Trump’s Climate Change Executive Order Will Make Energy Cheaper

TrumpClimateChangeNewscomPresident Donald Trump issued a new executive order today that aims to roll back Obama administration energy policies that sought to address the problem of man-made climate change. The Obama administration's climate strategy stood on three pillars: Tightening corporate average fuel economy standards (CAFE) for vehicles; the Clean Power Plan designed to cut by 2030 carbon dioxide emissions from electric power generation plants by 30 percent below their 2005 levels; and a moratorium on federal coal leasing. These measures were adopted to meet President Obama's commitment to reduce U.S. greenhouse gas emissions in 2025 by 26 to 28 percent below 2005 levels under the Paris Agreement on Climate Change.

The CAFE standards are now being reassesed. In February, the chief executives of 18 auto companies sent a letter to the Environmental Protection Agency (EPA) asking that it review the Obama administration's stringent CAFE standards. EPA administrator Scott Pruitt subsequently announced that his agency will conduct such a review decide by April 2018 if the standards should be loosened. The transportation sector is responsible for 26 percent of U.S. greenhouse gas emissions, amounting to about 1.7 gigatons of carbon dioxide in 2014. That's down from the 1.85 gigatons pre-global financial crisis peak of vehicle emissions in 2005.

Electric power generation is responsible for about 30 percent of U.S. carbon dioxide emissions. In 2014, burning coal for electric power generation emitted 1.57 gigatons of carbon dioxide. That is down significantly from peak emissions of nearly 2 gigatons in 2007. In 2014 emissions from natural gas burnt for electric power generation amounted to 0.44 gigatons. Basically, burning natural gas to generate electricity produces about half of the carbon dioxide that burning coal does. Since the carbon dioxide emissions from coal are so much greater than those from alternative fuels, the Clean Power Plan's carbon dioxide reduction goals would essentially force electricity generators to close down many of their coal-fired plants.

President Trump hopes that unraveling the Clean Power Plan will bring back lost coal-mining jobs. "A lot of people are going to be put back to work, a lot of coal miners are going back to work," President Trump told a rally in Louisville, Kentucky last week. "The miners are coming back." That is unlikely for two reasons: automation and cheap fracked natural gas.

U.S. coal production has dropped from 1.1 billion tons in 2011 to 0.9 billion tons in 2015. If 2016 fourth quarter coal production remained steady at the 2015 level, that would still mean that overall production will have fallen by nearly a third to 0.74 billion tons in 2016. Coal production in the Appalachian region in 2015 was 44 percent lower than it was in 2000. Power companies have been steadily switching from coal to natural gas as the fracking boom boosted production from 19 trillion cubic feet in 2005 to 28 trillion cubic feet in 2016. Last year, burning natural gas generated 33 percent of America's electricity compared to 32 percent from coal.

The upshot is that lower demand for coal means fewer jobs. In 2011, 89,500 people worked as coal miners. That has dropped 50,000 now. In addition, higher productivity means lower demand for workers. Due to automation miner productivity soared rising from 1.93 tons per miner hour in 1980 to 6.28 tons per miner hour in 2015.

Rolling back the Clean Power Plan means going through a long regulatory review process that will be opposed at every turn by environmental activist groups. Assuming that it is eventually revoked, what would that mean for future U.S. carbon dioxide emissions? Without the Clean Power Plan, the Energy Information Administration projects that U.S. energy-related carbon dioxide emissions would remain essentially flat up to 2040.

President Trump also lifts the moratorium on federal coal leasing imposed in 2015 by the Obama administration. The moratorium was part of the same "keep fossil fuels in the ground" strategy that motivated the Obama administration's refusal to approve the Keystone and Dakota Access pipelines to transport oil. Given the low demand for coal it is not at all clear that mining companies will be eager to open new mines on federal lands any time soon.

Trump also ordered federal agencies to drop climate change as a consideration when promulgating new regulations. The Obama administration devised the social cost of carbon (SCC) as a metric accounting for the effects on climate of any project that would result in the emissions of carbon dioxide. Currently, the social cost of carbon is $36 per ton emitted. However, the Obama administration violated various regulatory standards in order to get to this figure including using lower than usual discount rates and making calculations based on global rather than domestic harms.

As I reported earlier, using the $36 per ton SCC, the EPA calculated that implementing the Clean Power Plan would yield climate benefits amounting to $30 billion in 2030. "However, estimated domestic climate benefits only amount to $2–$7 billion, which is less than EPA's estimated compliance costs for the rule of $7.3 billion," noted Brookings Institution analyst Ted Gayer in recent congressional testimony. "The use of a global social cost of carbon to estimate benefits means that agencies will adopt regulations that could cost Americans more than they receive in climate-related benefits."

One side effect of setting aside the Obama administration's social cost of carbon calculation is that it will likely hasten the shut down of a goodly percentage of America's nuclear power industry. Why? Nuclear power plants are being out-competed by electricity generated from cheap natural gas and subsidized wind and solar power. Without subsidies tied to social cost of carbon calculations, "more than half the U.S. nuclear fleet may currently be at risk of closure," according to a new report from the centrist Third Way think tank.

During the presidential campaign, Trump promised to "cancel" the nonbinding Paris Agreement on climate change. On Sunday, new EPA head Scott Pruitt declared that the universal climate agreement was a "bad deal." However, President Trump will not make a decision about withdrawing from the Paris Agreement in his executive order. The Obama administration submitted a nationally determined contribution that committed to reducing overall U.S. greenhouse gas emissions in 2025 by 26 to 28 percent of their 2005 levels. Instead of withdrawing from the agreement, Rep. Kevin Cramer (R-N.D.) is urging the president to submit "a new pledge that does no harm to our economy."

There is some evidence that U.S. unemployment rate fluctuates with the fall and rise in gasoline prices. So one way to think about the effects of Obama administration climate policies is to consider how higher energy prices in European countries are affecting their economies. A U.S. Chamber of Commerce study estimated the adopting European energy policies would force the average American household to pay $4,800 more per year for their energy than they to today. Overall, European-style energy policies would eliminate 7.7 million jobs and cut labor incomes $364 billion. Of course, these estimates need to be taken with a grain of salt, but it is undeniable that scaling back the Obama administration's climate regulations should result in lower energy prices for American consumers. Lower prices mean more money in the pockets of Americans to spend in alternative ways that will tend to boost overall employment.

But what about the climate? By one calculation implementing the Obama administration's Paris climate pledge fully would reduce the future increase in average global temperature by 0.031 degree Celsius by 2100. Fulfilling all of the Paris pledges together would reduce future temperatures in 2100 by 0.17 degree Celsius. On the other hand, more robust economic growth will produce the wealth and new technologies that will help future generations to cope better with whatever future climate change occurs.