbon pollution from power plants 30 percent from 2005 levels by 2030. Power plants are the largest source of carbon pollution in the United States. And what it would do is it would require each state to come up with its own plan, come with its own compliant plan -- compliance plan on how it would reduce its rates of carbon pollution. And necessarily this is going to have an impact on coal-fired power plants. Power plants are the largest producer of carbon pollution in the United States. But within that sector, most of that pollution comes from coal.
REHMSo if you're talking about 30 percent reduction state by state, overall, you're talking about an average. Is that not correct?
DAVENPORTIt's an average. And what they've done is they've given each state a different target, taking into account the fact that economies are so different across the country and states depend on different sources, different mixes for electricity. In the Rust Belt, in Appalachia, you have states, like Kentucky, West Virginia, Indiana, that get most of their electricity from coal. It's going to be hardest for these states.
DAVENPORTIn the Pacific Northwest, where you have states like Washington State, they get most of their electricity from hydroelectric. They have one coal plant. It's going to be a lot easier for them to comply. So EPA looked at all of this, and they said, each state gets a different target based on what they can actually do.
REHMCoral Davenport, she's with The New York Times. Jeff Holmstead, why the 2005 platform from which to measure?
HOLMSTEADWell, I think there are a couple of reasons. First, when the president announced his own goal several years ago, he wanted to get a 17 percent reduction in U.S. carbon emissions from the year 2005. So it's consistent with the way he has talked about the issue. But also, it's a very clever way to allow the president to have a bigger number that he can tout.
REHMHow do the coal companies feel about that 2005 starting point?
DAVENPORTThey like it.
HOLMSTEADCertainly the 2005 starting...
BEINECKEThe utilities like it.
HOLMSTEAD...starting point is preferable, but actually the regulation itself is based on 2012 numbers. So EPA says correctly that if this is implemented, it will accomplish a 30 percent reduction from 2005. But the regulatory standards are actually based on where we are in 2012.
REHMJeff Holmstead, he's an attorney in private practice. His clients include coal companies. He's former assistant administrator for air and radiation at the Environmental Protection Agency from 2001 to 2005. Frances Beinecke, how does the environmental community look at these proposed rules by EPA?
BEINECKEWell, Diane, first of all, we're thrilled that the proposal is out. This is something the environmental community has been working on since the president's first term because, as Coral said, he did make this commitment. So we think this is a very, very significant step forward in addressing the very serious threat and reality of climate change that we're experiencing all across this country.
BEINECKEThese are real reductions, and they really -- not only do they reduce carbon emissions, the largest single source of climate change pollution, but they also, we think, will really unlock innovation and technology in clean energy. We think that this will really promote a major transition to a clean energy future for the country, one that's much more efficient, much cleaner, and has major significant improvements and benefits on the public health side.
REHMCoral Davenport, what percentage of climate change do scientists now attribute to U.S. carbon emissions?
DAVENPORTU.S. carbon emissions right now contribute to about, I think, about 20 percent. Is that right, Jeff, lower?
HOLMSTEADI think it's (unintelligible).
REHMIt's even lower.
REHMAnd so it's not that much anymore.
DAVENPORTNo, it's not. The point of carbon pollution and global warming is it's a global problem with global contributors. Scientists say that about 70 percent of global carbon pollution comes from about 10 economies, 10 major polluters. And in order to make a significant dent, in order to slow and eventually lower carbon pollution, all of those major economies are going to have to make significant cuts. You're going to have to take cuts out of all those pieces of the pie.
REHMBut, Jeff Holmstead, how do we know that the others are going to cooperate?
HOLMSTEADWell, I think that is the big issue. And a lot of analysts would say it really doesn't make sense for us to act unilaterally until we have some agreement from the other nations, that they will be doing something similar. So it -- I think it doesn't make sense to disadvantage ourselves economically without some commitment from other countries to do the same.
REHMFrances Beinecke, how do you feel about that?
BEINECKEWell, I think one of the things that's really happened in the international conversations over the last many years are other countries are really looking for the U.S. to lead and to act in the forefront. I think this is a very significant step forward. And interestingly, just yesterday, China announced a commitment to a coal cap. Now, they didn't provide any numbers, but the fact that this came right on top of the U.S. announcement, I think, is very, very significant. China's the largest emitter, and the rest of the world have been looking for the United States first, but also China, to take a step forward on this very serious issue.
