Government shouldn’t pick energy-market winners and losers. Or so politicians like to say. Yet, picking winners and losers is exactly what President Obama is trying to do, through his Environmental Protection Agency’s (EPA) carbon-dioxide regulations for power plants, the so-called Clean Power Plan and Carbon Pollution Standards.
No, those rules don’t single out specific companies for favorable treatment. (Solyndra, anyone?) Rather, they rig markets to artificially favor “green” renewable sources of energy over more affordable fossil fuels.
Specifically, the carbon pollution rules effectively bar investment in new coal generation by imposing carbon capture and storage requirements that no utility can afford without government subsidy. The Clean Power Plan drives investment into wind and solar power by imposing carbon-dioxide reduction targets that states can meet only by shifting generation from coal and gas to renewables.
The rules will burden consumers and our still-struggling economy, because new wind and solar units are more costly than existing coal and gas generation. A recent study by the Institute for Energy Research found that the per-kilowatt-hour cost of building and operating new wind generation is about three times that of utilizing existing coal generation. Those higher costs translate into higher electricity prices.
Moreover, kilowatts from intermittent renewables are not as valuable as kilowatts from dependable coal, gas, hydro or nuclear power plants. Wind often produces little electricity when it is needed most, such as on very hot or very cold days — sort of like Metro service that breaks down at rush hour.
Of course, nobody knows at this point how costly the new EPA rules will prove to be. But we do know the EPA’s claim that the Clean Power Plan will reduce consumer electric bills is not credible — especially given the agency’s estimate that utilities will have to spend $8.4 billion annually to comply.
The plan requires states, on average, to reduce their power-sector carbon-dioxide emissions down to 32 percent below 2005 levels by 2030. For perspective, NERA Economic Consulting had estimated that the plan’s slightly less-ambitious 30 percent reduction target would cost utilities $336 billion over 15 years and increase electricity rates by an average of 12 percent.
Consumers, particularly in the heartland states that rely on coal-fired plants, may see their rates skyrocket, just as President Obama predicted in a moment of candor. Workers will lose their jobs as energy-intensive manufacturing is forced out of the country.
What do we get in return for the economic pain? The EPA claims the Clean Power Plan will deliver between $34 billion and $54 billion in annual climate and health benefits by 2030, including $20 billion in climate benefits. None of that is credible.
According to the agency’s own climate model (aptly named MAGICC), the plan will avert less than 0.02 degrees Celsius of global warming by 2100. Such a vanishingly small temperature change cannot make any practical difference to farmers, coastal communities or polar bears in 2100. The climate benefits in 2030 would be even punier.
The EPA claims the rule will avert 90,000 childhood asthma attacks per year via collateral reductions in smog-forming air pollutants. That’s not plausible, either. Since 1980, concentrations of such pollutants have declined by 60-80 percent, yet childhood asthma rates increased dramatically. Smog is worst in summer, yet hospitalizations for childhood asthma are typically lower in summer than in fall.
In short, the EPA’s benefit calculation presupposes a correlation that does not exist between childhood asthma and today’s historically low, continually declining air pollution levels.
The one thing we know the Clean Power Plan will do is transfer power from the people’s representatives and the laboratories of democracy to the EPA. The federal environmental regulator will become the nation’s de-facto electricity czar.
The plan also advises states that emissions-trading programs, especially multistate compacts, will be the most flexible way to comply. And a companion rule, proposing a federal plan for states that can’t or won’t submit an EPA-approved implementation plan, details two emissions-trading schemes.
The Waxman-Markey cap-and-trade bill died after the November 2010 elections, and during the 2012 election cycle, Mr. Obama and Democratic leaders kept mum about cap-and-trade and hardly mentioned climate change. So how is it appropriate for the EPA to impose major changes in public policy that Congress debated for years and ultimately rejected?
Even during the 111th Congress, when Democrats controlled the White House and both chambers of Congress, a bill authorizing the agency to do exactly what it is doing now — design and implement a low-carbon U.S. electric supply system — would have been dead on arrival.
Congress must act quickly and decisively to block the EPA’s unlawful, economically perilous climate coup.
• Marlo Lewis Jr. is a senior fellow at the Competitive Enterprise Institute.