June 10, 2015

EPA CO2 Rule Raises Rates, Harms Economy

  • The Obama EPA has proposed a CO2 rule that would force twice as much coal-fired power to close as would happen otherwise.   

  • The rule would lower coal production, raise electricity prices, and reduce GDP.

  • Policymakers should defend Americans’ access to affordable energy and economic opportunity by rejecting the rule.

In May, the Energy Information Administration issued a report concluding that the Environmental Protection Agency’s proposed rule regulating carbon dioxide emissions from existing power plants would shut down coal-fired power plants, raise electricity prices, and reduce gross domestic product.

In total, 28 states have submitted public comments raising concerns about the rule’s impact on electric rates, jobs, and the economy.

EPA Rule's Impact on Economy

Source: U.S. Chamber of Commerce

EIA found that the rule would shut down coal-fired power plants capable of producing 50 gigawatts of power, nearly all by 2020. This would be in addition to the 40 GW of coal-fired power plants the EIA currently projects will close by 2017, largely due to the EPA’s Mercury and Air Toxics Standards. Coal production would be 20 percent lower in 2020 and 32 percent lower in 2030 if the rule is implemented.  

The report predicted how much this one rule would increase average residential electricity rates by 2030 in different regions of the country. It estimated that prices will increase by roughly seven percent in the Eastern Wisconsin, Lower Michigan, Mississippi Delta, Virginia-Carolina, and Rocky Mountain regions. Rates will rise by more than eight percent in the Tennessee Valley region, by more than 10 percent in the Southeast region, and by roughly 11 percent in the Florida, Southern Plains, and Southwest regions.

The report also found that the rule would reduce cumulative GDP by as much as a quarter of a percent from 2015 to 2040. It explained that “economic activity, when measured either by real gross domestic product, industrial shipments, or consumption, is lower” under the rule. “Energy prices are higher, and more investment is needed in order to produce electricity from low- and zero-carbon sources.”

An October 2014 NERA Economic Consulting analysis arrived at similar conclusions. It found that by 2031 the rule would cause 45 GW of coal-fired power plants to shut down, 43 states to be exposed to double-digit electricity price increases, and compliance costs to climb to $366 billion in present value terms. 

Less coal-fired power, falling coal production, higher electricity prices, and reduced GDP are not desirable policy goals. They lead to increased unemployment, unaffordable energy, and an unhealthy economy, all of which harm Americans and especially those on fixed and low incomes. States should resist the EPA’s attempt to impose a national energy tax and refuse to participate in its dangerous scheme. Federal policymakers should stand with those states to defend Americans’ access to affordable energy and economic opportunity.

Issue Tag: Energy