Jun 25, 2015 - 2:00pm

4 Reasons Why EPA’s Carbon Regulations are All Pain and No Gain


Senior Editor, Digital Content

House Energy and Power Subcommittee Chairman Ed Whitfield’s (R-KY) bipartisan bill, the Ratepayer Protection Act--which the House approved--will block EPA’s proposed carbon regulations. In an op-ed in The Hill, Rep. Whitfield calls EPA’s plan to reengineer the power grid, “a bad deal for the American economy, businesses, and ratepayers.”

He’s right.

Stephen Eule, Vice President for Climate and Technology at the Institute for 21st Century Energy, explained to a House Energy and Environment Subcommittees that EPA’s carbon regulations will be all pain and no gain.

Eule made four points using the Energy Information Administration’s analysis of EPA's plan:

  1. The economy will take a big hit.
  2. Electricity rates will go up
  3. The power grid will be less-reliable
  4. Carbon reductions won’t matter much in the big picture.

1. The Economy Will Take a Big Hit.

With electricity as an integral part of our economy, it’s odd that EPA hasn’t looked at how its proposed carbon regulations will affect the economy. “Nowhere in this document [CPP’s economic impact analysis] is there any discussion of how its rule will affect GDP,” said Eule.

Wait, “odd” isn’t the right word; “irresponsible” is better.

Anyway, EIA did look at the CPP's economic effects and found major costs:

[C]umulative economic costs over the Clean Power Plan’s 2020 to 2030 compliance period are an estimated $1.23 trillion in lost GDP, with a peak annual loss of $159 billion in 2025. This amounts to an average annual GDP hit over the compliance period of $112 billion.

epa_cpp_gdp_losses_800px.jpg

EIA estimates of GDP losses from EPA's Clean Power Plan: 2020-2030.
Source: Institute for 21st Century Energy.

2. Electricity Rates Will Go Up

EPA admits electricity rates will be higher—“an average of 6.5% in 2020, 2.9% in 2025, and 3.1% in 2030”—but it assumes there will be so much energy efficiency that consumers will pay less.

Eule notes that EIA doesn’t buy it:

[T]he price increases overwhelm these declines, leaving consumers with bigger, not smaller, electricity bills. Using EIA’s data, we calculate that average household electricity expenditures will be 3.8% higher in 2020, 2.8% higher in 2025, and 1.3% higher in 2030.

In total, consumers will pay $164 billion more for electricity from 2020 to 2040. “Pursuing the Clean Power Plan amounts to placing an entirely needless burden on families—especially low-income families—and businesses still struggling with a sluggish economy,” Eule said.

3. The Power Grid Will Be Less-Reliable

To add insult to injury, EPA’s carbon regulations will mean consumers will end up paying more for less-reliable electricity.

EIA estimates that 31% of all coal-fired power plants will be shut down by 2030. “A change in the generation mix of this magnitude this quickly will have repercussions for ratepayers,” said Eule.

Such a sudden shutdown of existing generating capacity is unprecedented, and it raises serious concerns … about the ability of the electric power system to handle such a rapid loss of base load generating capacity.

Regional power grid operators and state officials have expressed serious worries about this.

4. Carbon Reductions Won’t Matter Much in the Big Picture.

When all is said and done, under EPA’s carbon regulations, the U.S. will produce 6.2 gigatons less in carbon emissions by 2030.

Sounds like a lot, right? Eule points out that it will barely be a drop in the bucket globally:

As large as it is, however, the most recent forecast from the International Energy Agency suggests that in 2030 carbon dioxide emissions from China will offset this entire 11 years of reductions in a little more than 7 months.

When you put this all together—big economic costs, higher-priced but less reliable electricity, and little global effect—you can see that EPA’s carbon regulations are a raw deal for Americans.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.