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New EPA Regulations Would Hurt State Economies

by melodie bowler / /

In early June, the Environmental Protection Agency (EPA) released 645 pages of new regulations of carbon emissions for fossil-fuel-fired power plants in every state. The overall goal is to reduce total emissions from these plants by 30 percent in 2030, compared to measurements of emissions in 2005. Unfortunately, these regulations could have a devastating effect on taxpayers and state economies.

The EPA determined a different reduction goal for each state based on its ability for further reductions, since total emissions have already decreased since 2005. For some states, such as California, which currently has stricter emissions targets than the EPA, the transition will be easier. For states that rely heavily on coal for energy and jobs, particularly Kentucky and West Virginia, compliance with the reductions may prove extremely difficult.

The percentage reduction goals for each state vary from 10.6 percent in North Dakota to 71.6 percent in Washington. These numbers are deceiving, however. Washington has only one coal-powered plant left and gets the majority of its energy from hydroelectric power. The state legislature has decided to close that one plant in 2025, which will sufficiently reduce emissions to meet their target. Kentucky sits on the opposite end of the spectrum, with a goal to reduce emissions by 18.3 percent. While this might seem like an easily attainable goal, the state receives over 90 percent of its power from coal plants meaning it will be hard pressed to comply. Kentucky state officials, and many of their counterparts in states south of the Great Lakes, could be forced to close plants, which would immediately result in serious economic disruptions.

In response to the EPA’s unprecedented regulatory overreach and unattainable mandates, several cases were filed against the agency and combined to be heard at once by the Supreme Court. The main case was led by the Utility Air Regulatory Group, but other challengers included the U.S. Chamber of Commerce and several states. Unfortunately, the 5-4 ruling upheld the agency’s ability to force power plants to adhere to its regulations. There was one small win for proponents of free markets buried in the decision, which negated the EPA’s rule forcing power plants to request permission before expanding their operations. With the new targets now supported by the courts, states must submit their plans for reduction by June 2016, but if states refuse or their plans are deemed inadequate, the EPA will create plans for them.

Opponents of the regulations have spoken up at the state and federal level from both sides of the aisle. Kentucky Senator and Minority Leader Mitch McConnell, a Republican, pinned blamed on President Obama, stating, "It's clear that the president is trying to impose this national energy tax via executive order because he knows the representatives of the people would never vote for it." Democratic Governor Earl Ray Tomblin of West Virginia worries, "If these rules are put into place, our manufacturers may be forced to look overseas for more reasonable energy costs, taking good paying jobs with them and leaving hardworking West Virginians without jobs to support their families.”

Senator McConnell, among others, rightly calls the new regulations a national energy tax, since the likely result is higher costs for individuals and businesses as cheaper sources of energy are forced out of the not-so-free market. When energy prices rise, so will the costs of goods and services. Equally alarming is the possibility of state-level carbon taxes, which the EPA implicitly allows in the new regulations. While legislators may see a carbon tax as an easy way to comply with the rules and pad state coffers, such a tax might result in the phenomenon called “carbon leakage.” Because states have different reduction goals, their carbon taxes would be different as well. Coal plants and industries which rely heavily on energy consumption will relocate to states with lower taxes, ultimately exporting power and goods back to the states with higher taxes. In this scenario, some states may be marginal winners and others will most definitely be losers.

Despite the ruling by the Supreme Court, some congressmen have yet to concede this battle. The House Appropriations Committee, chaired by Republican Rep. Hal Rogers of Kentucky, approved legislation on Tuesday that would curb the EPA’s funding and ability to enforce the emissions regulations. Attached to an appropriations bill for the Department of the Interior, the riders would specifically cut EPA funding by 9 percent and reduce the staff to 15,000, its smallest since 1989. The bill would also bar the EPA from using its funding to implement the new regulations. While it is unlikely to pass, especially in the Democrat-controlled Senate, Rep. Rogers emphasized the importance of his committee’s action, stating, “The Congress must exercise its prerogative to prevent this kind of bureaucratic overreach that would be crippling for the U.S. economy.”

In order to keep this conversation alive on Capitol Hill, taxpayers should quickly contact their elected officials, expressing their concerns. In our sputtering economy, the last thing Americans need is a stack of costly regulations from unelected EPA officials. Stay tuned to NTU.org for more as this story unfolds.