BEINECKEAnd I think that that has happened.
REHMPretty significant then that China has at least stepped up.
DAVENPORTYeah. And I take issue with what Jeff said about a lot of analysts saying it doesn't make sense for the United States to act first. In fact, global analysts and negotiators and diplomats who are deeply involved in efforts to get a global agreement, a joint agreement of some kind on cutting carbon emissions, have said consistently, the United States is the largest historic polluter of carbon emissions. Most of the carbon emissions that are already out in the atmosphere come from the United States having grown its economy throughout the 20th century.
DAVENPORTThe United States is also the world's largest economy. And the dynamic within these global negotiations has been very much the U.S. doesn't have the leverage to come in to these negotiations and tell China, India, and other economies that they should make carbon cuts without having made any significant major domestic carbon cuts at home. And so what analysts are saying is, this is a game changer because the only way the U.S. has the leverage to get other countries to agree to cuts is by saying, we're the largest historic polluter.
DAVENPORTWe're the largest economy. We've now made these domestic cuts. Now, we have the authority to push for other cuts. And the other countries that have been hiding behind -- a lot of economies had been saying, well, look, if the U.S. doesn't act, if the world's largest economy, the largest historic polluter, isn't doing something, why should we? This policy has changed that dynamic significantly.
HOLMSTEADI've heard this argument many times, but no one has ever pointed to an international agreement where one country goes first and significantly disadvantages itself without some agreement from the rest of the world. So this dynamic, it is certainly true that I think many, many countries are hiding behind the U.S. But I think we won't really know for several years whether this unilateral action will accomplish anything.
REHMAll right. And when we come back, we'll talk about what these actions by the EPA could actually mean for climate change or the reduction of carbon dioxide in the atmosphere. And we'll take your calls. I look forward to speaking with you.
REHMAnd welcome back. We're talking about the EPA's proposed new limits on carbon emissions. The new rules stipulate that by 2030, emission rates must fall 30 percent below those of 2005 levels. Here in the studio: Jeff Holmstead, an attorney in private practice whose clients include coal companies, Coral Davenport, climate and energy reporter for The New York Times. And joining us from an NPR studio in New York, Frances Beinecke, president of the Natural Resources Defense Council. Jeff Holmstead, I would imagine that coal companies around the country are particularly concerned about this new ruling.
HOLMSTEADWell, I think it's not just coal companies although EPA projects that there will be many thousand jobs lost in coal country. But I think the concern comes from people who use a lot of electricity because there's no question that this will increase the cost of electricity. And even EPA concedes that fact. EPA's projections are that the utility rates will go up. The cost of power will go up on average about 6 or 7 percent in 2020. Other analysts would -- I think using more realistic assumptions -- say that the cost will go up more than that.
HOLMSTEADBut it's important to remember that that's not -- that will be very uneven across many states. So that increase will be much higher in states that get a lot of their energy from coal. And so those increases make a big difference in terms of utility bills, for people who can least afford to pay them, and for industries who operate in those states.
REHMAll right. And, Frances Beinecke, the loss of jobs in coal country and the increases in electricity costs, how do you respond?
BEINECKESo I think -- yeah, Diane, a couple things here. First of all, the way to make this rule be the most cost effective is to have a very significant investment and energy efficiency around the country. So even if rates may go up, the consumer's bill will go down if their homes, businesses, industries are designed to be much more energy efficient. We've seen huge gains, for example, in the state of California on energy efficiency.
BEINECKESo to really make this as cost effective as possible, the states, in designing their own plans -- and remember every state will have the opportunity to design their own plan. If they make a maximum commitment in energy efficiency, it will make it cost effective. Also the fastest growing sector in job growth in the energy sector is in renewables and in efficiency investments. And there are literally tens of thousands -- we calculate over 200,000 jobs in the clean energy sector will be a result of this rule.
BEINECKESo in coal country, what we're hoping is that there'll be a transition for those workers to cleaner job opportunities. And, for example, in West Virginia, which is in the heart of coal country, already there are wind turbines being located in that state. They're in a number of the community colleges. There are programs that are developing around wind so that people in those communities do have job training and job opportunities that are created about this.
BEINECKEAnd I think it is absolutely critical jobs are absolutely central issue to this. And I know that those of us in the environmental community who are working on this are as focused on the economic opportunity for people all across the country as we are in the very, very important result of reducing carbon emissions so that our climate is stable going forward.
