Obama steps it up on climate – takes on US coal, power plants

It’s taken just over four years for Barack Obama to deliver the climate action plan he had promised as a fledgling president. And he’ll do it the only way that has ever been available to him – by presidential decree.

“As a president, as a father, and as an American, I am here to say we need to act,” Obama said, in a speech outlining his first detailed plan for confronting what he’s described as a central global challenge of the 21st century. “We don’t have time for a meeting of the Flat Earth Society.”

Obama’s climate speech in Washington DC on Tuesday is probably a final recognition that he will not be able to deliver the carbon price that he knows would be the most effective mechanism. Instead, he will invoke a sort of direct action, but one with real bite – carbon emissions from existing coal-fired power plants will be tightly regulated, there will be a doubling of permitting for renewable generation on public lands – and there will be a renewed push on energy efficiency incentives.

Coming as it does a week after China launched the first of seven pilot emission trading schemes, it does show that the worlds two biggest economies, and two biggest polluters, are at least moving to deliver on their promises, and are preparing the way for the more ambitious action that the science demands.

The initial reaction to Obama’s proposals elicited two key responses – that the power sector in the US is going to bear the brunt of emissions reduction in the US; and that there are key lessons here for Australia, which is about to unravel the suite of climate and clean energy policies that have been implemented over the last four years.

First on the power sector. Some analysts estimate that the world’s biggest electricity grid could be forced to cut its emissions by one quarter by 2020, and the coal sector could be forced to cut its by around 30 per cent to meet Obama’s climate targets – an outcome that was presaged by US financial markets on Monday, when shares of US coal mining companies plunged.

Adding to coal investors’ woes was the news Monday that the Supreme Court would review the Court of Appeals decision to reverse the Cross-State Air Pollution Rule, one of the Obama administration’s key tools for improving air quality by forcing coal-fired power plants to install pollution controls.

Somewhat predictably, Republicans representing America’s coal-producing states have labeled the President’s proposals a “war on coal,” warning that they will drive up electricity prices and put US manufacturers at a global disadvantage. But the reality is that without a carbon price, there is not a lot else Obama can do to reduce emissions economy wide.

The situation in the US industry is further complicated by the fact that the boom in shale gas has caused a switch from coal to gas, but this is not expected to be permanent because no one expects gas prices to remain low – they will either go to export parity, or supplies will dwindle because all the cheap and easily accessed gas will exhausted.

Deutsche Bank notes that power emission are already 15 per cent below 2005 levels in 2012, thanks to shale gas, but even official forecasts expect this to be pared back to a 9 per cent fall by 2020.

The new plan has also cast serious doubt over whether the controversial Keystone XL tar sands pipeline will be approved, the President saying that allowing it to be built “requires a finding that doing so would be in our nation’s interest. And our national interest will be served only if this project does not significantly exacerbate the problem of carbon pollution.”

Obama’s plans suggest a doubling of power sector abatement efforts by 2020, and the target could be as high as 23 per cent of forecasts 2020 emissions and 30 per cent of coal plant emissions. That means a lot of retrofits (the plan also includes $8 billion in new loan guarantees for carbon-capture projects) but most likely closures, and a lot more clean energy (renewables).

In Australia, Opposition climate minister Greg Hunt has seized the opportunity to draw comparisons with Obama’s climate plan and the Coalition’s much-criticised Direct Action policy.

“The heart of any international agreement is China and the United States, India and the EU. And we’ve seen very promising signs from the United States, most significantly not using a carbon tax or an emissions trading scheme, but using direct action measures where they are specifically focusing on energy efficiency, forestry and cleaning up power stations,” Hunt said in an interview with ABC Radio‘s AM program this morning.

“Whereas Australia’s emissions go up under a carbon tax, in the United States they go down without a carbon tax. And it’s absolutely clear, absolutely clear that there is not going to be a carbon tax in the United States.”

But the CEO of the Climate Istitute, John Connor, has a different take: “This is certainly not direct action,” Connor told the ABC. “This is not a centre-piece big fund which is voluntary to participate in, which is the hallmark of the Coalition plan. This is a direct regulation plan.”

“This is a president frustrated by a hyper-partisan Congress who’s blocked his calls for a cap and trade carbon market. What he’s put in place now is a raft of initiatives and processes to meet a goal he set at Copenhagen.”

Connor says it’s now very clear that Obama is stepping it up on climate action. “He’s stepped up what he’s done on light vehicles in terms of emissions standards, put that into heavy vehicles. He’s stepped up what he was doing for new coal-fired power plants and put that onto existing ones. …He’s also stepping it up with China and wary of China’s investments in clean energy and low carbon,” he said.

“He’s made a whole lot of new mandates around renewable energy, made a whole lot of new mandates around preparing for climate impacts, but also calling for stepping up of international efforts and doing that at a bilateral level as well as at the UN.”

For others, Obama’s ramped-up plan has an important message for Australia.

“In the space of a week we’ve seen the world’s two biggest economies – China and now the US – take significant action against climate change,” said WWF Australia’s Will McGoldrick. “These low-carbon moves send a clear signal that the two biggest economies in the world are serious about acting on climate change.

“Australia’s response to climate change is now at an important cross-road. We need to decide whether we want to continue to be part of a global shift to clean energy, or whether we want to buck this trend by unwinding the policy platform we have in place,” he said.