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WASHINGTON, DC, Sept. 30, 2003 -- ICF Consulting's recently published SO2 Emissions and Mercury Market Outlook 2003 predicts that, contrary to many accounts, multi-pollutant air emissions regulations in the United States will increase output levels and improve profitability for many coal producers.
"The conventional view has been that air emissions regulations will increase the cost of electric generation from coal-fired plants, thereby placing these units at a competitive disadvantage to cleaner and therefore less costly, natural gas, nuclear, and renewable power plants. However, air emissions regulations will actually give a boost to some coal producers and air pollution control manufacturers will see an explosion in their business opportunities," says John Blaney, a Senior Vice President in ICF Consulting's Energy Markets practice.
New air emissions regulations are increasingly likely because President Bush has begun a major push to get his Clear Skies Act (CSA) enacted this year. The President's legislative proposal calls for major reductions in SO2, NOX, and mercury emission reductions.
Absent new legislation, the United States Environmental Protection Agency is under court order to pass new mercury regulations and has announced plans to proceed with a fine particulates rulemaking that will likely lead to cuts in SO2 and NOX similar to those included in the President's proposal. "New, more stringent air pollution regulations are inevitable," says Blaney.
CSA, and several other competing bills in Congress, calls for a two-phase implementation of emission reductions. If CSA is passed, the first phase of reductions are targeted for 2008-2010, with the second phase occurring in 2018.
New air regulations such as CSA will lead to capital expenditures for pollution control equipment in excess of 30 billion dollars by 2020. These investments will enable the owners of coal-fired power plants to continue to burn coal and in some instances even increase generation levels. The study results show that the immediate aftermath of the announcement of new air emissions regulations will include a production increase for low sulfur coal producers in 2005-2009. This is because coal plant owners will initially switch to lower SO2 emitting coals to build a bank of emission allowances to allow a longer transition to lower emission levels in the years prior to the implementation of the first phase of reductions. "Powder River Basin coal production in Wyoming and Montana will see an initial increase in production of over 50 million tons, or about 13 percent" says Blaney.
As the second, more stringent, phase of air emission reductions is implemented, the coal producing regions that are likely to experience the biggest boost are the currently depressed mid-west regions which produce high sulfur coal. Lastly, if a market-based approach to mercury emissions regulation is adopted, as envisioned in CSA, coals with low mercury levels will also see an increase in value.
For more information about ICF Consulting's allowance market views, this study, and other environmental and energy consulting services, please visit www.emissionstrategies.com.
ICF Consulting (www.icfconsulting.com) is a management, technology, and policy consulting firm. Drawing upon its extensive industry knowledge, credentialed professionals, and innovative analytics, the firm develops solutions to complex energy, environment, emergency management, community development, and transportation issues. ICF Consulting successfully implements strategies and analyses in these areas through its expertise in information technology, organisational improvement, and communications. Since 1969, ICF Consulting has been serving major corporations, government at all levels, and multinational institutions from key business centres in the Americas, Europe, and Pacific Asia.
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