REHMYou know, we've heard this before when we've made transitions. How much will there be for job training? How much money will be allotted for job training within each of these states? That's how it's going to have to be done, Coral.
DAVENPORTYeah, the rule doesn't address any of that. I think each state is going to have to look at how it's going to make an energy transition, what it's going to mean for each state's economy. As Frances said, the rules does particularly single out the issue of energy efficiency. It says one way that especially coal-dependent states can comply is by installing energy efficiency technology both to coal-fired power plants and to homes and buildings. The idea is to squeeze as much energy as you possibly can out of the current system while, you know, lowering the carbon emissions.
REHMYou know, it's been fascinating to me, and perhaps to you as well, Jeff Holmstead, that President Obama has not been talking as much about climate change as he has health effects. How do you interpret this change of message?
HOLMSTEADWell, I think first and foremost, it's very difficult to say that this rule will do anything for climate change. EPA doesn't discuss that in the rule. But using EPA's methodology, analysts have predicted that it will decrease the average global temperature by something like one-sixtieth of a degree Fahrenheit. And it would reduce sea level rise by something like one one-hundredth of an inch.
REHMCoral, do you agree with those figures?
DAVENPORTI think that that is a completely disingenuous argument. The goal -- the objective of this rule is not to lower sea level rise. In fact, I don't think there's anything that could happen right now to do that. The objective of this rule is to give the United States something to go to the bargaining table with internationally to...
REHMTo provide leverage.
DAVENPORT...to provide leverage. Nothing that any one single actor is going to do is going to curb carbon emissions enough to stop climate change. It has to come at the national and international level. And so to claim that one slice of policy is going to or not going to lower temperatures, lower sea levels, is a totally disingenuous argument.
HOLMSTEADBut I take offense to that. You have to look at what this rule accomplishes. So you can say there's a secondary purpose -- and I think there's a lot of dispute over whether this will actually induce other countries. That remains to be seen. But you have to...
DAVENPORTBut looking at it from the point of lowering temperatures is about lowering emissions -- lowering emissions.
HOLMSTEADOK. So let's look at emissions. If you look at when this rule is fully implemented in 2030, the rule will reduce about 20 days' worth of emissions from China. So in terms of total...
REHMHow can you project that far ahead, Jeff?
HOLMSTEADOh, I'm actually looking at current emissions from China. If you look at projections of future emissions, it's probably more like 11 or 12 days. But if you look at current CO2 emissions from China today and you look at the reductions that this rule will get, it's about 21 days of current Chinese emissions.
BEINECKEWell, I just disagree with Jeff fundamentally. The United States has a responsibility to address our own emissions. China has a responsibility to address theirs as well. This is an important step for the country to get on a clean energy pathway, reduce our carbon emissions, unlock the technologies which will increase that in the future. There are also -- and back to your original question, Diane, there are very significant public health benefits associated with this.
BEINECKEAs you reduce carbon emissions, you also reduce other pollutants from these coal-fired power plants that have our major contributors to respiratory disease around the country. EPA calculates, in the first year of implementation, there'll be over 100,000 asthma cases which will be avoided. And those numbers will go up. And that will have tremendous benefits to the economy too as far as avoided medical costs go.
BEINECKESo there are many benefits from this rule. And, to me, the most important is the U.S. leading reducing our emissions and getting us on a new pathway of innovation and technology, which is a 21st century pathway, and not keeping us in the 19th century coal-fired power plant industry that we've been (unintelligible).
REHMAll right. Coral.
DAVENPORTDiane, I will say one thing that scientists say is the impact of this rule along with everything else that Obama has done to reduce carbon pollution in his administration, along with what might emerge from an international treaty in the next couple of years, altogether combined are not enough to lower carbon emissions substantially to keep the globe from warming over 3.6 degrees Fahrenheit.
REHMWhich is why he's not talking about that as much anymore.
DAVENPORTWell, I think he's not talking about it because the issue has become so politicized. And I think they've realized -- I think the administration has realized it's very difficult to rally voters around the idea of rising sea levels in the future, drought in the future, you know, these issues that are happening around the world. And so what they've done for messaging is they've taken this sort of secondary impact.
