Reports Offer Conflicting View of EPA Regulatory Impact

Recent reports from various public and private sources offer conflicting views of what impacts new EPA regulations will have.

A report from the Economic Policy Institute, The Combined Effect of the Obama EPA Rules, estimated that current and proposed EPA regulations under the Obama Administration will produce more benefits than costs. The report found the combined compliance cost of the rules amounts to only about 0.1 percent of the economy, and thus are not a significant factor in the overall economy’s direction.

The Congressional Research Service, in EPA’s Regulation of Coal-Fired Power: Is a Train Wreck Coming?, concluded that until the regulations are finalized and implemented, it is difficult to determine with specificity how the rules will impact cost and reliability on a national basis. Due to the structure of the energy markets, decision-making by investor-owned utilities will be facility-specific and determined by a variety of factors. The report also concludes that while the costs of the rules may be large, in most cases, the public health and environmental benefits, although difficult to quantify, are larger, especially the estimated public health benefits.

A report from NERA Economic Consulting, Potential Impacts of EPA Air, Coal Combustion Residuals, and Cooling Water Regulations, argues that the EPA’s Cross State Air Pollution, Utility MACT, Coal Combustion Residuals, and Cooling Water Rules would:

• Lead to the premature retirement of 39 gigawatts of coal-fired capacity in 2015 (equivalent to 12% of U.S. coal-fired capacity in 2010).
• Increase electric-sector compliance and capital expenditure costs by $127 billion from 2012 through 2020.
• Increase natural gas generation by 19.7% and natural gas prices by 10.7%, which in turn would increase industrial, commercial, and residential natural gas costs by $58 billion over the 2012-2020 period.
• Decrease net employment by 183,000 jobs per year during 2012-2020.
• Decrease cumulative GDP by $190 billion during 2012-2020.

A report from the Department of Energy, titled Resource Adequacy Implications of Forthcoming EPA Regulations, assumed that the Cross-State Air Pollution Rule will go into effect in 2012 and that all existing coal and oil power plants will comply with toxic air pollutant standards by installing flue gas desulfurization systems and baghouses (where economically feasible). Using these assumptions, which DOE characterizes as an “extreme” compliance scenario, the report indicates that 29 gigawatts (GW) of coal-fired generating capacity would retire by 2015 – but that all regions of the country would still be left with sufficient extra capacity (“reserve margin”) to meet anticipated demand.

The North American Electric Reliability Corporation (NERC) completed its Long-Term Reliability Assessment, and concluded that between 32.6 GW and 53.6 GW of capacity will retire by 2018 as a result of the EPA’s regulations, causing available capacity to fall below target reserve margins in Texas and New England. Other regions of the country would continue to have adequate reserve margins following the implementation of EPA regulations, according to the NERC report.

This post was authored by GLLF staff attorney Emily Kelchen.