A Collision Course for Higher Energy Prices

In 2008, presidential candidate Barack Obama promised to bankrupt the coal industry, stating “if somebody wants to build a coal-powered plant, they can. It’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.”

Candidate Obama also stated that “electricity rates would necessarily skyrocket” under his cap-and-trade global warming legislation because power plants would pay a considerable amount to comply with the emission rationing plan.

Although Congress ultimately rejected his cap-and-trade legislation, President Obama appears intent on keeping his campaign promise to bankrupt coal through the imposition of costly regulations from his Environmental Protection Agency (EPA).

The EPA recently embarked on an aggressive crusade to implement new rules targeting coal-fired power plants, and manufacturers with coal-fired boilers. These oppressive regulations will dramatically increase the cost of energy, diminish the reliability of our power grid, weaken our manufacturing sector and threaten the very existence of certain manufacturing facilities.

Known as the “EPA Train Wreck,” the rash of new rules is a frontal assault on the use of coal as an abundant and affordable form of energy. The cascading cost impacts of the EPA rules are likely to render coal economically infeasible, and in some instances, may prohibit the construction of coal-fired power plants in the future.

Regulating our way to higher energy prices will spell trouble for our nation’s manufacturing sector, but the EPA rules will have a disproportionately painful impact here in Wisconsin. Our state uses coal to generate roughly 65 percent of our electricity, so the high cost of the Obama Administration’s anti-coal campaign will hit our state especially hard.

Wisconsin also has the second most manufacturing intensive economy per capita in the United States. So we are home to a much higher concentration of the types of businesses that are targeted directly by the regulations, or will pay more indirectly through higher electric rates.

How much will the “Train Wreck” rules actually cost? A number of studies have attempted to estimate the cost of these rules. Following is a summary of those cost estimates.

Cross State Air Pollution Rule (CSAPR). This proposal would impose stringent air pollution regulations on coal-fired power plants in 28 states, including Wisconsin. The rule is projected to cost $120 billion by the year 2015. WMC and a coalition of national business groups successfully challenged this rule, and it was recently overturned by a federal court. However, the EPA is likely to write a replacement rule.

Utility MACT. This rule establishes first-ever maximum achievable control technology (MACT) standards, regulating mercury emissions from coal-fired power plants, and is expected to cost up to $358 billion. The EPA estimates the rule will provide $500,000 and $6 million in public health benefits each year – far less than the cost of the rule. A recent study suggested that the CSAPR and Utility MACT rule together would increase electric rates in Wisconsin by 21.7 percent by 2016.

Boiler MACT. Industrial boilers burning coal are the target of this rule, which is projected to cost more than $100 billion, and result in 800,000 lost manufacturing jobs nationwide. In Wisconsin, the rule is expected to cost manufacturers $680 million, result in the potential closure of 11 paper mills, and the loss of 7,500 papermaking jobs.

Utility Greenhouse Gas Standards. The EPA has proposed New Source Performance Standards for power plants that set carbon dioxide limits sufficiently low that it would be virtually impossible to construct a coal fired power plant in the future. With nearly 500 years of mineable coal in the United States, the decision to cut ourselves off from this abundant and affordable source of energy will drive up costs and make us less competitive.

Everyone, including businesses, wants clean air. The good news is that our air is much healthier today than it was even ten years ago. Nationally, the EPA reports that air pollution has been reduced by nearly 70 percent since 1970. Here in Wisconsin, historic pollution reductions have led to removal of the Milwaukee area from the ozone nonattainment designation.

Given the tremendous progress already made toward cleaner air, the obvious question is why is the EPA now moving forward with such costly and economically destructive air pollution rules? The answer lies in the President’s failure to enact cap-and-trade legislation – he is instead waging a war against coal and other fossil fuels through EPA regulations. We as consumers will ultimately pay the price.

By Scott Manley, WMC Director of Environmental & Energy Policy

Follow Scott on Twitter @ManleyWMC