Economic Study Shows EPA Regulations Increase Prices, Kill Jobs

Matt Cover | June 10, 2011 | 4:13pm EDT
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Natural gas holding tanks near an Atmos Energy drilling sight in Grapevine, Texas. AP Photo/LM Otero)

( A study of two proposed EPA regulations seeking to curb power plant emissions shows that the regulations will raise electricity prices and cause a four-to-one job loss ration.

The study, conducted by economic research firm National Economic Research Associates (NERA) and commissioned by the American Coalition for Clean Coal Electricity (ACCCE), studied the effects of two proposed EPA regulations – the Clean Air Transport rule that would further curb sulfur and nitrogen emissions and the Maximum Achievable Control Technology (MACT) standard that aims to force power plants to install new emissions-control technology.

The study found that if EPA were to impose these new regulations, electricity prices would rise by a nationwide average of 12 percent by 2016 – and reduce employment by 1.4 million by 2020, killing four jobs for every one job created.

The study found that electricity prices would rise from an average of $87 per MWh [megawatt-hour] to $92 in 2035.

In some states, electricity prices would rise by more than 20 percent as the regulations took a heavier toll on these industrial-based states that have already seen high unemployment and poor job situations during the current recession.

States such as Michigan, Illinois, and Kentucky would all see electricity prices rise by more than 20 percent in 2016 alone, followed by continued price increases as the regulations are fully phased in.

The Clean Air Transport rules are designed to cut down on air pollution that travels over state boundaries, typically causing acid rain and smog. The new proposed rules tighten the existing system in order to meet tougher ozone standards.

The MACT standard would require coal and oil-fired power plants to install scrubbing technology that reduces mercury and other emissions. MACT standards already apply to other industries such as trash incinerators and cement manufacturers, but not power plants.

The NERA study finds that the regulations would increase power plant retirements, meaning that power companies would shut down older coal and oil-fired plants rather than update them to comply with the regulations.

These retirements would have two effects, the study found. First, coal-fired electricity generation would decline by 13 percent by 2016, and demand for coal in the electricity sector would decline by 10 percent. Second, natural gas-generated electricity would increase by 26 percent by 2016, and natural gas prices would increase by 17 percent.

This increase in both natural gas demand and natural gas prices is partly to blame for the rise in electricity prices, the study finds, along with increased costs of operating the remaining coal and oil-fired plants, due to regulation.

The study examines the impact on natural gas demand as a way to show how the regulations affect the market, essentially giving natural gas companies a new advantage over the typically cheaper coal and oil-fired plants, because the government was imposing new regulatory costs on the oil and coal-fired plants.

The study also found that while the regulations would create jobs in industries that produce the technology required to comply with the regulations and in other power-generating sectors that will benefit from these regulations, it will destroy four times as many jobs as it creates.

The total job losses caused by these regulations are 1.4 million, the net of 450,000 jobs created and 1.8 million destroyed from 2013 to 2020.

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