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Policy: Environment & Energy

More climate change, more money problems

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Senate,Climate Change,EPA,PennAve,Economy,FERC,Energy and Environment,Coal,Zack Colman,Greenhouse Gases,Power Plants

Green of the dead presidents variety, rather than alternative energy, is coloring the climate change chatter this week in Washington.

The White House and supportive Democrats are touting the Obama administration's climate strategy as a financial winner in a handful of events and hearings this week, while opponents of a proposed Environmental Protection Agency rule to slash carbon emissions from power plants argue it would hit people's pocketbooks and reduce electric grid reliability.

The push kicked off with a White House Council on Economic Advisers report that said delaying action on climate change would increase the costs of addressing it by 40 percent a decade later. The report was released as the EPA began hosting public hearings on its proposed rule, which aims to reduce power-sector emissions 30 percent below 2005 levels by 2030, and a pair of Senate committees described the financial and economic effects of unchecked climate change.

"This isn’t just an environmental issue. It also poses serious risks to our economy and the federal budget," Senate Budget Committee Chairwoman Patty Murray said during a Tuesday hearing. "And if we fail to address these threats, it will weaken economic growth and increase costs for the federal government."

U.S. operations across the board face financial risks from climate change, said Alfredo Gomez, director of natural resources and the environment at the Government Accountability Office. He pointed to the Defense Department, which manages more than 555,000 facilities at a value of $850 million that face risks from extreme weather events and sea level rise associated with climate change.

"Infrastructure is typically designed to withstand and operate within historical climate patterns. However, according to [the National Research Council] as the climate changes, historical patterns do not provide reliable predictions of the future," Gomez said in written testimony for the Budget Committee hearing.

In a hearing held by a Senate Environment and Public Works subcommittee, Carl Hedde, head of risk accumulation with Munich Reinsurance America, said the prevalence of extreme-weather disasters that inflict billions of dollars worth of damage — such as Hurricane Sandy, which struck the East Coast in October 2012 — has exacted a toll.

"One area where we do see an upward trend is in regard to losses from weather catastrophes, which, over time, have increased in both frequency and severity," he said.

The White House report underscored those points. Drawing from other studies, it determined that worldwide economic output would decline 0.9 percent if preindustrial temperatures rose by 3 degrees Celsius instead of 2 degrees. For comparison, 0.9 percent of U.S. gross domestic product is $150 billion, it said.

The EPA's proposed rule has been the subject of criticism from conservatives and business groups, who contend the effort would raise power prices and restrain economic activity.

Republicans at the Environment and Public Works subcommittee hearing questioned whether it made economic sense to attempt to quell climate change, expressing skepticism for scientific models and predictions despite the scientific consensus that humans are contributing to a warming planet largely by burning fossil fuels.

"Anybody else ask themselves this question? What caused this? I know there are a number of theories and everybody [testifying] raised their hand and said, 'Oh, [climate change] is for sure. It's man-made.' Again, I won't deny that man has an effect on our environment. But what caused this?" asked Sen. Ron Johnson, R-Wis.

The White House report discussed uncertainty regarding models, but noted that waiting to act would make mitigation 40 percent more expensive if delayed a decade. That's because of baked-in climate effects and deferred investments in low-carbon technologies and policies, it noted.

Part of those mitigation efforts include the proposed power plant rule. The agency has suggested upwards of $90 billion in benefits in 2030 from its proposal, which is due for finalization next June.

"This is about documenting what's already happening, and people are concerned that we need to take action," EPA Administrator Gina McCarthy said in a Monday call with reporters.

The EPA has said that while electricity rates would initially rise, consumers' bills would fall 9 percent in the decade leading up to 2030 due to increased efficiency — though some experts have said the agency's estimates are ambitious. It also has cited health benefits from taking older, dirtier coal plants offline, reduced damage from extreme weather events linked to climate change and development of a clean energy industry that supports higher-paying jobs.

Green and public health groups sparred with industry officials about the proposed rule's economic impact at a public hearing at EPA headquarters in Washington.

Collin O'Mara, chief executive of conservation and sportsmen group the National Wildlife Federation, said the proposed rule would help blunt the effects of climate change that are suppressing tourism and outdoor recreation revenues.

"We are not merely losing our outdoor heritage — insufficient action also threatens our multi-billion-dollar outdoor recreation and tourism economy. Sportsmen and other outdoor enthusiasts help conserve and protect our wild places, while infusing billions of dollars into local economies," he said in testimony.

Detractors, such as Frederick Palmer, senior vice president of governmental affairs with St. Louis coal company Peabody Energy, argued that the proposed rule would disproportionately hurt low-income consumers and make little difference for global emissions if other nations don't follow suit.

"Peabody has a profound disagreement with EPA’s approach on carbon under the Clean Air Act. We are opposed to any proposal that would punish electricity consumers, have no material benefit under climate theory and act outside the bounds of the law," he said in testimony.

Members of the Federal Energy Regulatory Commission, which oversees the nation's electric grid, told a House Energy and Commerce subcommittee that implementing the rule presents challenges, though they all agreed climate change required action.

EPA's proposed power plant rule would create shifts that affect fuel diversity, electricity market structures and infrastructure, altering how electricity is delivered and how states manage it. Philip Moeller, a Republican commissioner, said of the proposed rule's supporters that, "I don't think they fully appreciate the challenges we have with getting more pipeline infrastructure," referring to the transition from coal- to natural gas-fired power that the EPA has highlighted as a potential way for states comply with the proposed rule.

"The biggest challenge in implementing the proposed rule is that electricity markets are interstate in nature," Moeller said. "Thus the proposal’s state-by-state approach results in an enforcement regime that would be awkward at best, and potentially very inefficient and expensive."

Cheryl LaFleur, a Democrat who will serve as FERC chairwoman for another nine months under a deal brokered by senators and the White House, said states have been given "significant" flexibility to comply with the proposed rule, but that she's "mindful" about concerns regarding electric grid reliability.

"Clearly, the commission must remain engaged with EPA, states, industry and other stakeholders in the coming years as new EPA regulations are implemented," LaFleur said in testimony.

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Zack Colman

Staff Writer
The Washington Examiner

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