In the US, the climate is changing on climate change.
Though President Barack Obama lavished attention on climate change in both his inaugural address and State of the Union speech, he still has little chance of getting Congress to pass a law limiting carbon emissions. But he could achieve the same goal using regulation from the Environmental Protection Agency (EPA), and he is now in a better position to withstand—and even welcome—the confrontation with the energy industry this would entail, thanks to both economic and political shifts.
The key economic change is the surge in domestic production of natural gas spurred by the growing use of hydraulic fracturing, or fracking. That creates a cheaper alternative to coal-generated electricity and has eased fears that restrictions on carbon would send utility bills soaring. “The economic prerequisite for a major move against coal is low gas prices,” says Jerry Taylor, a senior fellow at the libertarian Cato Institute. “So economically the table is set.”
The big political change is that in 2012 the coal and oil industries threw everything they had at Obama—and he won reelection comfortably. Although the coal industry nearly quadrupled its political contributions from 2008 to 2012, and directed fully 90% of its money toward Republicans, it could not prevent Obama from carrying all of the key swing states that produce the most coal: Pennsylvania, Ohio, Colorado, and Virginia.
What’s more, the states where gas production is booming now form a growing political counterweight to those that depend on coal. And regulatory limits on carbon would encourage utilities to accelerate their shift from coal to natural gas. “There is a cleavage, a little wedge, between the traditional energy-based community and where we are,” says Dave McCurdy, president of the American Gas Association, which represents the major natural gas distributors.
Still, given Congressional opposition to carbon-control measures, Obama’s most likely move on climate is for the EPA to issue regulations limiting emissions from existing power plants. The agency has already proposed rules limiting such emissions from future plants—essentially precluding the construction of new coal-fired power plants under existing technology. The World Resources Institute, an environmental think-tank, recently calculated that extending those limits to existing plants, along with some smaller steps, would allow Obama to meet his stated goal of reducing US emissions in 2020 by 17% from 2005 levels.
Before 2012, the politics of EPA regulation appeared daunting to many inside the administration. And even now EPA regulation of existing coal plants would generate “a firestorm” in Congress, as Taylor puts it. The House would almost certainly overturn the rule, and the Senate might too. But in neither chamber would opponents have enough votes to override Obama’s veto of that resolution.
On both the economic and political fronts, insiders believe Obama would enter such a fight in a much stronger position than during his first term.
One reason was his success at winning reelection despite overwhelming resistance in coal country. Obama won just 30 of the 420 counties included in the Appalachian Regional Commission, a swathe from Pennsylvania and Ohio through Mississippi and Alabama that produces about one third of America’s coal. (As recently as 1996, Bill Clinton won 194 of those counties.)
Yet in the key swing states in that band, opposition from the preponderantly white rural voters in those counties was not enough to overcome Obama’s strength among what I’ve called his “coalition of the ascendant”: young people, minorities and socially liberal college-educated whites, especially women. That coalition supports action on carbon emissions much more clearly than the US public as a whole. Obama has increasingly embraced policies that mobilize this coalition (on immigration, gay rights, gun control and the federal budget) even at the price of inciting further opposition from older, blue-collar and rural whites.
An EPA move against coal-fired power would follow that pattern. One senior Obama adviser said the White House now believes that forcing the GOP to debate the issue will benefit Democrats politically by creating hurdles for the GOP with younger voters. “Republicans will eventually realize their position on climate for young people is the equivalent of their position on immigration for Latinos,” said the adviser.
EPA rules to push utilities towards gas and away from coal would also be swimming with a market current that is much more evident than it was at the start of Obama’s first term. Since 2004, the share of US electricity generated from gas has nearly doubled, from 16% to 29%, while the share from coal has dropped from 51% to 39%, according to the Department of Energy. Taylor wrote in the conservative National Review last week that during Obama’s first term “135 coal-fired power generators were shut down, and at least another 175 have announced that they will go dark by 2016.”
That trend is partly due to tougher EPA regulations on other power-plant emissions like mercury, and the expectation that eventually the US will limit carbon as well. But key too has been the narrowing gap between coal and gas prices, as gas production has soared. “There is a paradigm shift,” says McCurdy. “Because when most of us talked about carbon reductions, or carbon pricing, it was always based on a higher price for the fuel [that would replace coal]. With the natural gas renaissance, we see price stability at a very low price for quite some time.”
Not everyone is so sure that that gas prices, historically volatile, will stay low indefinitely. But the growth in gas production has tempered fears of big price swings. As a result, the industry and environmentalists alike expect that utilities would respond to EPA regulation primarily by shifting further and faster to natural gas, rather than trying to make a generational leap to solar or wind power. “Environmentalists would like to see renewables…but that would be the go-to fuel of choice,” says Marchant Wentworth, legislative director for the clean energy program at the Union of Concerned Scientists.
If an (effective) ban on coal does produce a boon for natural gas, it could change the politics of regulation in two big respects. First, it would be harder to claim that new emissions limits would make electricity prices spike. As important, it means coal jobs lost through regulation would be replaced, and possibly exceeded, by jobs producing and distributing natural gas. The senior Obama adviser says this would strengthen Obama’s hand if the EPA acts. “There is no question that what is happening in domestic production…gives you a permission structure to take on this issue,” the adviser said. “There is a substitute [for coal] now. Before it was a leap of faith.”
The gas boom would change the regional equation of carbon regulation. EPA limits would still provide a wedge for Republicans challenging the remaining Congressional Democrats in big coal states like West Virginia and Montana. But 32 states now produce at least some natural gas, and the top of the list is crowded with states like Texas, Louisiana, Wyoming, and Oklahoma, most of whose Congress members reject even the notion that the climate is changing. None would likely disavow that position, but all could face pressure from gas producers in their states, who would benefit from a shift away from coal, not to fight the regulation. “You are going to see a lot of red-state Republicans in states like Oklahoma who are going to have very difficult decisions to make,” says Taylor.
McCurdy, a former Democratic representative from Oklahoma, agrees. “The politics of energy is changing,” he says. “This generation of politicians will have a hard time making that switch. They have a hard time figuring it out. But I tell you there is a new politics out there if people are attuned to what is happening and were thinking more strategically about it.”