4 Reasons Why the President’s Climate Proposals are Bad for the Economy

Jun 25, 2013

President Obama's climate proposals threaten electricity reliability. Photographer: Daniel Acker/Bloomberg.

In his State of the Union address in February, President Obama uttered the word “jobs” 34 times. Four months later, he delivered a speech on a climate change plan that attacks fossil fuels, damaging the economy and job-creation. U.S. Chamber President and CEO Tom Donohue said in a statement that the plan "runs a serious risk of punishing Americans with higher energy bills, fewer jobs, and a weaker economy, while delivering negligible benefits to the environment."

The centerpiece is the President ordering EPA to develop carbon emission standards for existing power plants. Proposed rules for new plants issued last year  would effectively ban coal-fired power plants and put natural gas plants in the crosshairs as well. Oil and natural gas development are also targeted. The President continues wanting to tax fossil fuels under the rubric that they’re being subsidized. These special tax breaks don’t exist.

Here are four reasons why the President’s proposals aren’t good for the economy.

1. Higher electricity prices

The Washington Post reports that regulating carbon emissions for existing power plants “will raise consumers’ electricity prices in the short term as utilities are forced to shutter aging coal plants to comply with stricter pollution limits.” This happens to be exactly what President Obama predicted when he was running for President in 2008. Higher electricity rates aren't good when many Americans have a dangerously-low level of emergency savings and aren't in the position to afford rate increases.  

2. A less reliable electricity grid

The proposed greenhouse gas rules would shut down power plants that produce consistent amounts of electricity at a time when demand is projected to increase as the economy grows. EIA projects electricity demand to grow by as much as 24% by 2040. American Electric Power Executive Vice President for Generation Mark McCullough warned Congress in March:

[P]olicies that could prevent the construction of new baseload generating units or force the retirement of existing coal-fired capacity could cause significant shifts to this balanced energy mix; reduce capacity diversity; and hinder our ability to provide reliable and affordable electricity to our communities and customers.

3. Picks energy winners and losers

The President’s proposals make American coal a loser which is the administration’s intention. White House science adviser Daniel Schrag told the New York Times, “A war on coal is exactly what’s needed,” and with Utility MACT and other rules, power plants have closed and jobs have been lost across the country.

If these greenhouse gas rules go into effect the big winner initially will be natural gas. I am a fan of natural gas, but it’s not wise to rely too much on one fuel source when the U.S. has other plentiful options. Using a variety of energy sources makes the electricity grid more resilient and the country more energy secure. Federal policy should not pick energy winners and losers. Reliability will be pushed well pass acceptable limits once this program begins targeting natural gas generation as it must.

4. Avoids accountability by ignoring Congress

The Hill points out that the President wants to avoid having other democratically-elected officials debating the efficacy of the his proposals:

The plan is designed to get around Congress, where major climate bills have no political traction. White House spokesman Jay Carney said Monday that Obama’s executive approach “reflects reality.”

On the lack of accountability in the plan, U.S. Chamber President and CEO Tom Donohue said:

The administration must fully, transparently, and continually evaluate the impact of its proposed rules on jobs and the economy--just as the law requires.

It is unfortunate that on a matter of such importance to all Americans that the administration has chosen to bypass our elected representatives in favor of unilateral actions and go-it-alone tactics.

Going back to jobs, look at this chart Jim Pethokoukis posted showing the leap in long-term unemployment in the last few years. New attacks on fossil fuels as the President proposes will not help to reverse this trend. In his State of the Union address, the President said, “It is our generation’s task, then, to reignite the true engine of America’s economic growth.” With this attack on reliable energy, the American economy will stall.

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