Energy & Environment

President ignoring the economic harm of power
plant regulation

President ignoring the economic harm of powerplant regulation

This article was originally published by watchdog.org.

In Pres. Obama’s recent speech on June 25, 2013, he directed the Environmental Protection Agency (EPA) to finalize rules that would limit the amount of carbon dioxide released by power plants. Because coal-fired plants release the largest amount of carbon dioxide, coal-related businesses will experience the greatest harm once a limit is placed on emissions.  Furthermore,  coal is an important sector of the economy in many areas of this country, and it’s unclear whether this limit would have any benefit to the global environment, relative to the policy’s potential for real economic harm.

Since coal produces about 42% of the nation’s electricity, Pres. Obama had no hope of enacting this rule in his first term due to concerns over reelection and could not enact it now with the support of Congress. In response, he has decided to use his own executive power over the EPA to enact these regulations.

Though the final rule is uncertain as the EPA is still listening to public comment on the issue, a proposed rule issued in March 2012 would limit carbon dioxide emissions to 1000 pounds per megawatt of electricity generated. Without the implementation of costly technology like carbon capture and sequestration, a rule of this scope would effectively ban the construction of new coal-fired power plants. In his memorandum released on June 25, 2013, Obama has directed the EPA to make a new proposal by September 20, 2013.

There is no secret that all of this legislation limiting the emission of carbon dioxide and other greenhouse gases is pursued in response to concerns over climate change. However, it remains to be seen whether this legislation will actually limit the global use of coal or force it to be burned more cleanly.

Until the government actually limits the amount of coal that can be mined in the country, companies are going to produce as much as they can profitably sell, and whether those buyers are in the United States or elsewhere is of little regard to the business. While an energy company will certainly prefer to sell as close as possible to where the product is produced due to increasing shipping costs, the same company will still sell overseas if there is a profit to be had and a lack of domestic sellers.

In fact, that is currently the picture right now. According to information from the West Virginia Division of Commerce, coal exports in the state are up 40% from $5.3 billion in 2011 to $7.4 billion in 2012. The numbers specifically show that West Virginia’s 2012 coal exports to China were up over 500% from what they were in 2011, and exports to Japan grew over 1000% in this period. Thus, coal harvested from WV is still being burned somewhere, adding those emissions to the atmosphere regardless of regulation in place in the US, and environmental regulations are much more lax in China compared to those in place here.

Through the enacted regulation and proposed rules, power companies are hesitant to build new coal-fired plants, despite the fact that coal prices have historically been the most stable and coal is one of our nation’s most abundant, cheap energy resources. While natural gas prices have certainly decreased in recent years with the expansion of hydraulic fracturing, it remains to be seen how stable these prices will be, especially if natural gas is expected to take over much of coal’s market share for electricity production.

Now, businesses and families that depend on coal are fighting the enactment of this rule, and in reality, the rule threatens all Americans with more expensive electricity in the future. While the President and the EPA claim that these regulations will have environmental benefits, their economic costs cannot be ignored. As far as economic science shows, these costs threaten the American people more in the immediate future than the climate.

 


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