DAVENPORTAs Frances said, any kind of regulation that's going to lead to the shutdown of coal-fired power plants eventually is also going to lead to the reduction of other pollutants that those coal-fired power plants put out, soot, smog, that kind of things. Those pollutants are linked to asthma, to respiratory diseases, to sick kids.
DAVENPORTAnd so, you know, they've polled, and they've found voters respond very much to policies that say we're going to address sick kids, we're going to keep kids from getting asthma. It is definitely kind of a secondary tangential effect. Carbon pollution and global warming is not causing asthma in kids, but they're sort of really taking a two-step link to sell that.
REHMJeff, Frances talked about alternatives, and one alternative we're seeing now is increasing demand for gas. But gas provides its own problems, doesn't it?
HOLMSTEADWell, I think if you just look at the market forces, it is true that we are getting more gas in our power sector. And gas does have about half the carbon emissions of coal, but it still does have carbon emissions. I think the key thing though that we should just be honest about is it will be costly to make this transition. It will impose a real cost on families. It will impose a real cost on industries. The cost may be high enough that some industries will leave the United States and go overseas. We don't really know that yet. But I think we do need to all be honest with ourselves about the cost of this to our economy and then what it will actually accomplish.
REHMHow many coal-fired plants do you see shutting down?
HOLMSTEADEPA has not done that analysis yet. And the industry has not had time. I believe that EPA does say they expect a reduction in coal usage by about 25 percent by 2020. So that would suggest that there's a significant number.
REHMAnd which states do you believe will be most hard-hit?
HOLMSTEADWell, you would have to look at the states that rely heavily on coal.
REHMSo West Virginia?
HOLMSTEADThat would be Indiana, Missouri, West Virginia, Kentucky, Utah, so there are many states that get more than half of their electricity from coal. And rates will go up more in those areas than in areas like California that already have very expensive power.
DAVENPORTWe absolutely will see the shutdown of several coal plants in the coming years. However, part of that is for trends that are already in place. The average age of a U.S. coal plant is over 40 years old. And so electric utilities have already been looking at these coal plants and saying, you know, these coal plants are approaching retirement. They're already dirty.
DAVENPORTThey're already not in compliance or too expensive to update in order to get them in compliance with other regulations that have come down the pike. Electric utilities have consistently said that in the coming decades they had already planned to retire these coal plants and move over to natural gas because it's cheaper.
DAVENPORTI exchanged emails this morning with the top energy official in the state of Kentucky, and I said, hey, which coal plants do you think will -- in your state will be most vulnerable to this? And he wrote back, and he said, I don't anticipate that we will be closing coal plants. This regulation gives us a lot of options to comply.
DAVENPORTIt asks us to lower our overall emissions rate rather than target particular plants. So, for the time being, you know, we can't even say that we will close down coal plants. I was surprised.
REHMCoral Davenport of The New York Times, and you're listening to "The Diane Rehm Show." And to you, Frances Beinecke, before we open the phones, the EPA has said what it's trying to do is to strike a balance between what environmentalists have been seeking and the challenges for the utility industry. From your perspective, have they found a fair balance?
BEINECKEWell, I think they have found a fair balance. And just to Coral's point, many of the utilities are already heading down this road. Some of the -- what were the largest coal utilities, like the southern company Duke Energy, already have significant 20 percent-plus -- including the TVA by the way -- 20 percent reductions in their carbon emissions. So this gets them on a trajectory that they're already on.
BEINECKEAnd I think, from our point of view -- I mean, we would like it to be stronger, and our analysis shows you could actually get more reductions. You could get 35 percent reductions by 2025, I think, is our number. So we're going to push actually very hard to make sure that efficiency renewables are used to the maximum. We're going to work across the country in states with utility state regulators to get the maximum benefit out of this proposal.
REHMAnd, Jeff, from your perspective, not a fair compromise?
HOLMSTEADWell, I agree that EPA has tried to strike a balance, but I think I would disagree at where they have set the levels. It will be quite expensive in many states, and there will be a lot of uncertainty as to how this will play out because there's so much legal uncertainty as to whether this is even possible under the Clean Air Act. So it's an issue because I think most companies would like some certainty, so they can make future investments. But this approach -- this regulatory approach just keeps the uncertainty alive.
REHMAre we going to see lots of lawsuits?
