As state leaders meet in Baton Rouge for the legislative session, federal bureaucrats thousands of miles away are moving forward with an unprecedented incursion into Louisiana’s affairs. In just a few months, the U.S. Environmental Protection Agency is expected to finalize a rule requiring states to drastically reduce carbon dioxide emissions, with the goal of closing affordable coal-fired power plants, mandating costly renewables and imposing a backdoor cap-and-trade system.
At stake is whether Louisianans can continue to make our own rational and efficient energy choices, or cede our authority to the federal government.
Historically, states have taken the lead in regulating retail electricity markets. This autonomy has allowed Louisiana to achieve the fifth most affordable electricity prices in the country, the benefits of which ripple throughout the economy.
But now the federal government is trying to become Louisiana’s energy czar, which would mean higher energy prices, fewer jobs and more poverty.
The EPA’s rule would impose severe burdens on Louisiana families. For instance, a recent study we conducted with economists at the Beacon Hill Institute found that the rule would increase electricity rates by 22 percent, reduce disposable income by almost $2 billion and destroy tens of thousands of jobs.
The tragedy of this federal scheme is that it would inflict the most harm on those who can least afford it. The EPA’s rule would have a disproportionate impact on the poor, elderly and minorities, who spend a higher share of their household budgets on energy costs. In fact, Louisiana households in the lowest income bracket spend 70 percent of their after-tax income on energy, compared to 9 percent of families in the highest income bracket.
Forcing Louisianians — particularly poor families — to pay more for electricity would destroy jobs and exacerbate poverty at a time when many residents are struggling to make ends meet. The state’s unemployment rate sits at 6.6 percent, fourth-highest in the country. Meanwhile, median household incomes are lower now than 2007, the year before the Great Recession.
For all that economic pain, there’s little environmental gain. The EPA’s own models show its rule would reduce global warming by just 0.02 degrees. Furthermore, the pursuit of this trivial reduction could destabilize the electricity grid by reducing generating capacity.
Still, the EPA plows ahead. The agency is pressuring states to submit detailed plans to show how they intend to comply with the rule. While the EPA claims its rule gives states “flexibility” to comply, this couldn’t be further from the truth.
If finalized as written, the EPA’s rule would replace the established tradition of state autonomy in this area with federal mandates, such that Louisiana could regulate electricity among utilities only with the EPA’s approval. As Federal Energy Regulatory Commission Commissioner Tony Clark has explained, “[States] will have entered a comprehensive ‘mother may I?’ relationship with the EPA that has never before existed.”
One would think utilities would be the first to oppose regulations that force them to produce energy from more expensive sources. However, instead of fighting the rule, many utility executives are working with the EPA because they can simply pass on their costs to consumers. It’s similar to how the Obama administration co-opted insurance companies to support the federal health care overhaul even as many knew it would make insurance more expensive.
Louisiana needs bold leaders to fight the EPA’s overreach. The attorney general has joined a lawsuit challenging the constitutionality of the proposed rule, while U.S. Sen. David Vitter, a gubernatorial candidate, has commented that EPA’s rule “bullies states.” But action counts more than rhetoric. We hope these and other state leaders advance concrete solutions that protect Louisiana families from this costly intrusion into state affairs.
Kevin Kane is president of the Pelican Institute for Public Policy in New Orleans.
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- On May 23, 2015