The EPA’s “Clean Power Plan” Will Have Far Reaching Negative Impacts on the Economy and Middle Class

Plan will shatter the nation and Pennsylvania’s opportunity to capitalize the growing global coal market and the state’s ranking as one the top energy exporting and electricity generating states.

With the release of Pope Francis’ encyclical on the need for “urgent replacement of fossil fuels with renewables”, focus on energy policies is again generating much attention. This is an issue that President Obama has made a national priority. However, there is a disconnect between the rhetoric coming from President Obama’s Administration and reality– specifically on the proposed rule regulating carbon emissions that is being advanced by our nation’s Environmental Protection Agency (EPA).

In March, the President addressed a student body on his plans to build a competitive economy that produces high-wage jobs and a strong middle class. Job creation is a standard political campaign promise, but why does he not want to protect the high-wage jobs that already exist? What about preserving competitive energy markets that have already been built and maintain several state economies?

The EPA’s proposed greenhouse gas emissions rule, advertised as the “Clean Power Plan,” is the antithesis of sound economics. The rule, as written, will force Pennsylvania to reduce carbon emissions by 32 percent over 2012 levels. This requirement will produce far-reaching negative impacts on both the economy and the middle class.

The EPA has assured the American public that this proposed rule will create greater markets for renewable energy sources and spur their development across the nation. While the EPA has admitted this rule will cause price increases on every electric bill in the nation, the EPA’s projected single digit increases are greatly understated. This is particularly true for states like Pennsylvania that enjoy energy prices below the national average because of a competitive energy market that relies on coal, natural gas, hydro, and nuclear.

The National Economic Research Associates produced a study on each state’s projected electric rate increases under the “Clean Power Plan.” This plan projected a 14-22 percent rate increase for Pennsylvania. While the proponents of EPA’s proposed carbon emissions rule may be able to afford a 14 to 22 percent increase in their energy bills, this type of an increase in energy prices will devastate the budgets of low and middle-income families. The energy price increases that will be created by EPA’s proposed carbon emissions rule will affect every electric bill in the nation–from families to small businesses to energy-intensive industries like manufacturing.

An additional complication for the EPA’s proposed carbon emissions rule is a projection by the Electric Power Research Institute that America will not have enough energy to power our homes and businesses if we move away from fossil fuels and try to rely on renewable energy any time within the next 50 years. As America and its economy grows, the demand for energy increases, and the only available sources for supplying this needed energy are fossil fuels and nuclear power at present. The blind acceptance of EPA’s proposed carbon emissions rule would curtail our economic growth dramatically and result in a drastic change in American’s lifestyle.

The Obama Administration has been promoting public policy ideas in many fields, in addition to energy, based on ideology, not sound economic theory or public policy history. Further, this Administration has promoted public policy ideas that poll well with the general public, even if the public has not had time to educate itself on those areas of public policy. Green energy will always poll well with the general public, when the public has not been shown that these sources of energy cannot supply all the power that we will need in the near future as our nation develops and grows.

Coal accounts for 40 percent of the electricity in Pennsylvania with renewables at less than 3 percent. Through the Alternative Energy Portfolio Standard, Pennsylvania utilities are already required to purchase a percentage of renewables, no matter the price. The state is also on target to meet its mandate of reaching an 8 percent renewable capacity by 2020. There is no need for Federal overreach and additional regulation on this matter.

At a recent Pennsylvania Department of Environmental Protection (DEP) meeting, Pennsylvania Public Utility Commission (PUC) Commissioner Robert Powelson presented the facts that the EPA’s proposed carbon emissions rule, as it stands, will have adverse and significant impacts on electric grid reliability, wholesale energy markets, retail electric prices, and regional energy generation composition. This attempt at usurping state’s rights conflicts with the Federal Energy Regulatory Commission’s responsibility under the Federal Power Act to regulate wholesale electricity markets.

The Obama Administration’s goals are not rational for an economy that thrives on electric use and generation. The Pennsylvania Economy League reports that the coal industry alone contributes more than $4 billion annually to the state economy. Coal supports over 36,000 jobs in Pennsylvania with an average salary of $72,000. These are jobs worth protecting.

President Obama’s purely ideological approach to economics and public policy is foolhardy and very dangerous. Why artificially and prematurely alter the energy market away from coal? To let the market determine energy supply based on price and availability, will allow the corresponding job markets to grow or shrink respectively, without decimating an entire workforce and the economies that are built on it.

The EPA’s proposed carbon emissions rule will shatter the nation and the Commonwealth’s opportunity to capitalize on the growing global coal market and Pennsylvania’s ranking as one of the top energy exporting and electricity generating states.

The U.S. Chamber of Commerce has estimated the cost of compliance with EPA’s rule will run from $5.4 billion in 2020 to $8.8 billion by 2030. Carbon emissions from coal-fired plants in the U.S. account for less than 3 percent of the global total, and the U.S. is leading the world in reducing national carbon emissions.

As we artificially shift our energy markets to more volatile and expensive sources of energy, our energy-intensive Pennsylvania businesses and industries will look to move jobs overseas where electricity from coal-fired power plants is cheaper, but the process is barely regulated. We will lose jobs as well as losing a portion of our tax base and its economic benefits. These jobs and economic benefits will be transferred to competing countries that will release a greater level of carbon emissions into the same air.

The EPA’s proposed carbon emissions rule will also shatter the opportunity for the nation and the Commonwealth to capitalize on the growing global coal market and Pennsylvania’s ranking as one of the top energy exporting and electricity generating states.

Fortunately, Pennsylvania Governor Wolf has said that he understands the value of creating good-paying jobs, but he realizes that we must also protect the current jobs that support entire regions of Pennsylvania. In recent comments, he has stated he will work with the EPA’s proposed rule when it is published to maintain Pennsylvania’s position as an energy exporter and protect our jobs in coal and coal-related industries.

The President’s rhetoric has much of the population spellbound. Unfortunately, the wheels have already been put in motion to implement the EPA’s proposed carbon emissions rule. This action will regulate the vast majority of the coal mining industry out of the market, leaving Pennsylvania’s middle-class and our economy with sticker shock. America and Pennsylvania will be worse off—a development that is now preventable. What will we do?

Dr. Charles E. Greenawalt is Senior Fellow with The Susquehanna Valley Center.

Nothing contained here should be considered as an attempt to aid or hinder the passage of any legislation.