This commentary originally appeared in the Richmond Times Dispatch on February 6, 2016.
Rarely does anything good come out of government taking sides in the marketplace. This is especially true in energy markets.
Yet the Environmental Protection Agency has stepped into the electricity market with a new carbon emission rule that is poised to raise the cost of electricity for every Virginian. Supporting the rule, Governor McAuliffe said: “(the) Clean Power Plan will reduce carbon emissions and fight global warming; it will also further stimulate the clean energy economy and create new opportunities for states like Virginia.” Nice words — but at what cost?
In many respects, Virginia is already a leader in the energy sector, utilizing a mix of fuel sources, including 28 percent coal. The EPA is mandating that the commonwealth reduce its carbon dioxide emissions by 36 percent. This government policy will raise the cost of electricity annually by 14 percent, impacting every household (rich or poor), business, day care, church, firehouse, police station, school and government building. Consumers will pay more in their bills, and they will pay more taxes to cover the higher cost of electricity to government. The Energy Information Agency says Virginia households already pay a higher amount for electricity than the national average.
The benefits of these higher costs are dubious and the plan will not prevent climate change. Shockingly, even the EPA admits this rule will have no measurable impact on global temperatures. Implementing the CPP would reduce projected temperature increases only 0.018 degrees Celsius by 2100, and the projected reduction in sea level rise, the thickness of two sheets of paper, is insignificant.
At the end of my term as secretary of natural resources we announced that, between 2010-2014, Virginia reduced emissions of sulfur dioxide 66 percent, nitrogen dioxide 43 percent and carbon dioxide 27 percent. This was largely due to the efforts of the professionals at the Department of Environmental Quality and the actions of Virginia’s corporate citizens. I am sure my successor, Molly Ward, will have similar accomplishments. But the point is that we were able to reduce CO2 27 percent without the heavy hand of the EPA.
The Clean Power Plan is likely illegal, imposing financial harm upon the states in violation of the 10th Amendment. Harvard professor Laurence Tribe has testified that the regulation amounts to “burning the Constitution.” It is no wonder that 27 states are suing the EPA on its constitutionality. They are being joined by more than 120 companies, business associations, labor unions, utilities and co-ops. Virginia is in the minority siding with EPA.
The Clean Power Plan will hurt business and electricity production and coal-fired electric generating capacity will be retired. The Heritage Foundation has predicted as many as 1 million lost jobs from the rule.
When visiting Bristol in 2013, McAuliffe said: “we need to make sure we do what we need to, to make sure this vital industry (coal) here in Virginia continues to grow.”
But now, with this EPA rule, we see the impacts on Virginia’s coal communities. Coal mines are being shut down, miners are losing their jobs, the dreams of coal families are being shattered, coal companies are filing for bankruptcy and whole towns in Southwest Virginia are being threatened. It is hard to find anything good in this.
In addition, CSX reported a 13 percent fourth-quarter drop in revenue as a result of a 32 percent drop in coal volume. As a consequence the company will lay off more employees. Norfolk Southern has suffered the same fate. It is no surprise that Kentucky Sen. Mitch McConnell’s guest at the annual State of the Union speech was an unemployed coal miner. “Even though the president probably won’t know this unemployed coal miner was in the audience tonight,” McConnell said, “I wanted him to have to face the results of his policies. We have a depression in central Appalachia as a result of the president’s policies.”
Electric utilities are caught in a bind, wanting to be supportive of the governor and at the same time not fight the EPA. But the truth is larger investor-owned utilities can and will pass along these higher costs to the consumer. Their financial bottom line will not suffer.
Virginia’s rural electric co-ops are another matter. The National Rural Electric Cooperative Association released a study showing that EPA greatly underestimated the compliance costs of the Clean Power Plan on electric co-ops. The real costs will be “19 to 33 times greater” than EPA estimated. It won’t cost “millions” but instead “billions” to comply. These dozen or so customer-owned rural co-ops are unable to recover the costs associated with the rule.
Supporting the Clean Power Plan is more about politics than people. The state should not file a compliance plan until the courts fully adjudicate the rule. Free markets should determine the cost of energy. The best way to attract business is to make Virginia a low-cost energy state.