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Tomorrow, the Senate Environment and Public Works Committee will hear testimony from Gina McCarthy, administrator of the Environmental Protection Agency, regarding the regulation at the center of President Obama’s agenda to impose an electricity tax on the American people. Last month, the administration proposed a rule that requires states to severely restrict carbon emissions from existing power plants, radically curtailing coal’s share of electricity generation. It offers states “flexibility” to choose for themselves which carbon-reduction measures to implement. But flexibility in this context means little more than an invitation for states to choose the method by which their economic wounding will be performed. It enables the administration to shift blame to the states. When implementation of the rule causes energy prices to rise, electric reliability to diminish, and jobs to disappear, the administration will argue that state energy choices, not its rule, are responsible.

No Flexibility for Energy Consumers

To meet carbon reduction obligations, a state might shut down coal-fired power plants, impose a carbon tax, develop a cap-and-trade program, require more renewables, or mandate energy rationing. A state’s options will be limited – and virtually all of them will mean imposing an expensive tax on affordable, reliable, and abundant fossil fuels. Energy consumers will not enjoy flexibility to cope with the higher prices.

Over the past decade, Europe has pursued exactly the kind of flexibility the administration offers the states. Seeking drastic reductions in carbon emissions, European countries have imposed burdensome mandates, cap-and-trade regimes, and green energy subsidies. As a result, electricity prices in Europe are now far higher than in the U.S.

In 2012, each kilowatt hour of residential electricity cost 12 cents in the U.S., 26 cents in the European Union, and a staggering 35 cents in Germany, according to a February 2014 Manhattan Institute report. Between 2005 and 2013, the average price in the EU rose by 55 percent. Germany’s program to transition to renewable fuels has been an abject disaster, and the country now has plans to build 10 new coal power plants.

European Regulations Lead to Higher Electricity Prices  

Source: Eurostat and IEA

Like Europe, California has adopted various carbon-reduction policies. The state’s renewable energy mandate, low-carbon fuel standard, and cap-and-trade regime are pushing its energy prices well past the national average. Its cap-and-trade regime alone will increase electricity rates by eight percent, according to the California Public Utilities Commission. California already has some of the highest electricity rates, one of the worst unemployment rates, and among the most insolvent fiscal positions of any state.

Negligible Climate Benefits

The administration claims that emissions reductions mandated by the rule will generate $55 billion to $93 billion in “climate and health benefits” in 2030. The enormous $38 billion spread betrays a high degree of uncertainty about the rule’s benefits. The EPA estimates that climate benefits coming from carbon emissions reductions would account for $31 billion. According to a paper published by the Brookings Institution on June 3, 2014, the EPA’s methodology for calculating the proposed rule’s climate benefits represents a “dramatic shift” in policy by counting benefits that would accrue to countries around the globe, not just to the United States.

In 2010, the administration’s own Working Group on the Social Cost of Carbon determined that Americans only receive seven to 23 percent of a rule’s climate benefits but pay 100 percent of a rule’s costs. Applying this metric to the proposed rule governing carbon emissions from existing power plants, the U.S. would only receive climate benefits of $2.2 billion to $7.1 billion; much less than the estimated $8.8 billion compliance costs for the rule. The remaining benefit would flow to the rest of the world directly from Americans’ pockets.  

The EPA’s reliance on its social cost of carbon (SCC) estimate further undermines the climate benefits claimed in its rule. The SCC theoretically shows the cost to society of one ton of carbon emissions, and an equal benefit from any regulation that reduces emissions by that amount. In 2013, the administration raised the SCC from $22 to $36 per ton of CO₂, inflating the benefit of its regulations by 64 percent. The increase occurred behind closed doors, without accountability, and appears to have relied upon flawed science. As long as the SCC calculations go unjustified, the EPA should not use the method to rationalize its proposed rule for existing power plants.  

When Janet McCabe, acting assistant administrator for EPA’s Office of Air and Radiation, was asked how the rule would affect a few of the agency’s 30 “climate change indicators,” she could not answer. She was unable to provide the House Energy and Commerce Committee’s Subcommittee on Energy and Power with projections for how much the rule’s carbon emissions restrictions would reduce sea surface temperatures, ocean acidity, or lake ice.

