The Juice

EPA to Energy Industry: Stop Being So Lazy!

The new emissions rule is a kick in the pants that will lead to long-term economic benefits.

Power Station
Closing coal plants and/or installing carbon-scrubbing technology are only two of many ways to reduce emissions. Many of the alternatives have a lower cost, or no cost.

Photo by Jeff Swensen/Getty Images

The Environmental Protection Agency’s new emissions rule, whose draft was released Monday, appears to be aimed squarely at the nation’s massive coal-based utility industry. By 2030, power plants will have to reduce carbon-dioxide emissions by 30 percent from their 2005 level. (They’re already about halfway there.) Coal is both the leading source of electricity in the U.S., and the most carbon-dioxide-emissions-intensive means of generating electricity. So, the rule’s critics argue, coal will either be banished from the scene, or utilities will have to invest tons of money to make coal burn cleaner. Either way, it’s bad news economically. “New EPA Rule Will Threaten Manufacturers’ Competitive Advantage,” screams the release from the National Association of Manufacturers. Coal-country politicians are labeling it a job-killer.

The knee-jerk critics are thinking about this in the wrong way. The EPA doesn’t plan to proscribe coal generation. It’s simply setting a new standard, telling states that they have to reduce emissions related to energy use—but it is leaving the implementation up to them. Closing coal plants and/or installing carbon-scrubbing technology are only two of many ways to reach that goal. Many of the alternatives have a lower cost, some of them have no cost, and virtually all of them will prove economically beneficial over time. In effect, this standard, like so many other hotly contested standards relating to energy use—the 2007 light bulb rule, new standards for vehicle gas mileage or for appliances—is simply a diktat to the industry to stop being so lazy.

The surest way to emit less is to use less energy, and to manage the production, use, distribution, and storage of energy more efficiently. With each passing year, there are more products, technologies, services, and business models that can help individuals, companies, and institutions realize those goals.

Consider driving. Thanks to persistently high gas prices, competition, innovation, and the advent of new standards, America’s car fleet has become significantly more efficient in recent years. Between 2007 and 2014, the gas mileage of a typical car sold in the U.S. has risen from 20.1 to 25.2, a 25 percent increase in less than seven years, according to researchers at the University of Michigan. Combined with slight declines in the number of miles driven, the researchers say, the typical new vehicle that hits the roads emits 22 percent fewer greenhouse gases than the car it replaced. That’s a significant decline, and it came without a ban on the internal combustion engine, a prohibition on the use of gasoline, or significantly higher costs to consumers.

What’s more, many emissions-reducing efforts, far from being expensive drags, either cost very little or pay for themselves over time. Some have a negative cost, which is to say they don’t require any upfront investment and can start paying economic and environmental dividends immediately. All they require are some small behavior changes—for example, putting free air in vehicles’ tires to improve gas mileage, or turning off lights when they’re not needed, or setting the thermostat one degree cooler in the winter, or turning off cars instead of idling.

Meanwhile, businesses have sprung to help bring such efforts to scale. Take demand response. On hot summer days, utilities would typically fire up expensive fossil fuel–based plants to provide more electricity for air conditioning. But now most states have “demand response” programs, under which big power users agree in advance to dial down usage at times of peak demand, thus obviating the need for extra production. EnerNOC, one of the largest demand-response firms, effectively controls demand equivalent to the production of several large power plants.

Then there are investments that cost money up front but may ultimately have a negative cost because of the substantial energy savings they generate over time. These include items like programmable thermostats, more efficient boilers and insulation, or equipment that turns conventional vans into hybrids. LEDs, for example, cost much more money than the incandescent bulbs they are replacing. But an LED uses about 80 percent less energy (and hence produces 80 percent fewer emissions) then an incandescent bulb. Over a several-year period, LEDs more than pay for themselves. In 2008, according to the Energy Information Administration, lighting accounted for about 18 percent of commercial energy demand and 11 percent of residential energy demand.

A 2009 report from consulting firm McKinsey & Co. found that across-the-board investments of $520 billion in energy efficiency “would yield gross energy savings worth more than $1.2 trillion” and “slash energy consumption in 2020 by 23 percent of projected demand.”

And don’t forget alternative, low-emissions efforts to generate electricity. Coal is already dying a slow death in the U.S. as a fuel for electricity. As older coal-fired units break down or are retired, they’re being replaced by natural gas and renewables. Yes, solar and wind systems require significant upfront investments, and, yes, there are significant tax credits and rebates associated with them. But as the price of these systems—especially solar systems—falls, more and more customers and companies are finding them to be worthwhile investments.

We shouldn’t underestimate the advances that can take place when the extremely powerful force of corporate investment latches on to energy innovations that have a negative cost. Walmart and Ikea are racing to plant solar panels on the roofs of their big-box stores because doing so helps boost their profits over time. (Walmart has panels on more than 250 stores, and Ikea has panels on 90 percent of its U.S. locations.) They came to emissions-free electricity for the image, and stayed for the savings. Most large manufacturers have aggressive emissions-reduction efforts, largely because slashing emissions generally means slashing energy use—which helps improve the bottom line. Ford, for example, is aiming to cut the amount of carbon dioxide it creates in producing a car by 30 percent by 2025. Its latest incremental move: re-engineering the painting process to use less paint. At its Korean plants, Kia last year cut the carbon-dioxide emissions per vehicle produced by nearly 5 percent.

So, yes, trying to switch to carbon capture or immediately abandoning coal as an electricity fuel would impose large costs on the economy. But the U.S. has so many more levers to pull when it comes to cutting emissions. As Bert Cooper reminded us in his Mad Men swan song, many of them don’t cost a dime. “The sunbeams that shine,” he warbles. “They’re yours and they’re mine.” And companies and consumers are already doing some of the heavy lifting on behalf of the utilities.

Cooper was right: Some of the best things in life are free—or pay for themselves over time.