EPA Expected To Mandate Coal, Gas-Fired Power Plants Install Carbon Capture

According to media reports, U.S. President Joe Biden plans to introduce unprecedented greenhouse gas emission rules in the U.S. as soon as April 27. Specifically, the Environmental Protection Agency (EPA) will for the first time required existing power plants, not just new ones, to install pollution-capturing equipment such that nearly all carbon dioxide (CO2) emissions from coal- and natural gas-fired plants would be captured by the year 2040. Currently operating fossil fuel-fired plants account for about a quarter of all CO2 emissions in the U.S.

The enormous scope of the Administration’s proposed action — and the attendant costs — can perhaps best be illustrated by the following statistic: pollution-capturing equipment is currently installed on fewer than 20 of the U.S.’s 3,400 coal- and gas-fired power plants.

Despite an approval rating of only around 40% and an economy perhaps teetering on recession, President Biden continues to double down on aggressive pro-environment priorities which would carry high business tags. Earlier in April, the Biden EPA proposed a tightening in auto emission rules that ensure around two-thirds of cars sold by 2032 are electric vehicles. In addition, the Inflation Reduction Act of 2022 is almost certainly the most significant legislation to accelerate transportation electrification in U.S. history.

Source: EIA

Under the EPA’s proposed rule, economics could force coal-fired and potentially gas-fired plants to be retired. Republicans and states with significant coal mining operations seem likely to challenge the EPA’s views. Such challenges were successful in a June 2022 U.S Supreme Court ruling. In that decision, the nation’s highest court voted 6 to 3 to curb the EPA’s ability to broadly regulate emissions from existing power plants. The majority opinion of the Court said “there is little reason to think Congress” assigned decisions on carbon emission caps to the EPA. 

However, the Supreme Court did say the EPA has the authority to regulate the operations of power plants, implying that requiring the addition of carbon capture systems to existing power plants may be within the purview of the environmental regulatory body. This issue will likely be feverishly debated in the courts throughout 2023.

The implications of the EPA’s actions seem quite positive for the solar power industry, as more solar facilities could be built. Uranium, the commodity, could also be boosted as electricity prices would presumably rise to accommodate the costs of the new pollution controlling equipment. Utilities which own nuclear plants could then contract for uranium under longer-term, higher-cost contracts to ensure those baseload plants can continue to run without interruption.   

Information for this briefing was found via Bloomberg and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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