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Debating the costs of carbon regulations

MAP MASTERALBUQUERQUE, N.M. — The U.S. Environmental Protection Agency’s newly proposed carbon-reduction regulations are spurring heated debate nationwide and in New Mexico.

But so far it appears the rules will have less impact here than in other states, where utilities rely more heavily on coal-fired generation and where fewer renewable resources have been installed.

A new analysis by Western Resource Advocates shows that, under current plans, New Mexico would meet about 84 percent of the required emission reductions called for by 2030 under EPA’s proposals.

Those plans include shutting down half of New Mexico’s coal-fired San Juan Generating Station near Farmington plus renewable additions to the grid and energy efficiency measures either already done or planned by utilities.

“The additional amount we’ll need to do to meet the proposed standards is not that much,” said Steve Michel, chief counsel for the organization.

That doesn’t mean additional measures to meet EPA rules won’t generate controversy, such as proposals by some environmental organizations and clean energy advocates to shut down more generation at San Juan.

But given the ongoing efforts by all local utilities to progressively add clean energy to their systems to comply with New Mexico’s renewable portfolio standard – which requires that they derive at least 20 percent of electricity from renewables by 2020 – the state seems in good shape, said Environment Secretary Ryan Flynn.

“We’re still analyzing the proposed regulations, and we have many questions and concerns,” Flynn said. “But on preliminary review, with the retirement of two of the four generating units at San Juan, and with our renewable portfolio standard in place, I think we’re well positioned. I’m not sure if those things will be enough, but it does put us in a very strong position to meet EPA requirements.”

Under EPA’s proposed regulations, released June 2, all states would be required to cut carbon-dioxide emissions from their electric power plants 30 percent by 2030 compared with 2005 levels.Money_jd_03aug_Emissions graph

It’s the first time the federal government is imposing limits on the release of greenhouse gases – which contribute to global warming – at existing power plants.

The regulations won’t be finalized until next June to allow the public to weigh in on the proposals, paving the way for what promises to be an intense political battle nationally among government officials, industry groups, environmental advocates and consumer organizations over the costs and benefits of the rules.

Broad, acrimonious debate is already underway in the media, Congress and other public forums. The EPA and its supporters insist the health and economic benefits far outweigh the costs, while industry groups and climate-change skeptics are projecting tens of billions of dollars in annual economic losses and hundreds of thousands of jobs lost as utilities and states scramble to comply.

The real impact, however, won’t become clear until the rules are finalized and each state begins to devise its individual compliance plans, said Tim Profeta, director of Duke University’s Nicholas Institute for Environmental Policy Solutions.

“I believe the costs are so far unknowable because the rule defers to the states to devise their own carbon-reduction plans, and that makes it hard to assess the general impact nationwide,” Profeta told the Journal . “The regulations give states the flexibility to create plans that work best for them.”

Moreover, new federal regulations like the proposed carbon rule are almost always met with widely contrasting predictions about impact as supporters and opponents battle over new rules.

“Historically, that’s always been the case,” Profeta said. “But as the process moves forward, government and industry always innovate to find cheaper ways to do things, and that ends up lowering the costs. There’s no reason to assume this won’t follow those same trends.”

In New Mexico, the state has not yet begun to devise a carbon-reduction plan, much less calculate the costs of compliance, because officials are first focusing on providing comments and posing questions to the EPA during the current period of public discussion.

Given the uncertainties, state officials remain on edge despite the progress New Mexico has already made with San Juan and renewable development.

“I’m very concerned about the impact that EPA’s proposals will have on New Mexico,” Flynn told the Journal. “But it’s too early to clearly define what those impacts will be. We have a lot of questions, and we hope the EPA will listen to our concerns and take them into account.”

The amount of required carbon reduction will vary widely around the country because emission rates in each state are different.

In New Mexico, the EPA has set a 34 percent reduction target by 2030, based on emission rates from local power generation as of 2012.

So far, it’s unclear how the EPA proposals will impact individual utilities like PNM. That’s because EPA rules make compliance with carbon reduction a statewide responsibility that falls on the shoulders of all of New Mexico’s public utilities, including El Paso Electric Co. and Southwestern Public Service Co.

And that makes any proposals to further cut San Juan generation premature, said Maureen Gannon, PNM’s executive director for environmental services.

“We can certainly look at PNM facilities with the retirements at San Juan. But without knowing how the rules will be applied across the state, we don’t know yet how the company is positioned,” she said.

In addition, a variety of measures can be pursued under EPA’s plan, such as adding more renewables to electric systems and pursuing energy efficiency to lower consumption.