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EPA Clean-Power Plan? The Market Has It Covered

By: Contributor - Jul 22, 2014, 7:47 am

About a month ago, the Obama Administration published its Clean Power Plan, which aims at cutting carbon emissions from the electric power sector by 30 percent below the 2005 levels. In addition, the plan aims at reducing pollution that creates soot and smog by over 25 percent by the year 2030.

Environmental Protection Agency
Environmental Protection Agency. (Wikimedia)

The Environmental Protection Agency (EPA) argues that these reductions will lead to public health and climate benefits worth an estimated US$55 billion to $93 billion in 2030, while also maintaining an affordable and reliable energy system. The EPA claims the plan’s implementation will prevent 2,700 to 6,600 premature deaths and 140,000 to 150,000 asthma attacks in children. Despite these laudable goals, there is one question that is worth asking: are these claims realistic?

First, the EPA is fighting two battles at the same time: controlling CO2 emissions and smog. They should be treated separately, because the former does not cause the latter. Furthermore, carbon “pollution” is a misnomer. CO2 is not a pollutant. In fact, it’s an essential part of life, as plants need it for photosynthesis. If anything, more CO2 will mean denser vegetation, which can already be observed.

Besides, CO2 emissions in the United States have decreased since 2005 by 15 percent, bringing them back to 1994 levels. This reduction is due in large part to an increased reliance on natural gas, which emits less CO2 than coal. This change in energy source reliance occurred outside the realm of government regulations and coercion.

Furthermore, the Cato Institute estimates the decrease in temperature resulting from the application of EPA regulations to be a grand total of 0.018⁰C, which would be barely detectable. It would happen only if international CO2 levels were to remain stable, which is very unlikely considering the pace at which India, China, and other developing countries are growing.

Second, the EPA seems to have “omitted” some calculation in its cost-benefit analysis. By calculating a discount rate between 2 percent and 5 percent, the regulations yield benefits between $4.4 billion and $9.5 billion. The Institute for Energy Research believes that this omission was purposeful, so as to hide the true cost of compliance that surpasses the EPA’s estimate of $8.8 billion.

Finally, it is arguable that the EPA overstated the impact of PM2.5, fine particles that can cause health problems. While it was indeed problematic in the 1970s, it has been under control since the passage of the Clean Air Act of 1970. In fact, a NERA Economic Consulting report states that zero deaths have been caused by these fine particles since 2005.

In other words, the new EPA regulations are, at best, superfluous, since the market (i.e. everyone’s decisions and actions) has reduced CO2 emissions by half of what the EPA wanted. At their worst, the regulations will cost at least $55 billion annually in GDP, and up to 224,000 jobs, in order to avoid an increase in temperatures so insignificant that it’s not worth the expense.

If the EPA wants to better allocate funds to regulate and improve environmental conditions, it should spend money helping other countries better exploit their shale gas resources and improve technology. There are still fears that hydraulic fracturing, or fracking, pollutes the water supply and causes earthquakes, although most of these fears seem unfounded.

This article was based on a group project written by Jesse Backstrom, Isabela Campos Christo, Michael Farren, Becca Harris, Russ Hooper, and Pierre-Guy Veer.