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Is coal power headed for a downsizing in US?

Utilities may close up to 1 in 5 coal-fired power plants after tougher EPA air pollution rules go into effect next year, Wall Street investment banker Credit Suisse recently reported. Coal power is losing its price edge to natural gas, too.

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"There is little doubt that coal-based generation will continue to come under increasing regulatory pressure in the next few years at a time when natural gas is very likely to continue capturing a larger slice of the generation portfolio," he writes in an e-mail. He had no comment on the merits of the Credit Suisse report, however.

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Environmentalists were buoyed by the Wall Street study, but they worried that the report's projection of plant closures – even though regarded as good for investors – would prompt members of Congress to intensify their attacks on EPA clean-air regulations. Some 41 congressmen, including 17 Democrats, last month sent a letter to EPA Administrator Lisa Jackson opposing new pollution regulations limiting emissions of industrial boilers. The Council of Industrial Boiler Owners released a study last month that claimed more than 300,000 jobs were at risk. The Credit Suisse report, in fact, didn't get much media attention until the blog of Sen. Jim Inhofe of Oklahoma, ranking Republican on the Environment and Public Works Committee, posted it under the alarm-ringing headline "EPA hits the Heartland."

EPA's greenhouse-gas rules yet to come

That may be only an opening salvo, however. New EPA regulations restricting greenhouse-gas emissions – mainly carbon dioxide – for large emitters such as power plants are due to be implemented in January. Those rules are expected to produce fireworks.

"We anticipate that the new Congress may unleash a full-scale attack on virtually every EPA air regulation – not just those proposing reductions in greenhouse-gas emissions," says Frank O'Donnell, president of Clean Air Watch, a Washington-based environment group.

The EPA rule changes projected by the Credit Suisse study would remove from the air tons of pollutants that health officials blame for breathing problems and thousands of premature deaths. The Credit Suisse study projects that the amount of coal burned each year would drop by 157 million tons to 324 million tons.

Limited reduction of carbon emissions?

If that really did happen, it would greatly cut greenhouse gases. But only a fraction of that reduction may come to pass, says John Thompson, director of the coal transition project for the Clean Air Task Force, a Boston-based environmental group.

"It's our view that these EPA rules make a tremendous environmental impact and improvement on mercury, NOx, and SO2, but not much on greenhouse gases," says Mr. Thompson.

Most of the electricity and carbon-dioxide emissions, he says, come from big coal plants that are usually in operation. The plants that would be retired are generally smaller plants called on to generate power only a few times a year – responsible for providing about 10 percent of America's electricity load, he says. Even if a large number of these low-production units are closed, overall greenhouse-gas emissions will not drop that much, he says.

Natural-gas turbines, which also generate greenhouse gases, would likely replace the older plants. That means "the benefits on climate from plant closures are pretty small," Thompson says.