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July 30, 2014

EPA’s Misleading PR Campaign on Power Plant Rules

July 30, 2014
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This week, EPA and its allies are leading a full-court press to promote the agency’s controversial regulations to limit carbon dioxide (CO2) emissions from existing power plants. EPA is holding some listening sessions around the country, and administrator Gina McCarthy and her lieutenants are giving speeches and holding press events. While the rule is not yet finalized, a closer look at both the Administration’s statements and the historical impact of environmental regulations will give the public a better sense of what the new EPA rule will mean for American families. Not surprisingly, the EPA is less than transparent on just how far-reaching the negative impacts of the rule will be.

EPA Refuses to Discuss the Impact the Regulations Will Have on the Climate, Despite the Fact that the Point of the Rule is Climate Change

In the Executive Summary, EPA claims, “This proposal is an important step toward achieving the GHG [greenhouse gas] emission reductions needed to address the serious threat of climate change.” EPA, however, provides zero evidence that this rule will actually address the threat of climate change. In the 130-page rule, EPA fails to quantify the climate impact of the rule.

EPA’s failure to discuss the climate impact of this proposal is a glaring omission, especially because EPA created the MAGICC climate model for this exact purpose[1] and because EPA previously ran this model to calculate the impact on the climate of its CO2-regulating rules.[2]

It is implausible for the point of EPA’s regulation to be about climate change when the agency fails to actually measure the impact of the rule on climate change. At a hearing before the Senate Environment and Public Works Committee last week, McCarthy admitted that the rule would have no impact on climate, but that it would instead “impact the tone and tenor of [climate] discussions.”  [emphasis added]

Here’s the exchange between McCarthy and Senator Barrasso:

Barrasso: So the question is: can you guarantee success in Paris [on climate change], and, if not, are these climate change policies all pain for America and the citizens of this country, and little gain globally?

McCarthy: Sir, what I know about this rule is that it will leave the United States in 2030 with a more efficient and a cleaner energy supply system and more jobs in clean energy, which are the jobs of the future. So, no matter what happens internationally, this is of significant benefit to the United States in terms of those kids in the audience who want to breathe healthy air and don’t want [to get] sick.

Barrasso: So you admit that it has no impact on global climate.

McCarthy: No, it will have a significant impact on the tone and tenor of the discussions.[3]

McCarthy, when given the chance, did not claim the regulation would impact the actual climate in any way, but only “discussions” about the climate.

The likely reason McCarthy is reticent to discuss the actual effect on climate is because the impact is very small. It turns out that if you use EPA’s MAGICC model, the impact of this rule would reduce the rise in global temperatures by only 0.137 degrees Celsius by 2100.[4]

Reducing global temperatures by 0.137 by 2100 does not justify the billions of dollars in additional costs this rule will cost America, and EPA is hiding that fact from the American people.

EPA Misleads on Effects of the Regulation on Economy and Jobs

EPA understands that this regulation on U.S. existing power plants only produces de minimus climate benefits at best and therefore tries to argue that the regulation will create jobs. This is the same “green jobs” argument we debunked years ago.[5]

Earlier this week, McCarthy stated on a conference call, “We do know that the clean power plan is going to generate significant new job options cross the U.S.” and “spur some innovation”…“That’s what has happened every time EPA has put out [a] rule like this.”[6]

It’s true the regulation will create new “job options”, but that doesn’t mean that on net it will create jobs. After all, war creates new “job options” because of all of the destruction, but war is not good for the economy. Neither the EPA nor the White House addresses how many jobs would be lost because of the ripple effects of higher energy prices.

For years, the administration has been arguing that subsidizing renewable energy (or forcing people to use renewables) will create jobs. This is not supported by the evidence.  One prominent example is the paper by Dr. Gabriel Calzada Álvarez on the impact of renewables policies in Spain, which found that 2.2. jobs were lost for every one job created by pro-renewable policies.[7]

On this rule specifically, multiple studies explain that the rule will be a net job killer. Even some labor unions, traditionally supporters of this administration’s policies, have come out against the rule. The United Mine Workers of America, for example, calculates that 75,000 direct coal generation jobs will be lost by 2020 and 152,000 by 2030.[8] Furthermore, a recent study by the U.S. Chamber of Commerce of the impact of a 40 percent reduction of carbon dioxide emission (due to the complexity of EPA’s rule, the reality is that reductions will be closer to the Chamber’s 40 percent figure than EPA’s claimed 30 percent) would cost Americans $51 billion annually and an average of 224,000 jobs annually.[9]

Electricity Prices

The EPA claims that the rule will lower electricity prices by creating “energy efficiency.” McCarthy, in her testimony during the Senate hearing, said, “What we’re projecting is that consumers will see a lowering of their energy bills, and that’s because we’re getting waste out of the system…it’s the cheapest, most effective way to get these reductions—to get more efficient.”[10] McCarthy’s assumptions are incorrect. EPA’s regulation will close low-cost, efficient power plants, and replace them with higher cost plants. This will necessarily drive up electricity prices. President Obama admitted this when he stated that under his plan, “electricity prices would necessarily skyrocket.”

