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June 9, 2014 Other Voices

Obama's emissions plans bad for business

Scott H. Segal

A lot of attention was generated by last week's Environmental Protection Agency (EPA) announcement of a proposed regulation to cut carbon emissions from existing coal-fired power plants by 30 percent from 2005 levels — all by 2030. Aimed at reducing greenhouse gas emissions, the effort is being billed as flexible, far-reaching and even a money-saver for American citizens.

The policy is a homerun for the Obama administration, improving everything from our skies to our pocketbooks, right? Not so fast. To truly understand the implications of the EPA's announcement, it's worth sifting through the hype and asking a few clarifying questions.

First, how flexible is the EPA's underlying “flexible approach” likely to be?

The rule aims to allow states to cut emissions 30 percent by relying on various solutions, including enhanced energy efficiency, shifting from coal plants to natural gas, investing in renewables, and making upgrades to existing plants. All fine in principle, but flexibility is ultimately in the eye of the beholder — and the beholder is the EPA itself, which gets to approve the finer points of actions states will take to comply.

Unfortunately, the EPA's track record in flexibility won't give regulators in states lacking vast renewable resource potential much comfort that they can reach required reductions. For example, EPA rejected state proposals to cut regional haze even before those proposals were submitted to the agency for review. EPA also disrupted a flexible air permit program for industrial facilities that it had already approved — until a federal court ordered it to stick to its word. Other examples abound, but the bottom line is clear: EPA is not always as flexible as it might like to appear.

More likely, EPA flexibility will be demonstrated by future attempts to create the cap-and-trade system that Congress decided to forego as a means to help states achieve its mandate; compel states to impose limits on how much energy individual houses, schools, hospitals and businesses are allowed to consume; or simply impose taxes on energy use flat-out.

A second question to consider: How much will this rule actually cost Americans?

In the new rule's PR rollout, EPA made the bold claim that, for every $1 Americans spend to implement the initiative, Americans will gain $7 in health benefits. In other words, the EPA is making us money!

The thing is, the imagined health benefits that EPA refers to relate to reducing traditional air pollutants that are already closely tracked — and on the decline — under existing clean air regulations. The cost of greenhouse gas regulations, in other words, is being justified by reductions in already-regulated pollutants that have nothing to do with global warming at all.

Unfortunately, those costs are all too real. Estimates vary, but one recent study shows that phasing down coal-fired power would place millions of jobs at risk while sapping household incomes by $1,200 per year. It's worth remembering that the lowest 10 percent of U.S. earners already pay three times the amount of their monthly incomes on energy than the most affluent, meaning those on fixed incomes are particularly hurt.

But aren't you ignoring the rule's real economic benefits, like jobs created by people hired to install insulation and build renewable power plants?

There may well be an uptick in jobs needed to comply with the new rule. But the number of workers left unemployed by increased energy costs and decreased manufacturing competitiveness will deliver a devastating economic punch amidst our country's still fragile economic recovery. That's why politicians from both sides of the aisle are expressing real concern about this lofty initiative.

Ok, so household electricity costs will go up, energy-intensive businesses will suffer, and entire regions of the U.S. could suffer major job losses as livelihoods diminish. Wouldn't the EPA's new rule make a measurable impact on global warming?

Given the costs, you would certainly think so. But the reality is less promising. Using EPA's own methodology, even a complete shutdown of our nation's entire fleet of coal-fired power plants would reduce average global temperatures by about 1/20th of a degree Fahrenheit. That's the whole fleet of coal-fired power plants, replaced lock-stock-and-barrel by carbon neutral energy sources. And if U.S. manufacturing loses out to foreign competitors, we might be emitting even more carbon getting goods back to our shores from less efficient factories overseas.

The EPA initiative is far-reaching, alright. It just seems to be reaching in all the wrong directions.

Scott H. Segal is the director of the Electric Reliability Coordinating Council and a partner at Bracewell & Giuliani L.L.P.

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