7. Clean Power Plan, $11.9 billion
The Clean Power Plan is considered the centerpiece of President Obama’s effort to battle climate change. And while it is the most publicized of all his actions, its cost, estimated by the EPA to be $11.9 billion, is a source of dispute.
Under the plan, states must cut their greenhouse gas emissions one-third by 2030. To do that, the EPA expects them to cut back on their use of coal-fired power plants.
It is expected that it will take state officials a total of 821,000 hours to file the paperwork to comply with the regulations.
Most of the cost will come in the several years leading up to the final compliance year in 2030, according to the EPA. States have two options for cutting emissions: by the rate of emissions or by a mass-based standard such as an emissions cap.
Under the agency’s rate-based scenario, which is seen as the default for achieving the targets, it would cost states $8.4 billion a year to comply in 2030.
But the conservative American Action Forum, which has compiled the cost of all EPA rules, says the EPA’s assessment of the Clean Power Plan is limited and conservative at best.
By adding the annualized cost estimated by the agency beginning in 2020 at $2.5 billion, before leveling to $1 billion for 2021-25, and then jumping to $8.4 billion in 2026-30, the total cost of the rule is $11.9 billion, based on the think tank’s Regulation Rodeo database and the EPA’s final rule.
The cost estimates for the years 2020, 2025 and 2030 are derived from the EPA’s Integrated Planning Model, which provides one-year cost estimates in five-year increments, said EPA spokeswoman Melissa Harrison.
“This is a problem throughout the regulatory world, where there is not really a standard way to control for cost,” said Sam Batkins, the group’s regulatory policy director. For example, another expensive EPA rule for coal ash gives a total cost figure over the next 100 years, while the Energy Department provides a total cost over 30 years.
“In this particular rulemaking, EPA didn’t give a net present value of cost, and all indications are this $11 billion figure is not going to be the total cost of the rule.”
Batkins said that in other documents, the agency said that just one of the rule’s “building blocks,” which lay out the types of resources states can use to comply, could cost $30 billion.
Other ways exist to evaluate cost, he said. “There are industry costs that are much higher, and there are industry costs that are probably lower as well. Even within an agency you won’t get a standard, with the exception of the Department of Energy, figure for [cost],” where the total cost and benefits of a regulation are broken down by year and made available to the public.
EPA cost figures should be looked at only as milestones that give an idea of what the cost would be, he said.
In fact, some industry studies suggest the Clean Power Plan could surpass the cost of all other major electric utility rules combined.
A study done by NERA Consulting for the coal industry shows that the annual cost of the rule could be $39 billion per year, “far outpacing the costs of compliance for all EPA rules for power plants in 2010 ($7 billion) and the annual cost of the Mercury and Air Toxics Standards rule ($10 billion),” the American Coalition for Clean Coal Electricity said.
The Congressional Research Service, the legislative branch’s nonpartisan research arm, also looked at various industry reports that examine the cost of the rule in a guide to the Clean Power Plan it issued in June.
The guide cites the NERA study, but also a study by the National Mining Association that “projected sharp increases in the cost of both electricity and natural gas as a result of the rule, with a cumulative increase in wholesale electricity costs of $214 billion between 2022 and 2030.”
“Others, including electric power producers and regional transmission organizations, argue that it is too early to arrive at cost estimates,” the CRS guide said. “Much depends on decisions to be made by the states as to how they will structure their regulatory programs and on projections of the cost of natural gas, coal, renewable power and end-use efficiency measures between now and 2030.”
The agency is encouraging states to use emissions trading schemes or participation in regional cap-and-trade programs to comply with the plan. The final rule also includes a clean energy incentive program, which provides states with special credits for ramping up renewable energy development before they must begin complying with the plan in 2022.
The plan has been put on hold by the Supreme Court until the D.C. Circuit Court of Appeals reviews lawsuits filed by dozens of states and industry groups. The challengers argue that it oversteps the EPA’s legal authority under the Clean Air Act and is an unconstitutional power grab over states’ rights to regulate their own energy supplies.
The appeals court is set to hear oral arguments on Sept. 27, and they will be heard by the entire court, instead of a normal three-judge panel. That is meant to expedite the hearing process and move the court to a final decision before the end of the year. After that, it is expected to go to the Supreme Court no matter what the judges decide.
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- On August 8, 2016