US regulations will drive down coal price
White House action on carbon emissions from the electricity sector will ripple through industries
The White House yesterday announced that it would increase targets for the carbon intensity of the power sector. States must now look to implement a 32% reduction in carbon dioxide emissions by 2030, relative to 2005 levels, compared to the previous target of 30%. Renewable energy is now being targeted for 28% of utility-scale power, from a previous target of 22%. This move comes after the Supreme Court struck down a rule by the Environmental Protection Agency (EPA) that did not consider the cost of regulations before deciding to create new rules. While it was seen that the decision may slow EPA action, the White House is demonstrating that it does not see the decision as crippling.
Our judgement
Restrictions on carbon emissions will further marginalise coal as a source of electricity in the United States. This will increase the amount available to export and drive down prices worldwide. New regulations will also encourage subsidies for renewable energy at the state level, to avoid breaching EPA carbon limits.
See INTERNATIONAL: Regulatory haze will hinder green bonds - May 12, 2015.