CERAWeek 2014 - Keynote Address Thursday Luncheon

Daniel Yergin, IHS Vice Chairman, welcomed Gina McCarthy, the Administrator of the US Environmental Protection Agency (EPA), to deliver a keynote address during Thursday's luncheon. Administrator McCarthy was appointed to lead the EPA by President Barack Obama and was confirmed in July 2013. Her keynote address focused on the Obama Administration's goal of reducing US carbon emissions. Throughout the address, Administrator McCarthy emphasized EPA's commitment to continuous dialogue with the energy industry, state regulators, and the environmental community as it formulates emissions standards for existing power plants.

Administrator McCarthy laid the foundation for her remarks with a well-known example of how the Obama Administration has sought to balance environmental and economic goals: higher mileage standards for light-duty vehicles. According to the Administrator, these standards have simultaneously reduced emissions while saving money for consumers-demonstrating that government policies "do not have to choose between a healthy environment and a healthy economy." She hopes that the president's "Climate Action Plan" will follow a similar path.

The Administrator proceeded to outline the Obama Administration's general strategy for power sector carbon emissions reduction. She affirmed that the potential impact of regulation on energy costs is a serious concern for EPA, but argued that her agency must also consider the cost of inaction on climate change. She cited the concerns of global reinsurance companies in asserting that climate change presents one of the greatest financial risks facing the world in this century.

Noting that wind and solar power generation has already doubled under President Obama's tenure, the Administrator suggested that renewables growth is an important goal for the Administration. Still, she said that fossil fuels will need to continue to play a significant role in the US power mix for years to come, suggesting that technological innovation will likely allow them to do so with a lower carbon emissions profile. She emphasized that the well-known Obama aphorism, "all of the above," is not just rhetoric but an accurate description of the Administration's energy policy.

After Administrator McCarthy concluded her prepared remarks, she and Dr. Yergin discussed one of the most complex issues on EPA's agenda: carbon emissions standards for existing power plants. The Administrator noted that EPA intends to ensure that these regulations do not compromise the reliability of the power system; the agency plans to take full advantage of the "open-ended" nature of Section 111 of the Clean Air Act in order to build as much flexibility into the regulations as possible. Her goal is to develop a "legally solid" regulatory framework that provides state regulators with enough leeway to adapt the rules to account for the particular needs of their regional grids. In order to comply with legal interpretations of the Clean Air Act, EPA has not set a specific target for carbon reductions stemming from the law. However, it does use a "social cost of carbon" metric when performing cost-benefit analysis.

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