EPA’s New Carbon Rule: What You Need to Know

Yesterday the EPA finally released its new rule proposal to limit carbon emissions from existing power plants. The rule mandates a 30 percent reduction in CO2 by the year 2030, based on 2005 levels. The implications for ordinary consumers could be staggering and confusion seems to abound about what exactly this move means for power consumers. To help clear the air about EPA’s proposal, the Electric Reliability Coordinating Council has provided responses to several questions regarding the rule, which are paraphrased here.

What Will the Rule Cost?

Common sense tells us that when new regulations force major changes in power generation, the price of electricity will rise. This is especially true when carbon reductions dictate the use of more expensive forms of power like renewables.

The only question is how much? Most studies estimate that this regulation will cost the U.S. economy more than $50 billion per year and will take away more than 200,000 jobs per year. Added costs to consumers per year are estimated at $13 to $17 billion. EPA argues that the rule comes with health benefits, but concedes that any health benefits gained won’t come from reducing carbon.

What is the Environmental Impact?

With such a huge economic impact, one would think there would at least be a tradeoff with a large environmental impact. Unfortunately, that is not the case. While U.S. emissions have basically remained the same over the past decade, China’s emissions have increased more than 170 percent and emissions in India more than 90 percent. Carbon production in China and India, as well as in other countries, continues to increase and is not going to slow down any time soon. That means that if we completely shut down the U.S. coal fleet tomorrow, the impact on global carbon emissions would be less than one percent. Neither the EPA nor the Administration has offered any figures for exactly how this new burden on consumers will affect global temperatures.

What Are the Health Benefits of Reducing Carbon?

The Obama administration has touted this regulation as a public health issue. EPA Administrator Gina McCarthy even began yesterday’s press conference by referring to asthma rates in the U.S. However, there is no linkage between carbon dioxide and asthma, and the EPA’s own endangerment finding admits that. Unlike conventional pollution, there is no evidence that carbon emissions cause asthma or any other health problems. There are already regulations on the books for conventional pollution and, according to EPA, emissions of those pollutants has significantly declined, even as U.S. asthma rates have tripled.

Does This Rule Affect Reliability?

The new rule poses serious reliability threats. Utilities will have no choice but to close a number of coal-fired plants, switching to natural gas or other forms of power. It was clear during the January 7th polar vortex that over-reliance on any one form of energy can prevent reliability concerns, as natural gas supplies were limited.

Perhaps more alarming is that AEP, a major American utility, revealed that 89 percent of its coal-fired generation slated for retirement next year was running out of necessity during the polar vortex. Nations such as Germany that have implemented similar regulations have experienced brownouts and other reliability problems, particularly affecting the manufacturing sector. Now, Germany has reverted to burning more coal to correct its missteps.

Is EPA’s New Rule a Done Deal?

The only way out of this regulation is through legislation or the courts. More votes will be needed in the Senate to pass legislation forbidding the rule. There are also significant legal questions. Although EPA has fared well in the courts recently, it is unclear whether The Clean Air Act allows EPA to make such a sweeping change. It will certainly be challenged by the states and others.