Proposed Emission Rules Could Hit U.S. Economy
MPC reacts to EPA's proposed greenhouse gas reduction rule
In June, the Environmental Protection Agency (EPA) announced its proposed rule to reduce greenhouse gas emissions from existing power plants by 30 percent from 2005 levels by 2030. The rule has the potential to either severely damage the economy or give it a great boost, depending on who you believe.
Last month, the Environmental Protection Agency (EPA) announced its proposed rule to reduce greenhouse gas emissions from existing power plants by 30 percent from 2005 levels by 2030. The rule has the potential to either severely damage the economy or give it a great boost, depending on who you believe.
Marathon Petroleum Corporation’s (MPC’s) electricity requirements are enormous, and so any increase in power costs has the potential to affect our business negatively. In 2013, we spent more than $400 million on electricity. In terms of the proposed rule’s effect on the nation as a whole, a study by the U.S. Chamber of Commerce – the nation’s largest business lobbying group – warns that the rules could lead to 224,000 fewer jobs each year and cut disposable household income by a total of $586 billion through 2030. The study shows the economic losses would peak in 2025, at $104 billion.
The Chamber pronounced its verdict before the proposed rule was even released, because it was widely known that the rule would be based on a plan previously released by the Natural Resources Defense Council (NRDC).
The Chamber’s claims, in greatly simplified form, are based on relatively straightforward economic reasoning:
- The new rules will require power companies to spend large amounts of money to comply.
- These costs will make electricity more expensive for consumers, whose power bills will increase.
- This increased cost will lead to businesses having less money for expansion, hiring, etc., and individual consumers will have less money to spend on other things.
- Net effect: job losses and less economic activity.
The NRDC claims are just the opposite of the Chamber’s: the new rule can reduce electric bills and create hundreds of thousands of jobs. The NRDC also has commissioned a study that backs its position.
The EPA touts the proposed rule’s flexibility, because it allows states “to design a program that makes the most sense for their unique situation,” by choosing between “generation using diverse fuels, energy efficiency and demand-side management” to comply with the new rule.
“To call this proposed rule flexible is inaccurate,” said Pam Beall, MPC senior vice president of Corporate Planning, Government & Public Affairs. “Under this rule, the federal government would force states to choose only among a few expensive options for meeting their power-generation needs – no reasonable person would call that flexible.”
Under this rule, the federal government would force states to choose only among a few expensive options for meeting their power-generation needs – no reasonable person would call that flexible.
The EPA claims – as does the NRDC – that new rules will result in lower electric bills because of energy-efficiency measures that will be implemented as part of the emissions-reduction effort. Such measures could include switching to energy-efficient light bulbs, adding weather stripping, improving insulation, and switching to more efficient appliances and equipment.
The EPA says the proposed rule will “put Americans to work making the U.S. electricity system less polluting and our homes and businesses more efficient, shrinking electricity bills by roughly 8 percent in 2030.”
“Even if that’s correct, where is all the money to pay for those energy-efficiency measures going to come from? And what about implementing those ‘flexible’ options for generating electricity?” asked Beall. “We will all have to pay for the new appliances, new factory equipment, new insulation and everything else, both up-front and on a continuing basis.”
Beall also noted that the claim of lower costs for electricity is at odds with the president’s previously stated intentions. “In 2008, thencandidate Obama said that under his plan, ‘electricity rates would necessarily skyrocket,’” said Beall. “He was talking about the ‘cap-andtrade’ legislation that was rejected by Congress, but now it seems he’s achieving the same goals through the EPA, and bypassing Congress. This rule would put the EPA in charge of ournation’s energy policy, which should concern our lawmakers and energy consumers alike.”
Beall says that even as the EPA’s proposed rule would make our electricity grid less reliable and cause electricity prices to soar, it would have virtually no impact on the global warming it’s supposed to address. According to a Wall Street Journal editorial on June 3, 2014, “Based on the EPA’s own carbon accounting, shutting down every coal-fired power plant tomorrow and replacing them with zero-carbon sources would reduce the Earth’s temperature by about one-twentieth of a degree Fahrenheit in a hundred years.”