What Does the New EPA Regulation Do?
June 5, 2014
The Environmental Protection Agency's (EPA) plan to reduce greenhouse gas emissions (GHGs) from power plans will cost an estimated $8.8 billion annually, write Catrina Rorke and Sam Batkins of the American Action Forum.
The latest proposal from the EPA would cut GHG emissions by 30 percent by 2030, with each state having its own emissions target. But the proposal's high costs and short compliance timeline could threaten electricity reliability, and the rule will transform energy production in the United States. Rorke and Batkins look at some of the issues surrounding the rule, including employment, costs and compliance.
- The EPA estimates that the rule will create jobs, including 28,000 "job-years" in 2020 in the electricity, coal and natural gas industries. There is no academic evidence to support these claims, and even if this figure were true, a "job-year" lasts only a single year. And any job-related benefits that the rule might create are undermined by losses in other parts of the economy.
- According to the agency, the rule will cost $7.5 billion annually by 2020 and $8.8 billion by 2030, not including monitoring and recordkeeping costs (those latter costs will reach $68 million by 2020 and require more than 900,000 paperwork hours).
- While the EPA claimed in a press release that the proposal will "shrink electricity bills roughly 8 percent," its regulatory analysis admitted that the U.S. would see an increase in retail electricity prices between 5.9 percent and 6.5 percent in 2020.
- The EPA estimates that up to 15 percent of America's coal fleet could be removed from operation as a result of the rule. To satisfy demand in the summertime, states will need a substantial amount of reserve capacity. But according to projections, the rule could cut reserve capacity by 10 percent, raising summer electricity prices and threatening power availability.
Compliance costs for each state will vary, based on the amount of power plants in each state. According to estimates by Rorke and Batkins, Texas could experience compliance costs of $812 million.
Source: Catrina Rorke and Sam Batkins, "An Inside Look at Greenhouse Gas Regulation," American Action Forum, June 4, 2014.
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