Last month the Environmental Protection Agency released its final Clean Power Plan for the reduction of carbon emissions from existing power plants. Now the question is how will Wyoming, which supplies 40 percent of the nation’s coal-fired power plants, respond? Last Thursday at a meeting sponsored by the Jackson Hole Conservation Alliance, the community had a chance to explore this issue.
Coal, the most carbon-intensive fossil fuel, will of course take the biggest hit under the plan. By one set of estimates, under an earlier version of the plan Wyoming would have had to close five of the largest of its 10 coal-fired power plants to meet its target. Nationwide, other coal-fired power plants would face similar closures, reducing more of Wyoming’s total production. There was considerable discussion in the forum for the need to cushion this transition from coal with worker-retraining programs and a study of alternative means to replace tax revenue from coal production.
The question is, transition to what? Here is where the revised rules provide a ray of hope for Wyoming’s energy future. Under the old rules Wyoming as a producing state could not claim credit for emissions reductions from renewable energy power transmitted to out-of-state markets; only the consuming state could. Wyoming does not have enough in-state demand to absorb new renewable energy capacity. If it cannot claim credit for renewable power transmitted out-of-state, it effectively loses the renewable energy option for compliance with the CPP.
According to the new rules, however, power-generating facilities can claim credit for emissions reductions resulting from renewable energy investments. They can trade these credits to other facilities or companies that need them to meet their own targets. This allows the renewable energy investor to sell these credits forward to finance their investment.
Wyoming has a lot of wind. Already 15 percent of the state’s total power production is generated from wind. The possibility of transmitting electricity generated from this wind to out-of-state markets and claiming credits for this investment in renewable energy could bring Wyoming’s targets for compliance within reach.
The problem is that many Wyoming policy makers are opposed in principle to this “cap-and-trade” approach. They see it as a fatally flawed component of the energy legislation that failed in the U.S. Senate in 2009. That legislation was apparently offensive because it specifically addressed the issue of climate change, the “third rail” of Wyoming politics. In the eyes of these policy makers the cap-and-trade approach has inherited guilt by association with that legislation.
This is ironic because Wyoming was a beneficiary of this approach 25 years ago when it was the centerpiece of the revised Clean Air Act. The purpose of that 1991 revision was to reduce sulfur dioxide emissions from coal-fired power plants that caused acid rain. Cap-and-trade was the chosen mechanism to achieve this end. The incorporation of this provision gave electric utilities on the East Coast a significant incentive to switch to low-sulfur coal from Wyoming’s Powder River Basin. The result was a two-decade boom in the Wyoming coal market.
If Wyoming could benefit from cap-and-trade then, with our comparative advantage in low-sulfur coal, why can’t we benefit from cap-and-trade now, with our comparative advantage in wind power? Moreover, this approach could benefit the world’s largest carbon emitter, China. To achieve its goal of stabilizing its carbon emissions by 2030, the Chinese government needs to provide incentives for hundreds of thousands of coal-burning enterprises to innovate their way to greater energy efficiency, cleaner ways of burning coal and finding alternative sources of energy. The government can’t do it all. Emissions trading can provide private sector incentives.
But China has no experience in such market-based systems of environmental management. It needs to learn how other countries have gone about implementing such systems. In several recent meetings with Gov. Mead and other top Wyoming policymakers, senior officials from Shanxi, China’s largest coal-producing province, have articulated their need to learn U.S. management experience. The meetings were organized by the Jackson Hole Center for Global Affairs, Wyoming’s only independent, bipartisan policy research center dealing with global issues.
Wyoming can again trump other states in clean energy development. A proactive response to this opportunity can expedite Wyoming’s transition to a new comparative advantage of the future: wind power.