Industry Market Trends
Will Obama's Latest CO2 Regulations Help or Hurt the Economy?
July 11, 2013
According to a recent national telephone survey conducted by Rasmussen Reports, "nearly half of U.S. voters like the idea of putting tighter environmental controls on new and existing power plants, but just as many think President Obama's proposed regulations to do that will hurt the economy."
The survey also found that "most expect those regulations to drive up energy costs."
Half and Half
The survey found that 48 percent of likely U.S. voters "favor new environmental regulations to place stricter limits on carbon dioxide emissions from new and existing power plants," Rasmussen officials said, while 34 percent oppose the new regulations and 18 percent are undecided.
In late June, during a speech at Georgetown University, President Barack Obama announced his Climate Action Plan to deliver on promises from his 2008 election campaign to get tough on climate change.
Some characterized it as President Obama declaring war on coal. According to the Associated Press, the president's proposed regulations include, for the first time in American history, government-mandated caps on carbon dioxide emissions from power plants. The plan as presented had no "detailed emission targets or specifics about how they will be put in place," the AP said, but focused instead on launching "a process in which the Environmental Protection Agency (EPA) will work with states to develop specific plans to rein in carbon emissions."War On Coal and Jobs?
As expected, Republicans were quick to denounce the president's proposals. The policies "will shutter power plants, destroy good-paying American jobs, and raise electricity bills for families that can scarcely afford it," House Speaker John Boehner, R-Ohio, said, echoed by Senate Minority Leader Mitch McConnell, R-Ky., who said Obama's plan is a "war on coal" that translates to a "war on jobs."
Some questioned not just the cost but the current need for such regulations, due to the fact that American CO2 emissions are at their lowest levels since 1994 and, in large part because of the boom in natural gas from fracking. As President Obama himself has noted, "no country since 2006 has cut emissions more."Can We Get Some Numbers Here?
But is there any way to get past the heated rhetoric and put numbers to the issue?
Last November a major study attempted to do just that -- determine whether or not environmental regulations, in general, cost more than they're worth, based on a specific study. The report, written by Nam D. Pham and Daniel J. Ikenson for D.C. consulting firm ndp|consulting, assessed the EPA's final Utility MACT and Boiler MACT rules, the proposed Coal Combustion Residuals and Cooling Water Intake Structures regulations, the expected Cross-State Air Pollution Rule, and National Ambient Air Quality Standards for Ozone on the U.S. economy.
These regulations are pretty close in approach and intent to what the EPA would most likely come up with for CO2 emission cap regulations for the president's latest round of regulation. The study found that the worst-case scenario was that the regulatory burden could "cut annual U.S. output by as much as $630 billion and 4.2 percent of GDP." The EPA claimed that the value of the benefits achieved would outweigh the costs.
But it's a tricky question to quantify, since you're really only working with semi-solid numbers for one half of the equation. As Frank Swigonski writes in PolicyMic, "Environmental costs are especially difficult to compare to economic benefits because the environment doesn't necessarily have a monetary value." It's an unwinnable debate.Electricity Rates to "Skyrocket" As Promised
The National Association of Manufacturers (NAM) conducted an analysis of the Pham and Ikenson study. NAM found that annual compliance costs for all six regulations "range from $36 billion to $111.2 billion (by EPA estimates) and from $63.2 billion to $138.2 billion (by industry estimates)," with "total capital expenditures for all six regulations range from $174.6 billion to $539.3 billion (by EPA estimates) and from $404.5 billion to $884.5 billion (by industry estimates)."
One fairly certain effect of the CO2 caps would be dramatically increased electricity costs. In that respect, at least, the president is correct in his assertion that electricity rates will "skyrocket." The Pham and Ikenson study found that the EPA regulations it studied would have the "immediate and incontrovertible impact" of a 6.6 percent increase in the price of electricity as "utilities would incur costs of up to $142 billion in the short run to comply with only three of the dozens of EPA rules."Creating Compliance Jobs Supporters of the administration's environmental regulatory agenda are quick to say that such estimates are usually overblown, and that many jobs are created in the compliance industry whenever such major regulations are passed. And true, industry-funded studies should be regarded with as cold an eye as studies backed by environmental groups. In 2011 The New York Times noted that the Environmental Protection Agency's proposed amendments to the Clean Air Act to reduce acid rain from power plant emissions were estimated to cost "$7.5 billion and tens of thousands of jobs" by the industry, contending that, according to certain studies, "the cost of the program has been closer to $1 billion," and that "the law had been a modest net creator of jobs through industry spending on technology to comply with it."
The president's regulations do seem to not take into sufficient account the progress that is steadily being made. Gary Long, president of the Public Service Co. of New Hampshire, the state's largest electric company, told the Associated Press that New England has spent billions to get cleaner energy, agreed to voluntary emissions caps and plans to import Canadian hydroelectric power. As such, he asked, "Does no good deed go unpunished?"