HOLMSTEADWell, traditionally we have whenever EPA does a rule of this type. And one of the things that's most troubling, just from a public policy perspective, is there will be initial litigation over the rule itself. And that's not so surprising. But then there will be 50 different state plans. And EPA will have to make decisions on those plans. And there will likely be litigation over those state plans. So you will -- it's good for lawyers perhaps, but it's not really very good for investment certainty or perhaps even for the environment.
DAVENPORTI wrote yesterday that...
DAVENPORT...this is going to be a job creator for the environmental lawyers.
REHMHold on one second. What happens if the Senate turns to Republicans in the fall?
HOLMSTEADWell, again, I don't think we really know. If both the House and the Senate are Republican hands, there may be efforts to tie the president's hand here by withholding funding. But I don't think we really know because this is clearly an important issue for the president's legacy. And so if you have a showdown between the president and the Congress over this issue, it's very hard to predict what will happen.
REHMAll right. Very briefly, Frances.
BEINECKEYeah, I just want to go back to the legal authority. I just want to let people know that the United States Supreme Court has twice affirmed EPA's authority to regulate carbon under the Clean Air Act. There is absolute legal authority here.
REHMAll right. We'll take a short break here. When we come back, we'll try to work in as many of your calls, your question as possible.
REHMAnd as we talk about new EPA proposals to lower the carbon emissions that go into our atmosphere between now and 2030, we have from Reuters this morning that China, which, as you've already said, is the world's biggest emitter of climate-changing greenhouse gases, will set an absolute cap on its CO2 emissions from 2016. And that's what a top government advisor said today.
REHMWe have -- speaking of how difficult it's going to be for employees of coal companies, from Peter in Arlington, Va., he says, "Maryland was a major tobacco producer. The state helped the farmers transition off that crop. Can West Virginia, other states, and the federal government provide similar support to wean us off coal?" What do you think?
HOLMSTEADWell, the answer is that they perhaps can, but this rule doesn't address that issue at all. So states may choose to have these programs. It's hard to see what the federal government would do, but I think there's some hope for people whose livelihood is taken away, that there will be some kind of transitional assistance.
DAVENPORTSo the bill that President Obama initially tried to pass through, the Cap and Trade Bill, was designed to do that. It would have taxed polluters, put a heavy tax on coal emitters, but the idea was that the bill that passed the House had huge carve-outs for a lot of that money to go back and help the coal industry, help coal community. That was the idea. Tax it, but then use the money to help make the industry and its workers whole. When you're doing this by a regulation, you don't have that.
DAVENPORTYou know, a regulation just forces a crackdown. However, it's possible -- very likely actually. A lot of analysts say -- and the EPA says -- that this rule will spur the creation of state-level cap and trade programs. So we may see this at the state level where states are taxing their polluters. And then they can choose what to do with the money. They may choose to put the money back for things like job creation programs or transition. All of this remains to be seen. But when you do it at, you know, at a straight regulation, you don't have those funds to direct into helping that transition.
REHMAnd for you, Frances Beinecke, John in St. Louis, Mo. says, "It's frustrating that there's no answer on how much CO2 reduction is needed to halt global warming. Can you answer that?"
BEINECKEWell, I think that the thing that we know is that climate change is real and that carbon emissions are a major contributing factor. So the more we can get out of reductions, not only of carbon but also now, increasingly, of methane emissions, is very, very important. So I don't think the number is as important as the trend. And this, again, gets to why -- it's obviously critical to transition to a cleaner source of energy, to a more efficient energy system for us and around the world.
BEINECKEAnd I think that if we invest here in this country in technology, in new opportunities, create jobs, that's something that we can share with the rest of the world, and particularly in the developing world where they don't have these very elaborate grid systems that we've created over the last 100 years, where they're making the energy investment now. So how that's made is absolutely critical to the future of the planet.
REHMAll right. Let's go to Steven in Richland, (sic) Va. Hi. You're on the air.
STEVENYes. And I'd first like to say that your show is very balanced and informative.
STEVENI come from a line of coal miners. And the region that I'm from is predominately coal mine industry. And I just wanted to speak to the point that, while it will be a difficult period, the transition to natural gas is somewhat inevitable and progress, I think. And the industry itself has come into the area in the past 8 to 10 years and created a boom of its own between the support services and the construction involved with gas lines and the equipment necessary. So it's really an industry that's already got a foothold in our region and has created a great deal of jobs in advance of losing the coal mine position.
