What Would an EPA Rollback Mean for the Energy (and Green) Sector?

Earlier this week, Scott Pruitt, the head of the Environmental Protection Agency (EPA), announced his agency would discontinue Obama-era regulations limiting greenhouse gas emissions from power plants that rely primarily on coal.

The move could have a big impact on industries that create greenhouse gases, such as the energy sector, as well as on investors who are concerned about the environment.

But what does that all mean? We break it down.

What’s the EPA?

The EPA is the federal agency charged with protecting the environment and ensuring that federal regulations around human health and the environment are effectively enforced. It was launched in 1970 by President Richard Nixon.

What are greenhouse gases?

These are gases, created primarily by industry and human activity, that trap heat in the atmosphere and are thought to contribute to global warming. They include carbon dioxide from burning of fossil fuels like coal and oil, methane from decomposing animal waste, nitrous oxide from agricultural activities, and fluorinated gas from industrial processes.

What regulations will be rolled back?

The Clean Power Plan (CPP). The CPP, created by the Obama administration and put into play in 2015, would have moved the energy industry primarily away from coal, which together with natural gas reportedly produce one third of all carbon emissions in the U.S. The CPP, which was decades in the making but has been held up in court, set goals of reducing greenhouse gas emissions by industry to 30% below 2005 levels by 2030. It empowered states to make necessary changes, which included upgrading existing energy infrastructure to pollute less, switching to renewable energy sources like solar and wind, and investing in or creating new energy efficiency programs, among other things.

Why is the EPA pulling out?

The Trump administration, which guides the EPA’s decisions, campaigned on the promise of rolling back numerous business regulations put into place during the Obama era, which it believes hinder economic growth. It also vowed to put coal miners back to work. Although use of coal for power has been on a steep decline for years as the U.S. relies increasingly on other sources of power, exiting the CPP could provide a boost to the coal mining industry.

Pruitt also said on Tuesday that by giving states specific greenhouse emission reduction goals, the CPP represented an overreach of federal authority into state activities.

What would the impact be?

Rolling back the plan could save power producers an estimated $33 billion in additional compliance costs, the EPA said in a press release on Tuesday. But environmentalists say there will be steep costs beyond dollars and cents. Those would include a negative impact on  air quality, which it says will worsen if coal use increases, and will disproportionately affect the health of children, according environmental group the Sierra Club.

The repeal of CPP also would effectively end U.S. participation in the Paris Agreement, an accord signed by 168 countries in 2015. The goal of the Paris Agreement is to reduce global greenhouse emissions starting in 2020.

EPA rollback: It’s not a done deal yet

The EPA proposal to do away with the CPP must first go through a public comment period that could last for months, and requires the EPA to come up with a formal replacement plan. Legal challenges could arise, as the EPA is specifically charged with regulating carbon emissions from power plants, per a decision by the U.S. Supreme Court in 2011.

It’s interesting to note that about 25 states are reportedly on track to meet CPP requirements.

More than half of people in the U.S., regardless of political party, are concerned about global warming, and an equal number say they think that human activities such as industrial emission of greenhouse gases, are a the prime contributing factor, according to recent research from Yale Program on Climate Change Communication.

Top takeaways:

  • Earlier this week, the head of the Environmental Protection Agency said his agency would repeal an Obama-era program called the Clean Power Plan (CPP), which called on state energy producers to reduce their carbon emissions.
  • The repeal could boost the fortunes of coal miners, the coal industry, and other energy producers, but it likely comes with steep environmental costs.
  • It’s not a done deal: The EPA proposal to do away with the CPP must first go through a public comment period that could last for months, and requires the EPA to come up with a formal replacement plan.

Read More: Nobel Prize Winner Richard Thaler Talks Irrational Financial Behavior






Author:
Jeremy Quittner is the financial writer for Stash.



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