Takeaways for Europe from the EPA’s Clean Power Plan

Takeaways for Europe from the EPA’s Clean Power Plan
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From left to right: Mr José Manuel BARROSO, President of the European Commission; Mr Barack OBAMA, President of the United States of America; Mr Herman VAN ROMPUY, President of the European Council.

On June 2 the Environmental Protection Agency (EPA) released the details of the Clean Power Plan, the Obama Administration’s proposal for reducing carbon emissions – aka carbon pollution – from existing power plants in the United States. The plan, to be enacted under the Clean Air Act, sets a customized carbon pollution reduction target for each state, based on the carbon intensity of its power system. Each state is given the flexibility to figure out how to meet its own target and can employ any number of low carbon policy options for its power system to do so. These measures are grouped into four categories – improving the efficiency of its coal plants, using more lower-emitting power sources, increasing renewable energy capacity, and increasing demand-side energy efficiency. Taken collectively, these reductions by the states should add up to a national reduction of 30% less carbon pollution from 2005 levels by 2030.

Reactions from Europe to the EPA’s announcement were guardedly optimistic at best. EU Climate Action Commissioner Connie Hedegaard issued a one paragraph statement stating that “all countries, including the United States, must do even more” to end global warming. Outgoing European Commission President Jose Manuel Barroso seemed more inspired at his June 5 press conference at the end of the G7 summit in Brussels, when he said that he “specifically welcomed and congratulated President Obama on the recent measures he announced domestically.” In any case, the significance of the Clean Power Plan should not be underestimated in Europe. First, Europeans need to understand the political risk that President Obama is taking at home. Historically, coal has been one of the Democratic Party’s key political constituencies, yet the President is promoting a diminished role for the coal industry in the country’s energy future – in a mid-term election year, no less. Imagine Sigmar Gabriel, the German Minister for Economic Affairs and Energy from the Social Democratic Party, investing political capital into drastically reducing coal’s market share in the German energy mix – almost unthinkable, unless you count his recent flirting with allowing fracking in Germany.

Second, the Clean Power Plan will give a huge boost to promoting a broader green economy in the U.S. This can be seen in the reactions of the business community to the EPA’s announcement. Before the details of the EPA’s plan were even released, the U.S. Chamber of Commerce heavily criticized it, claiming it would decrease economic output, result in job losses and cause electricity prices to rise. However, when the plan was actually announced, other industry voices immediately came forward in favor of the EPA’s plan – the companies across the country, many of whom are SMEs, that are invested in a clean energy future for the U.S. and see the EPA’s new rules as a business opportunity. Advocacy groups like The Business Council for Sustainable Energy, The Alliance to Save Energy and The American Council on Renewable Energy praised the EPA’s plan for its contribution to fighting climate change while emphasizing the economic benefits of transitioning to low carbon energy and signaling the eagerness of U.S. companies to invest in it. The enthusiasm of SMEs to be heard on the issue is also worth noting. For example, the business coalition Business for Innovative Climate and Energy Policy (BICEP) published a letter from 176 companies in support of the EPA’s plan to reduce carbon pollution, stating that the new rules “will help spur investment and provide the long-term certainty necessary for our businesses to thrive and to meet these goals”. Among the signatories are both internationally recognized names and small businesses nationwide – the backbone of green economy in the U.S.  Business alliances like BICEP represent not only the future of green economy in the U.S., but they are also potential partners for promoting a sustainable and green transatlantic economy.

Finally, in taking comprehensive action on carbon pollution as part of his Climate Action Plan, President Obama created new leverage for the U.S. in international climate negotiations. This is especially important in the run up to the UN’s climate summit in New York in September and in advance of COP 21 in Paris in 2015. Obama is sticking to his 2009 pledge in Copenhagen to cut U.S. carbon emissions by 17% from 2005 levels by 2020 (a target that was greeted with skepticism at the time), proving that the U.S. takes its international commitments seriously and wants to play a leading role internationally on climate change. Indeed, the Clean Power Plan brought momentum to climate and energy talks at the G7 summit in Brussels. The summit declaration calls for a 2015 deal on climate that is “ambitious, inclusive and reflects changing global circumstances” – a nod to the importance of energy security in Europe after the recent unrest in Ukraine and the absence of Russia from the summit. The news on June 3, the day after the EPA’s announcement, that China is considering an absolute cap for its carbon emissions in 2016 was another sign that the EPA’s announcement was being closely watched internationally. As the EU continues to debate its own climate and energy framework for 2030, Europe should note that in the case of the U.S. an ambitious plan for cutting carbon pollution – one that took political risk – resulted in immediate domestic and international momentum for acting on climate change and enacting a low carbon energy economy to do so.