REHMBut, Steven, let me ask you, what about other neighbors, friends of yours, who may have been working in the coal mines, in the coal industry? Do you see them transitioning to the gas industry?
STEVENA good percentage, yes, because a good portion of the skillset is a natural transition to the gas well. Some of the same technologies are used and the setup of the pumps necessary, the pipe, the welding.
STEVENSome of the positions are essentially the same job.
REHMAll right. Steven, thanks for calling. Of course, on the other hand, gas brings with it its own problems. Coral?
DAVENPORTYeah. One thing that is so interesting about this regulation is it really is a shot across the bow to coal, in the long run. And the way I put it is it's a valentine to natural gas. This, you know, the industry -- electric utilities were already shifting from coal to natural gas because of market forces, because natural gas is cheaper. Now that shift is locked in. Electric utilities are going to continue to choose natural gas. There's going to be huge, huge demand for natural gas to build those new lower-polluting power plants. And that immediately brings up the question of fracking.
DAVENPORTOf regulating fracking. And so that's the next question for EPA. How much are they going -- you know, if they need this natural gas to help make that transition, how much are they going to regulate the extraction of that natural gas, which brings another host of, you know, of potential environmental problems?
REHMAnd the methane problems. Frances?
BEINECKESo there's no doubt that there are very serious environmental problems related with fracking, air quality problems, water quality problems. There are communities alarmed all across the country about this. And it is imperative that EPA and the federal government, also the Bureau of Land Management that has authority, create the strongest safeguards to protect our communities and our families.
BEINECKEAnd that has not yet happened. And one of the reasons it's not happened is that the natural gas industry got a variance to the many provisions of the Clean and Safe Drinking Water Acts. So EPA's authority is actually limited. This is something that has alarmed people all across the country. It certainly alarmed the environmental community. And even as we press to reduce carbon emissions, we have to press equally hard to protect our communities from the dangers of fracking.
BEINECKEAnd one thing that our analysis shows is that we can move forward with carbon reductions and with aggressively investing efficiency in renewables and making sure the existing natural gas plants are as efficient as possible. And it doesn't require a major uptick of gas. And I think that that's really important to realize, that all of our energy demand has been going down because our system is becoming more and more efficient. And we just have to maximize that.
REHMJeff Holmstead, I wonder how much investment you see going into alternative forms of energy, excluding the gas industry, talking about wind, talking about solar, which would not, apparently, produce carbon dioxide emissions.
HOLMSTEADWell, I don't -- my clients haven't done their own analysis of that. If you look at EPA's analysis, it suggests that there will be some additional investment in wind and solar, but it suggests much more will be accomplished by switching to natural gas, just because of the reliability issues. It is much more difficult to accommodate a source that isn't always available when you need it.
HOLMSTEADThe other thing, I think, which is certainly a good thing from a CO2 perspective is EPA has designed this to try to preserve the nuclear plants that were being threatened. So I don't know the answer to solar and wind. Those have typically been driven by subsidies and by regulatory mandates. And I don't think this really does a whole lot beyond what's already out there.
REHMAll right. Let's go to Scott in Dallas, Texas. Hi. You're on the air.
SCOTTHi. Yeah. I'm an organic gardener by trade and a naturalist, you know, in my free time. But so many of these environmentalists are very gullible. Cap and trade will only divert billions of dollars to Goldman Sachs and speculative financial instruments. That's not going to help us get more efficient. I have no problem with the EPA capping emissions or cutting them or whatever, but cap and trade's a terrible way to do it.
SCOTTThe environmentalists have jumped on board all kinds of terrible ideas. Wind power in Texas has been a total loser. We've put $20-some-odd billion into it, and we get 8 percent production during peak demand. That's a total loss. Solar makes more sense. It jives with our demand cycle. Ethanol's another nightmare. And it's done nothing to make anything greener. You've got to be more discerning, and you've got to have a few more facts behind you. But lauding everything that's labeled green is foolish, and you get exploited.
SCOTTT. Boone Pickens got more out of our wind than anybody else.
REHMThanks for calling, Scott. And there you are with this state-by-state approach to what's going to work.
DAVENPORTExactly. And that's, you know, the EPA recognizes that, you know, Texas, for example, has a very distinctive energy profile, very, you know, very distinctive economic profile. Every state has its own different economic and energy profile. I think that's something that's going to be different as we start to see state level cap and trades. States can choose whether or not cap and trade will work for them. We do think that some states -- California has a state cap and trade.
