Well, today's announcement of proposed EPA regulations on GHG emissions was another reminder that we don't live in the a free-market society. Why do we have such little faith in the free market to find solutions to global problems?
If we lived in a free-market society, you couldn't ban something until you proved that it was dangerous. And we are still far away from proving that CO2 emissions are dangerous, especially because it's a chemical that live depends on so dearly. You can't have life on Earth without carbon dioxide.
The argument that CO2 is a pollutant is absurd. We can't even agree on what is the climate sensitivity due to a doubling of CO2 concentration in the atmosphere. Sure, we can all agree that the climate sensitive factor is greater than 1 deg C per doubling, and it's probably closer to 2 deg C per doubling of CO2 concentration. All the current regulation will do is push back slightly the time at which we reach a certain level of global GHG concentration.
But knowing the climate sensitivity doesn't help us answer the question: what is the economic and environmental damage from CO2 emissions?
The meta-analysis by Tol of the 14 studies (conducted before 2009) suggests that the global average economic effect of CO2 emission is positive in the short-run, and then only slightly negative in the long-run.
Why would we want to ban something with short-term economic benefits, even though it might or might not have long-term economic consequences?
So, I'm not trying to argue that CO2 isn't a greenhouse gas. It most certainly is a greenhouse gas. The question is: Do we want a warmer planet that the one we currently have? If we can figure out how to increase temperatures in the winter without drastically increasing the temperature in the summer, then we can have our cake and eat it to. Perhaps, we would continue to emit GHG's, but we add more dust into the Northern atmosphere during the Northern summer, and vice versa.
While this might sound like difficult geo-engineering, the problem with the EPA's new regulation is that it is so arbitrary. For example, if your power plant produces 1100 lbs of CO2 emissions per MWh, then it can't be built in the future, but if it produces 900 lbs of CO2 emissions per MWh, then that's perfectly fine. Or if you build a power plant that generates less than 25 MW of electricity, then you can generate as much CO2 as you wish. It's so arbitrary! (I'm not saying we should adapt a CO2 cap&trade program here in the US, but at least the advantage of a cap&trade program is that it is not arbitrary. You pay for what you emit. You don't pay for what you don't emit.)
With that having been said, the new regulations will have virtually no effect on the choice of power plants to build in the US. With natural gas prices as low as they are, virtually the only type of power plant being built today is natural gas combined cycle power plants. In addition, it's fairly easy to convert an old coal fired power plant into a natural gas combined cycle power plant (NGCC) by adding in a gas turbine, and then using the old coal-fired power plants as the steam cycle of the new NGCC power plant.
In a future post, I will update the analysis from the last post and estimate at price of natural gas it will make economic sense to build either a coal gasification power plant with pre-combustion capture of CO2 or a coal-fired power plant with post-combustion capture of CO2. This will tell us the real future impact of this legislation if / when the price of natural gas increases.
Obama timed the announcement of this new regulation at a good time because he waited for natural gas to be so cheap that the law is effectively meaningless at the moment. So, while I think that the regulation is unconstitutional and arbitrary, I find it hard to get angry at the regulation because we aren't building coal power plants anyways. What's good is that since this is not a law, all we have to do to over-turn the regulation is to change Presidents. If we find out that the law is economically damaging, then we just need to elect a new President.
We are still left with a difficult and unanswered question: what is the optimal concentration of CO2 in the atmosphere? If you have an educated guess, please post below what you think is the optimal concentration of CO2 in the atmosphere.