Obama's New Climate Plan: Key Issues & Challenges

What is being proposed?

• Emissions from Power Sector: President Obama has proposed cutting US carbon dioxide emissions from the power sector by 32% by 2030, compared to 2005 levels. This is more stringent than an earlier draft of the plan – which called for a 30% reduction – and would lead to coal’s share of electricity falling from 39% today to 27% by 2030.
• Greater Promotion of Renewables: President Obama wants the US to receive 28% of its power from renewables by 2030, which is up from a target of 22% in a previous plan. This reflects a shift in focus. The previous plan sought to encourage a transition from coal to gas, whereas the new plan is focused on the promotion of renewables. This change is likely to result in a major increase in costs for consumers (see final paragraph of briefing).
• CO2 Obligations on US States: Under the Obama plan, each US State would have until 2018 to propose a carbon cutting plan to the US Environmental Protection Agency, and then until 2022 to implement the plan.

The Key Issues

Although President Obama has described the plan as “the biggest, most important step we have ever taken” in tackling climate change, the implementation of this plan is far from certain for a number of reasons.

Will there be a legally binding agreement in Paris?

President Obama would struggle to justify the implementation of this plan if no global, legally binding agreement materialised from the Paris climate conference later this year. Although the US-China emissions deal that commits China to peak emissions by 2030 was portrayed as a major step forward, it has no legal force underpinning it. Should no legally binding commitments be placed on the largest emitter of greenhouse gas emissions in the world, Obama’s plan would lumber the US with a series of damaging unilateral commitments.

US Presidential Election

The current proposals are set to become law in January 2017 – well after President Obama leaves office. A number of leading Republican nominees for the President, including Jeb Bush and Marco Rubio, have outlined their opposition to the proposal, leaving open the possibility of the proposals being blocked or rolled back in the future.

Resistance from US States

Several State Governors have already stated their intention to ignore President Obama’s emissions reduction plans. Resistance is likely to be strong in States such as West Virginia and Kentucky, where coal generates over 90% of electricity.

Legal Challenges

The President is hoping that the US Courts’ system will uphold the rights of the Environmental Protection Agency to regulate carbon emissions under the Clean Air Act. However, the plans will undoubtedly face legal challenge. The National Mining Association has already said that it will seek to challenge the plan in the federal court.

Analysis – What Next?

Will the plan be implemented?

Obama’s US emission reduction plan faces significant hurdles in the domestic political sphere. The President is expecting the courts to rule in his favour over any legal challenges to the plan, but the resistance from prospective Republican Presidential nominees and US States might be harder to counteract.The biggest hurdle President Obama will face is at the Paris Climate conference later this year. President Obama’s radical new proposals are an attempt to give a boost to the climate summit, where he is hoping that other countries will agree to legally binding targets on emissions. If a global, legally binding deal fails to materialise, it is difficult to see how Obama’s emissions plan would be politically feasible.

Implications for Shale Gas and the US Economy

In the previous plan, power from natural gas was expected to increase and replace generation from coal. The revised plans, however, seek to keep natural gas generation steady and increase electricity from renewables. This decision will have a negative impact on the US’ booming shale industry, with the Head of America’s Natural Gas Alliance describing the move as “confused and disappointing”.This change in policy direction is also likely to impact US energy consumers. By favouring expensive renewables over low-cost shale gas, the new plan will almost inevitably lead to higher energy bills for households and businesses. This will be of particular concern to low income households and the US’ energy intensive industries, who currently benefit from competitive electricity prices.