On the other hand, the Cato Institute published a report on June 11, 2014, that concluded that any effect the rule might have on EPA’s climate change indicators would almost certainly be negligible. The authors point out that the EPA failed to address “how much climate change would be averted by the plan” when it rolled out the proposed rule. Using a climate model developed with the support of EPA, they found that full implementation of the EPA’s proposed rule would avert a future temperature rise of .018 degrees celsius by 2100. The authors conclude, “We’re not even sure how to put such a small number into practical terms, because, basically, the number is so small as to be undetectable.” Benjamin Zycher, a scholar with the American Enterprise Institute, agreed in a June 10 op-ed for the Los Angeles Times: “Those trivial temperature effects are much smaller than the annual variability (11-hundredths of a degree) of the surface temperature record. They could not be measured reliably.”

Europe’s experience suggests that the rule’s restrictions on carbon emissions are not very effective. According to the Manhattan Institute report: “For its higher electricity costs, Europe has not received the benefit of higher carbon-emissions reductions: between 2005 and 2012, U.S. carbon dioxide emissions fell more than those of the EU did. Furthermore, in 2012, Germany’s CO₂ emissions actually rose by 1.3 percent over 2011 levels, while U.S. emissions fell by 3.9 percent.” The U.S. Chamber of Commerce predicted that the U.S. experience could closely follow Europe’s if an aggressive carbon emissions scheme targeting coal-fired power plants is implemented – substantial costs in return for negligible environmental benefits.

The U.S. share of global carbon emissions has been steadily declining for years in the absence of expensive, unworkable policies the president and other Democrats claim are necessary. A primary reason has been increased electricity production from low-carbon natural gas, made possible by technological innovations in horizontal drilling and hydraulic fracturing that halved its price. If growing global carbon emissions are a problem, the president and other Democrats should quarrel with China, India, and other developing nations, not American energy producers and consumers who are already doing their fair share. China’s carbon emissions exploded by 173 percent from 1998 to 2011 and are still growing. India’s emissions could pass China’s by 2020.

Speculative Health Benefits

The EPA estimates that health benefits from its proposed rule would amount to $24 billion to $62 billion. The agency projects that reduced exposure to ambient fine particulate matter (PM_2.5) would constitute roughly 95 percent of all health benefits.  

On December 14, 2012, the EPA finalized a new annual health National Ambient Air Quality Standard (NAAQS) for PM_2.5. It set the standard at 12 micrograms per cubic meter, down from 15 micrograms per cubic meter, the level set in 1997. “Emission reductions from EPA and states rules already on the books will help 99 percent of counties with monitors meet the revised PM_2.5 standards without additional emission reductions,” EPA stated at the time. The national average for PM_2.5 air quality had already fallen below the new standard by the end of that year.

Particulates Have Already Fallen to Safe Levels 

Source: EPA

Janet McCabe, acting assistant administrator for EPA’s Office of Air and Radiation, responded “yes” when Congressman Pete Olson asked whether EPA’s NAAQS for PM_2.5 fully protects human health with “an adequate margin of safety.” She also confirmed that many parts of the country already meet the new standard. Congressman Olson remarked: “Existing rules will protect America’s health and then some, and yet, this new rule says that there will be billions in new PM protection benefits for EPA to trumpet to the public, and that begs the question: Is EPA giving this carbon rule credit for what it is already doing? Are you double counting?”

Senate Democrats Protect the President’s Anti-Fossil Fuel Agenda

Democrats have used their control of the Senate to protect the president’s anti-fossil fuel agenda. In May, Senate Republicans sought votes on amendments to approve energy projects like the Keystone XL pipeline that are being blocked by the president. Democrats voted against a Republican motion to make room on the amendment tree for legislation offered by Senator McConnell. That legislation would prevent the administration from imposing unworkable carbon emissions reductions on new and existing coal-fired power plants. Even energy-state Democrats sided with their party leadership instead of their constituents.

Democrats Block McConnell Amendment 3013

Since 2009, the president and congressional Democrats have promoted spending, regulatory, and policy steps to reduce U.S. carbon emissions in the name of tackling climate change. They have tried to exploit federal power to shape the U.S. marketplace to give “green” energy an advantage over conventional fuels, while dismissing Republican proposals that would have advanced both.

Republicans will keep working to support energy sources that provide Americans with economic benefits. But energy-state Democrats must join Republicans in their fight against the administration’s policies. They must force the president to retreat from his regulatory war on fossil fuels. Anything less is just playing politics with the energy needs of Americans.