Sunday, April 10, 2016

How Obama's Reforms of Federal Coal Leasing Could Cut Carbon Pollution - by David Roberts

In January, Interior Secretary Sally Jewell called for an immediate moratorium on new federal leases for private developers to exploit coal so that the program could undergo its first top-to-bottom review in 30 years.
These days, things are different.  The US is moving away from coal.  Taxpayers no longer see the logic in subsidizing coal mining.  And one of the country's two major parties has become aware of the enormous danger of climate change and coal's contribution to it.

So the program is being reviewed with, among other things, climate change in mind.

The question is as simple as it is difficult:  Just how much does coal leasing contribute to carbon emissions?

Obviously, digging up coal and burning it generates lots of carbon emissions.  But for any given lease, some amount of coal would have been dug up and burnt anyway — there would have been some amount of "substitution" from some other coal mine.

But how much?  How much of an impact does the program have on emissions, and, conversely, how much might emissions be impacted by leasing reforms?

A study, published in February, takes a stab at answering those questions.

Funded by Paul Allen's Vulcan philanthropy and carried out by Vulcan's Spencer Reeder and Harvard's James H. Stock (a former Obama economic adviser), it uses the same same model the Environmental Protection Agency uses to project the effects of market and policy changes.
With respect to the Clean Power Plan, the study models three scenarios:  no CPP (in case it's struck down in court) plus "mass-based" and "rate-based" CPP compliance in the states.

I won't bore you with all the details; I'll just highlight what I think are some intriguing findings.
  • While a royalty rate bump to $2.50 a ton wouldn't have much effect, a more substantial boost — even 20 percent of the SCC — would reduce power sector emissions.  (In other words, the effect is not zero, as BLM has argued in the past.)
  • There is some substitution of non-Western, non-federal coal in all scenarios, but the higher the royalty rate goes, the more likely the market is to switch to natural gas or wind.  The more stringent the reforms are, the more they push the whole market away from coal.
  • In all carbon-adder scenarios, state leasing revenue increases, even as production declines, out through 2030, in some cases 2050.  In other words, the states where the coal is leased would benefit from reforms.
  • If the CPP is implemented, rising royalty rates will have a noticeable, but not huge, additional effect on emissions.  However, if the CPP gets scrapped, rising royalty rates could make up some (but not all) of the difference.  A royalty rate that reflected 50 percent of the SCC would accomplish 40 percent of what the CPP would have.  One that reflected 100 percent of the SCC would accomplish 70 percent of what the CPP would have.
Leasing revenue stays elevated even as production declines. (Credit: Vulcan) Click to Enlarge.
That last bit, in bold, is the most interesting aspect of all this.  It suggests that these coal leasing reforms might have an important political role to play.

To be sure, the DC Circuit Court is probably going to uphold the CPP, and the Supreme Court, divided 4-4, won't be able to overturn that judgment.

However, in the unlikely event that the CPP is scrapped and the EPA is sent back to the drawing board, substantial coal leasing reform could take a big bite out of US emissions in the meantime.

Read more at How Obama's Reforms of Federal Coal Leasing Could Cut Carbon Pollution

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