A previous Primer post highlighted the folly of the President’s illusory “deal” with China on greenhouse gas (GHG) emissions. Unfortunately, the outsourcing of American jobs is not the only flaw in the President’s extreme, expensive energy agenda. Another predominant misconception is that overly aggressive GHG controls, such as those the Administration is advancing in relation to electricity generation, will shed reliance on fossil fuel and lead to some sort of utopian alternative energy economy. The Environmental Protection Agency’s (EPA) own data highlights nothing could be further from the truth. In reality, these regulations will lead to incremental advancements in alternative energy at best at a significant, negative social cost. These facts once again prove the best way to allow society and public health to continue advancing is through the efficient use of affordable fossil fuels in a free market.
In discussing EPA’s expensive GHG regulations, ironically called the “Clean Power Plan,” EPA Administrator Gina McCarthy stated, “We’ll spur innovation and investment, and we’ll build a world-leading clean energy economy.” Other statements and information from the Administration infer this “clean energy economy” is one where renewable energy is the predominant driver. However, EPA’s own data projects that when the utility GHG plan is fully implemented in 2030, electricity from renewable energy – in the best case scenario – will only represent less than nine percent of our nation’s total electricity generation mix. Stated differently, this means EPA’s own numbers show that our nation will still rely on good old fossil fuels for almost 85 percent of our energy (hydropower represents a little more than six percent, which is the same in all EPA scenarios). An estimate from NERA economic consulting projects nearly no increase in renewables under EPA’s plan. Such numbers hardly suggest a robust transformation to an alternative energy economy. Proponents of the measure may say this highlights how only a small amount of overall alternative energy in our electricity generation mix can help address the alleged “climate crisis.” Once again, EPA’s data turns the lights out (pun intended) on this idea. The Agency’s figures (often rosy by most reasonable standards) show the electricity GHG regulations will reduce average global temperatures by 2/100th of one degree. This assessment also ignores the continued expected growth of GHG emissions from China and other developing nations (see Part I).
The price tag on these regulations adds insult to injury. While EPA projects its regulation will cost a measly $8.8 billion a year, other estimates paint a significantly more expensive picture. NERA estimated the rule could cost at least $41 billion annually and result in 12-17 percent electricity rate hikes for consumers nationwide, with increases in some states exceeding 20 percent. A separate assessment from Energy Ventures Analysis (EVA) concluded the cumulative impact of the GHG plan and other utility regulations would increase energy costs $173 BILLION in 2020, translating into an increase in average annual energy bills of $293 per household in real dollars ($680 annually in nominal dollars). The report shows such costs could also put a damper on the manufacturing renaissance, since the industrial sector would experience a 64 percent increase in energy costs.
The social costs of the all pain, no gain expensive energy agenda are significant, because higher energy expenses disproportionately impact the poor, who would be forced to spend a larger portion of their incomes on power for heating and cooking. Numerous analysis of extreme carbon control measures, including estimates from the Congressional Budget Office, have highlighted this reality. As the American Coalition for Clean Coal Electricity efficiently summarizes:
“The U.S. has 60 million low-income and middle-income households. Over the past decade, real incomes for these households have declined by 22%, while real energy prices have increased by 27%. In addition, the 29% of U.S. households that receive Social Security benefits include many fixed-income seniors who are among the most vulnerable to higher energy costs.”
These populations can little afford to bear the additional expense of EPA’s GHG regulations. At a time when budget battles are becoming the norm in Washington, and as the U.S. and the world still strive to get back on more solid economy footing, one can only imagine the impact such cost increases will have on the purchasing power of our social safety net programs, like food stamps and the Low Income Home Energy Assistance Program (LIHEAP).
While much of the recent carbon debate is rife with rhetoric about saving the planet and mankind, the reality of programs being advanced run counter to these goals. In fact, as Alex Epstein points out in his book, The Moral Case for Fossil Fuels, greater fossil fuel use over the last several decades has actually been coupled with increased life expectancy, enhanced air quality and higher GDP. Despite GHG increases, which have leveled out and even decreased domestically over the last decade and a half, the number of climate-related deaths has also dropped significantly. Rather than focusing on government mandates that do nothing to advance alternative energy or reduce emissions, disproportionately burdening the poor in the process, policymakers should look to advance measures that expand the benefits of the free market. History dictates such initiatives will lead to a wealthier, healthier and cleaner world.