WTI Crude


Brent Crude


Natural Gas




Heating Oil


Rotate device for more commodity prices

A Serious Warning From The World’s No.1 Copper Nation

A Serious Warning From The World’s No.1 Copper Nation

Tougher environmental regulation in Chile…

Global Energy Advisory 21st October 2016

Global Energy Advisory 21st October 2016

The Iraqi army, with its…

What Is The Real Price Of Obama’s CO2 Plans?

On August 3rd President Obama made a speech* detailing his plans to decarbonize the US electrical power generation sector. While the legality of this move has been challenged in certain quarters, in this post I want to focus on the technical details and competence of the President and his advisors at the Environmental Protection Agency (EPA). Let me begin by focusing on what the main target is:

to reduce carbon dioxide emissions by 32 percent from 2005 levels by 2030

*Note that the quotes throughout are lifted from the White House narrative to the speech rather than the speech itself.

So what does a 32% reduction in CO2 emissions mean in practical terms for US power generation and CO2 emissions? A good starting point is to look at the electricity generation mix and how it has changed since 2005 (Figure 1).

Figure 1 US electrical power generation 2005 to 2014 as published by DOE-EIA.

The key observations are as follows:

1) Electricity generation (i.e. electricity consumption) has been flat since 2005.
2) Fossil fuel based generation, coal + natural gas, has been flat to falling slowly
3) Coal fired generation has declined to be replaced by natural gas
4) Hydro and nuclear combined make up 26% and have been flat since 2005
5) Other renewables (wind, solar, biomass etc) have increased from 2 to 7% since 2005

Related: Low Oil Prices Make This Stock A Good Long-Term Bet

Figures 2 and 3 show how the generation mix has evolved from 2005 to 2014:

Figure 2 Pie chart showing the percentage distribution of electricity generating sources in the USA in 2005. Data from DOE-EIA.

Figure 3 Pie chart showing the percentage distribution of electricity generating sources in the USA in 2014. Data from DOE-EIA.

Put simply, the key trend is substitution of coal by natural gas and other renewables. The CO2 intensity of coal is 2.13 pounds of CO2 per KWh and natural gas 1.21 pounds of CO2 per KWh (data from DOE-EIA). Hence the substitution of coal by natural gas reduces CO2 emissions quite significantly. DOE-EIA has already documented this achievement, which is founded on the fracking revolution and the ‘drill baby drill’ mantra (Figure 4).

Figure 4 The chart is from an EIA report titled Lower electricity-related CO2 emissions reflect lower carbon intensity and electricity use. Note that while the Y-axis has a zero on it, it is not zero scaled.

Related: Could WTI Trade At A Premium To Brent By Next Year?

The DOE-EIA report (Figure 4) reiterates my key observations above but puts some hard numbers on them:

2005 electric power emissions = 2417 million tons (Mt)
2005-2013 lower demand = 402 Mt reduction (16.6% reduction)
2005-2013 substitution of coal with gas = 212 Mt reduction (8.8% reduction)
2005-2013 addition of low carbon sources i.e. other renewables = 150 Mt reduction (6.2% reduction)

Thus the reductions already achieved = 31.6%. Job already done?!

So what’s going on here? Have the EPA and President Obama set out to deliberately dupe the US and global populations with this deception? I don’t know, but this gaffe will come back to haunt them. Let me be charitable and assume that the savings from reduced demand growth are not included in the calculation to date. Then the CO2 reductions so far, amount to 15% over 8 years leaving 17% to be achieved over the remaining 15 year period to 2030. For one supposedly deeply concerned about the effect of CO2 on climate change this represents a totally underwhelming level of ambition.

But I’m not sure that the EPA and The President should be let off the hook so easily. The President’s plan includes future energy efficiency gains and one must surmise that past energy efficiency gains should also count. Note that nuclear power is also in the Green arsenal of what is effectively an anti-coal policy.

All low-carbon electricity generation technologies, including renewables, energy efficiency, natural gas, nuclear and carbon capture and storage, can play a role in state plans.

Impact on Total US Emissions

Figure 5 shows that in 2012, 81% of total US primary energy came from fossil fuels and that 40% of total energy was used in electric power generation. 67% of power generation is from FF (Figures 3 and 5), hence we are talking about 67% of 40% which = 27% of total US energy consumption that is targeted by this part of Obama’s energy plan.

Hence Obama wants to reduce 27% by a third (32%) and that equals an 8.6% reduction in emissions grossed up to the whole energy economy and all or half of that has already been achieved depending on how the numbers are sliced and diced. At best this plan reduces US total emissions by 4.3% by 2030, at worst by nothing at all. It’s not exactly the same as making a commitment to send a Man to the Moon, is it?

Figure 5 From the EIA Annual Energy Review (in this link click on “graph”).

Impact on US Economy and Population

From Obama’s speech*:

Due to these improvements, the Clean Power Plan will save the average American nearly $85 on their energy bill in 2030, and save consumers a total of $155 billion through 2020-2030, reducing (typo?) enough energy to power 30 million homes.

Related: An Unusual Potential Ally In The U.S. Shale Boom

Paul Homewood recently published this chart (Figure 6) that shows the relationship between electricity prices and renewables penetration in Europe.

(Click to enlarge)

Figure 6 Chart from Paul Homewood Electricity Cost v Renewable Capacity. I have not yet had time to check the data that underlies this chart but have no reason to doubt them. It is further understood that renewables capacity excludes hydro.

[Note that the x-axis on this chart should read “Installed Renewables Capacity KW / capita” or some such and that the original version may have been produced by Willis Eschenbach at WUWT. HT Joe Public.]

It is plain to see that adding intermittent renewables to a grid increases the cost of electricity. Does the EPA not know this? In Europe this is in part down to consumer paid renewables subsidies. But it also reflects the substantial costs of maintaining grid integrity that include:

1. Maintaining, and paying for when not in use, 100% fossil fuel backup
2. Building power lines and inter-connectors everywhere
3. Expanding energy storage
4. Buying expensive balancing services from neighboring countries like Norway

Coal powered electricity is currently by far the cheapest and one of the most reliable forms of electricity generation known to Man. To suggest that replacing this with intermittent wind and solar or carbon capture generation will somehow reduce American’s electricity bills is either delusional or plain stupid. Or is the intention to deliberately deceive?

By Euan Mearns

More Top Reads From Oilprice.com:

Join the discussion | Back to homepage

Leave a comment
  • David Hrivnak on August 07 2015 said:
    Not sure that the move to renewables is obviously more expensive. My experience is they are cheaper than fossil fuels and a lot less expensive than drought, wildfires and rising sea levels due to burning fossil fuels.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News