Not only does theory not support McCarthy’s statement, but history does not support it either:

  • Since 2005, electricity prices in the Northeastern states, which are a model for compliance with their regulation, have increased by 31 percent compared to 20 percent for the U.S. as a whole. In short, electricity rates spiked 57 percent faster in RGGI states than in the rest of the country.[11]
  • New York, a state that has followed the EPA recommendations on reducing carbon dioxide emissions, now has the second highest electricity rates in the nation. Their residential electricity rates are 70 percent higher than the national average, 60 percent higher than neighboring Pennsylvania, and 81 percent higher than nearby Ohio.[12]

War on Affordable Energy

The EPA has attempted to claim that the rule will not negatively impact areas that rely on coal for electricity. McCarthy, in the press call, argued, “You’ll see that the states that are heavily coal generation now will remain heavily coal generation in the future…Every fuel supply will be able to continue to succeed in a low carbon future under these plans.”[13]

Many parts of the EPA’s own guidance document for the new rule dispute McCarthy’s claim that coal will not be negatively impacted. The EPA states[14]:

  • “We estimate…a 16 to 22 percent reduction in coal-fired electricity generation as a result of this rule.” (page 596)
  • “The proposed standards are projected to result in…additional coal retirements.” (page 561)

Thus, while McCarthy claims that the EPA is not “waging a war on coal,” the agency’s own guidance document states that coal generation would necessarily have to decrease in order for the rule to achieve any of its purported benefits.[15]

Conclusion

The existing source rule will, according to EPA’s climate model, achieve a reduction in global temperature of 0.02 C by 2100.  In exchange for this, EPA is proposing to completely alter U.S. electricity generation and to make prices “necessarily skyrocket.” The American people care about growing the economy. Neither climate change nor the environment is very high on the list of priorities, and when Americans understand the costs associated with this rule, they reject this rule.

IER Policy Associate Kaavya Ramesh authored this post.

 

[1] See e.g., MAGICC: Model for the Assessment of Greenhouse-gas Induced Climate Change, http://www.cgd.ucar.edu/cas/wigley/magicc/about.html.

[2] Federal Register, Search Documents, Search conducted on July 28 2014, term: “MAGICC,” filtering for only the EPA, https://www.federalregister.gov/articles/search?conditions%5Bagency_ids%5D%5B%5D=145&conditions%5Bterm%5D=MAGICC.

The four rules are:

1) 2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions and Corporate Average Fuel Economy Standards

2) Greenhouse Gas Emissions Standards and Fuel Efficiency Standards for Medium- and Heavy-Duty Engines and Vehicles

3) Light-Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule

4) Regulation of Fuels and Fuel Additives: Changes to Renewable Fuel Standard Program

[3] Senate Committee on Environment and Public Works, Archived Webcasts, http://www.epw.senate.gov/public/index.cfm?FuseAction=Hearings.Choose&Hearing_id=8655edd9-03ac-bb36-cab8-7913ec6c2b94.

[4] Patrick J. Michaels and Pul C. “Chip” Knappenberger, Current Wisdom: We Calculate, You Decide: A Handy-Dandy Carbon Tax Temperature-Savings Calculator, Cato at Liberty, July 23 2013, http://www.cato.org/blog/current-wisdom-we-calculate-you-decide-handy-dandy-carbon-tax-temperature-savings-calculator — select “US,” CO2 Reduction of 100 percent, and climate sensitivity of 3.

[5] Gabriel Calzada Álvarez, Study of the effects on employment of public aid to renewable energy sources, Universidad Rey Juan Carlos, March 2009, http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf

[6] Erica Martinson, McCarthy battles negative perceptions of climate rule, Politico Pro Energy Whiteboard, July 28 2014.

[7] Calzada, see note 5.

[8] Cecil E. Roberts, EPA existing source emissions rule puts American jobs at risk, does nothing to address climate change, United Mine Workers of America, June 2 2014,  http://www.umwa.org/?q=news/epa-existing-source-emissions-rule-puts-american-jobs-risk-does-nothing-address-climate-change.

[9] Institute for 21st Century Energy,  Assessing the Impact of Proposed New Carbon Regulations in the United States, http://www.energyxxi.org/epa-regs.

[10] Senate Environment and Public Works Committee, see note 3

[11] Energy Information Administration, Electric Power Monthly,  Table 5.6.A. Average Retail Price of Electricity to Ultimate Customers by End-Use Sector, by State, February 2014 and 2013 (Cents per Kilowatthour), and  Table 5.6.A. Average Retail Price of Electricity to Ultimate Customers by End-Use Sector, by State, August 2005 and 2004 (Cents per Kilowatthour), Electric Power Monthly, http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_5_6_a.

[12] Energy Information Administration, Electric Power Monthly,  Table 5.6.A. Average Retail Price of Electricity to Ultimate Customers by End-Use Sector, by State, March 2014 and 2013 (Cents per Kilowatthour)

[13] West Virginia Public Broadcasting, EPA Administrator Defends Clean Power Plans, July 28 2014, http://wvpublic.org/post/epa-administrator-defends-clean-power-plans.

[14] Environmental Protection Agency, Emission Guidelines for Existing Stationary Sources: Electricity Utility Generating Units, June 2 2014, http://www2.epa.gov/sites/production/files/2014-05/documents/20140602proposal-cleanpowerplan.pdf.

[15] Beth Vorhees, EPA Administrator Defends Clean Power Plans, West Virginia Public Broadcasting, July 28 2014, http://wvpublic.org/post/epa-administrator-defends-clean-power-plans.

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