Obama keeps coal in the crosshairs

February 13, 2013: 2:28 PM ET
Obama's State of the Union in 99 secs
NEW YORK (CNNMoney)

President Obama got a little feisty on the climate change issue during Tuesday night's State of the Union.

"I urge this Congress to pursue a bipartisan, market-based solution to climate change," Obama said, referencing a plan that's been stalled in Congress for years to cap emissions of greenhouse gases. "But if Congress won't act soon to protect future generations, I will. I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy."

The chance Congress will act is pretty low. Florida Senator Marco Rubio, delivering the Republican rebuttal, made a point of saying "our government can't control the weather."

What that likely means is that the coal industry will face continued pressure to clean up their power plants.

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Coal is used to produce about 40% of the nation's electricity, with a heavy concentration of plants in the Midwest. It's a cheap source of power, but it's also dirty. Coal emits about twice as much carbon dioxide as natural gas, which can also be used to produce electricity.

Obama's administration has been targeting coal since it took office, passing a series of regulations that don't address carbon emissions specifically but ultimately reduce them by restricting the output of other dangerous pollutants such as mercury. These pending regulations, combined with low natural gas prices, have already caused utilities to start using more natural gas at the expense of coal, cutting fairly steeply into coal shipments.

The administration is also close to restricting carbon emissions from new coal plants. That's part of the reason why there are very few new coal plants under construction.

Some fear that Obama may now move to impose carbon restrictions on existing coal plants as well.

"The impact could be economic havoc," said Luke Popovich, a spokesman for the National Mining Association, which represents the coal industry.

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Popovich pointed to a labor union study saying 250,000 mining, railroad and utility jobs could be lost if there were large shutdowns of coal-fired power plants. He also said electric bills would rise for some customers.

But it's unclear if Obama would actually go that far -- or even if he needs to.

Simply continuing with the mercury rule (slated to be implemented in 2015) and regulations of new coal plants, along with the continued impact of low natural gas prices, will reduce the electricity produced by coal by another 20% by 2020, according to the engineering and consulting firm Black & Veatch.

"The statements were pretty vague. I'm not convinced he'll move more quickly on existing coal plants," said Divya Reddy, an energy and natural resource analyst at the Eurasia Group, a political risk consultancy.

Obama's tough talk Tuesday may simply indicate he's not willing to back down on regulations that have already been proposed. That might not be enough to appease his environmental base, but it's clearly not good news for the coal industry.

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