DAVENPORTThere are nine states in the Northeast that have a regional cap and trade. The expectation is that some states probably will join up with those existing cap and trade programs. What's interesting about seeing what will happen with cap and trade at the state level is, if a state chooses to create a cap and trade, the state get the -- the taxes from that, the money will go to the state.
DAVENPORTThey won't necessarily go to, you know, the federal treasury. They won't be going to these major financial institutions. The state gets the money. The state will be able to figure out what to do with it. And one of the big ideological complaints about cap and trade was that all this billions and billions of dollars were going to go to the federal government. It could do whatever it wanted. It was this very centralized control.
DAVENPORTIf each state can run its own cap and trade and can choose what to do with the money -- and it's sort of state-level control -- I think it'll be interesting to see what that does to the politics of this idea of cap and trade, you know, again, if it's states get the money, states figure out what to do with it, rather than nationalized control.
REHMOf course, in Europe, cap and trade has not worked as well. In California, it's worked quite well.
HOLMSTEADWell, but I think, again, it's important to be honest about what it does. Energy prices in California are much higher than the rest of the nation. Energy prices in the Northeast are significantly higher than the rest of the nation. So when you adopt these policies, you just need to be honest about what it means. It does mean that there'll be significant costs that people will have to pay for their energy.
REHMAnd you're listening to "The Diane Rehm Show." Frances, I know you want to add.
BEINECKEYeah. So I just think that Jeff's point -- in California, they have made major investments in efficiency, billions of dollars of investments, and the actual consumer bill in California is lower than in other parts of the country because of those investments. So, yes, the rates may be higher, but the bills are lower. And I think that's really an important factor to keep in mind.
REHMGo ahead, Coral.
DAVENPORTAnd that's -- the EPA's analysis is that because of -- that this law will spur an aggressive investment in energy efficiency. And because of that energy efficiency, the EPA's analysis is that consumer bills will go down 8 percent. That was what I saw in their analysis. And you -- I'm sure you read it more closely than I did, Jeff.
HOLMSTEADWell, again, I think a lot of people are skeptical that you increase the electricity rates and lower people's power bills. EPA does make some pretty heroic assumptions about the growth rate of energy efficiency. I mean, they're projecting that it's 1.5 a year compounded for the next 16 years. I think a lot of people believe that that's kind of wishful thinking. So we will see.
BEINECKEWe actually think that's a very modest number, Jeff.
BEINECKEWe think it's well beyond that.
REHM…let me ask you about fracking and where you think this is going, as far as the EPA is concerned. You've got a temporary ban on fracking in Maryland, but other states around the country are certainly involved.
BEINECKEWell, what's happening is fracking is pretty much regulated at the state level. So, for example, in New York State, there's a moratorium, but in Ohio and California, fracking is proceeding. There are moratorium efforts in California, but the most important thing -- because fracking is occurring, I think, in over 30 states in the country -- is to insure that the strongest safeguards are adopted both at the state level and at the federal level.
BEINECKEAs I mentioned, there is restrictions on the federal authority. So it's critically important that the states take leadership, too. And one of the things that's happening is, because of this very strong reaction on the part of many affected communities, the states are looking much harder at what they need to do to protect their citizens.
REHMHow soon do you expect the EPA to really come out with something definitive about fracking?
DAVENPORTWell, they are…
DAVENPORTThey do say that they are working on a set of fracking regulations. I think that this issue is only going to grow in urgency as this climate regulation creates further demand for natural gas. So, you know, I would expect that we would see this some time in the next year or so. But, you know, it's really hard to tell. They don't have any kind of deadline for it.
REHMJeff Holmstead, do you think many of the companies you represent in the coal industry will be looking very closely at moving toward fracking?
HOLMSTEADWell, mostly the companies that I represent are those that produce electricity. And what they're interested in is just finding the lowest-cost ways for their consumers. So I think it is absolutely true that this rule would be much more expensive if we didn't have low-cost natural gas. So I think utility companies, as -- are always looking for what they can do to produce power at the lowest possible cost.
REHMAll right. Jeff Holmstead, Frances Beinecke, Coral Davenport, thank you all so much. And thanks for listening. I'm Diane Rehm.
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