The US federal appeals court decision to uphold the Environmental Protection Agency's
(EPA) greenhouse gas rules will limit the use of coal for
electricity generation and increase the nation's reliance on
other fuel options, according to a new report from Fitch Ratings.
Earlier this week, the US Court of Appeals said EPA was correct
in using existing federal laws to reduce emissions of six gasses, including
carbon dioxide, by denying two of the challenges and
dismissing the others.
Fitch says the decision will severely constrain the construction of future coal-fired
The effects are also expected to further strain the
operations of older, smaller coal-fired plants already
struggling to address imposed restrictions on other
Many of these plants may be prematurely retired, as
significant new investment would be needed to meet prescribed
Most are located in the Midwest and central states,
including Pennsylvania, Ohio, Indiana, Illinois, and Michigan.
Moreover, Fitch says it foresees a continued reduction in
the use of coal as a fuel and an increase in the use of natural
As such, fuel price dynamics have already begun a large
shift for some electricity producers.
According to the Energy Information Administration, in April
2011, almost twice as much of US net power output was generated
from coal than natural gas-fired units. In April 2012, they
contributed nearly the same.
Other power resources, including nuclear, may also be given
greater consideration going forward.
Future construction of coal-fired plants is
unlikely given these rules and a myriad of others due this year
and next, the credit-watch firm said.