Regulations will carry major economic costs for Illinois businesses and consumers
On June 2, the Obama administration and its Environmental Protection Agency unveiled the Clean Power Plan, a set of costly guidelines to reduce carbon dioxide emissions from existing coal-fueled power plants.
The proposed regulations take direct aim at our nation’s coal fleet, threatening job losses and higher energy costs for businesses and families. Moreover, EPA’s plan will have virtually no impact on global climate change, reducing CO2 concentration by less than 1 percent and reducing sea level rise by 0.3 millimeters.
A newly released study by NERA Economic Consulting shows just how devastating EPA’s plan will be not just to the coal industry, but to the economy as a whole. Simply put, EPA’s proposal would be the most expensive environmental regulation ever imposed on the electric power sector.
Under the plan, compliance costs could total $366 billion or more over a 15-year period, with annual costs averaging $41 billion to $73 billion. On a national level, consumers would spend more than $500 billion out of their own pockets on ways to reduce electricity use.
EPA’s proposed carbon regulations would also fundamentally alter our capacity to generate electricity. As of July 2014, EPA policies – primarily the Mercury Air Toxic Standards rule finalized in 2013 – have led to the announced retirement or conversion of more than 350 coal-fueled generating units throughout the country.
According to NERA, coal retirements are projected to increase by at least 45,000 megawatts more under EPA’s proposal, a total greater than the entire electricity supply of New England. When combined with the agency’s proposed regulations for new power plants under section 111(b) of the Clean Air Act, which effectively bans the construction of new, highly-efficient clean coal plants, we face major threats to the reliability and strength of our electric grid.
What does this mean for Illinois? With 43 percent of Illinois’ electricity currently generated by coal, we enjoy the eighth lowest electricity price in the nation. If these regulations are put into effect, our state would be required to reach a CO2 emission rate reduction target of 33 percent. Our electricity rates would rise dramatically, increasing by an average of 13 percent between the years 2020-2029, with peak year increases of 25 percent. Higher electricity costs will affect all aspects of our economic system, from manufacturing costs to the transportation of goods to the operating expenses of businesses. These increased prices on goods and services will be inflicted on Illinois consumers, impacting households’ budgets and creating a negative ripple effect throughout the broader state economy.
The plan would also result in job losses throughout industries tied to coal production and electricity generation. Direct and indirect employment generated by coal mining in Illinois accounts for nearly 39,000 jobs. The industry is an integral part of the state’s economy and would be severely impacted as a result of the proposal.
Under EPA’s plan, we would be forced to rely on less dependable and more costly fuel sources such as natural gas, which has already proven to be an inadequate replacement for providing the baseload electricity our country needs. Last winter, 90 percent of coal-fired plants set to retire were brought back on the line to transmit power. By taking coal out of our energy mix, American families and businesses will pay the price through a weakened electric grid and threats of power outages.
State legislators in Illinois share these same fears. A resolution recently passed by the Illinois House of Representatives urged EPA to respect the primacy of Illinois and to rely on state regulators to develop performance standards for carbon dioxide emissions that take into account the state’s unique policies, energy needs, resource mix and economic priorities. Illinois House Resolution 782 also calls for more achievable standards and maximum flexibility under the plan.
Despite the threat of job losses, a less reliable electricity supply and higher energy costs for American families and businesses and virtually no global climate change benefits, EPA continues to push its reckless plan forward. State legislators, regulators, utilities, manufacturers, business owners and consumers can all agree that EPA’s proposed carbon regulations carry enormous and unjustifiable costs that Illinois’ economy simply cannot afford.
Phil Gonet is president of the Illinois Coal Association.