Policy: Environment & Energy

Obama's Climate Action Plan means higher electricity prices for business, consumers

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This testimony was prepared for delivery before the Senate Committee on Environment and Public Works on Jan. 16, 2014.

President Obama's Climate Action Plan is a hodgepodge of policies that will raise energy costs and erode the competitiveness of America's most innovative small businesses and entrepreneurial firms.

Its core policies will result in a massive new tax that, over time, will cripple the ability of these enterprising entities to invest, create new economic opportunities for new labor force entrants or the jobless, and revive the stagnant economy.

The centerpiece of the president’s plan is new federal mandates to address carbon dioxide emissions from power plants.

In an analysis of these and other EPA regulations conducted on behalf of the National Association of Manufacturers, NDP Consulting found that “one immediate and incontrovertible impact of these new regulations would be an increase in electricity prices.”

NDP also concluded that “as consumers of more than 28 percent of electricity production, manufacturers in the United States would see production costs rise.”

That would lead, NDP noted, “to higher prices of manufactured goods and services, resulting in lost sales at home and abroad, which, subsequently, would encourage layoffs and discourage new hiring and investment, render exports less competitive and ultimately suppress U.S. GDP.”

Higher electricity prices will impose particularly severe economic hardship on small business owners, as electricity costs constitute the biggest expense of many small firms.

Consider Bob Farber, president of Quality Perforating Inc., a manufacturer of pierced coils, sheets and components, in Scranton, PA.

In a May 25, 2010, article in the Scranton Times-Tribune, Farber observed that “for a business like ours, electricity is probably our biggest fixed cost because all our machines are electric.”

Small business owner Todd Westby expressed similar concern in the International Business Times:

“Electricity prices are a big concern for me. And on a tight budget, I can only account for so much to go toward the electricity bill before I have to pass this cost on to my customers.”

The skepticism and opposition to the president’s climate policies stretches across the political spectrum as lawmakers from both parties are expressing growing concern and frustration with the Obama administration’s climate mandates.

Sen. Joe Donnelly, D-Ind., has characterized EPA’s climate rulemakings as “extreme” for they “fail to recognize the impact these regulations will have on Hoosier families and businesses.”

Sen. Joe Manchin, D-W.Va., has pledged to fight, in his words, EPA's “overreach,” or the demand that the coal industry “meet impossible standards,” something that, Manchin believes, “makes absolutely no sense and will have devastating impacts to the coal industry and our economy.”

And Sen. Heidi Heitkamp, D-ND, has said she explained to EPA “how these regulations are completely unachievable based on current technology and are cost prohibitive."

As numerous commentators have noted, and as Heitkamp, Manchin, and Donnelly have alluded, EPA’s proposal to address carbon dioxide from new power plants (called “New Source Performance Standards”) would effectively ban construction of new coal-fired power plants.

Cecil Roberts, president of the United Mine Workers, declared bluntly, “That’s just a fact.” For this reason, Rep. Bill Enyart, D-Ill., is opposed to EPA’s new source rulemaking.

“I've spoken to coal operators and Illinois industry leaders in the last week, and it's clear to me that the proposed standards would make it virtually impossible to construct a new coal-fired power plant in America,” Enyart said.

EPA counters that coal plants can be built if they use carbon capture and storage technology and that by forcing this requirement it will be widely deployed. But CCS is nowhere near widespread commercial viability.

Engineering consultant Edward Cichanowicz, who has over 40 years of experience in testing and demonstrating fossil fuel technologies, testified to the House Energy and Commerce Committee that, “I believe that we do not yet have sufficient experience by which to judge the commercial prospects of CCS.”

Pursuant to the president’s CAP, EPA is also moving forward to control CO2 emissions from existing power plants—a policy that, while in its early stages of development, will surely be designed to force more coal plants to close.

In a white paper sent to EPA Administrator Gina McCarthy last year, 18 state attorneys general expressed alarm that, in the existing source rulemaking, “EPA may attempt to force coal-fueled EGUs to decrease operation time or retire early, or force utilities to rely more heavily on natural gas and other resources in an effort to ensure greater CO2 emission reductions.”

As it implements the president's radical climate change agenda, EPA's climate rulemakings are effectively forcing through regulatory fiat a misguided energy policy that poses a grave threat to business growth and expansion - and even the survivability of many firms.

Simply put, these rules will take affordable energy offline for businesses and replace it with costlier and less reliable sources.

These costs have severe consequences for business owners, so the question arises as to the benefits produced.

EPA Administrator McCarthy pledged that the agency’s carbon rulemakings will “protect the health of our families and future generations.”

But the EPA has admitted its proposed rule for new power plants “will result in negligible CO2 emissions changes” by 2022. And McCarthy herself has said that unilateral action to address global climate change will have minimal effect.

As she told the House Energy and Commerce Committee, “I think what you’re asking is can EPA in and of itself solve the problems of climate change. No we cannot.”

The International Brotherhood of Boilermakers put it best: “The unilateral destruction of the American coal industry will not solve global climate change.”

One of the most troubling aspects of the president’s climate agenda is the administration’s attempt to arbitrarily inflate the benefits of its global warming rulemakings.

In a secretive process, several agencies dubbed the “Interagency Working Group” established a highly speculative cost estimate called the “Social Cost of Carbon” to measure the benefits of reducing carbon emissions.

The IWG defines the SCC as “an estimate of the monetized damages associated with an incremental increase in carbon emissions in a given year.”

It is intended to include (but is not limited to) “changes in net agricultural productivity, human health, property damages from increased flood risk, and the value of ecosystem services due to climate change.”

The administration’s SCC is based on flawed modeling and mistaken economics. The projections about future damages from climate change are highly speculative.

The so-called “Integrated Assessment Models” on which these projections are based have, to quote Professor Robert Pindyck of MIT, “crucial flaws that make them close to useless as tools for policy analysis.”

And these models were not subject to appropriate peer-review, as required by the Office of Management and Budget.

The process used to calculate the SCC remains shrouded in secrecy and fails to live up the president’s claims that he would oversee “the most transparent administration in history,” as well as transparency requirements established by OMB.

According to a petition filed last fall by a coalition of business groups, OMB “has not revealed the identity of the participants or any information from which to make an assessment as to the participants’ expertise or their qualification to participate in a group tasked to estimate the SCC.”

“The public does not even know,” the groups contend, “whether all the IWG’s listed agencies and entities provided personnel or what levels of engagement each of the agencies actually had in the development of the SCC Estimate. The public does not know whether or how government contractors were used in the development process.”

Whether it’s bureaucratic secrecy, higher energy costs, flawed economics, or the prospect of fewer jobs, shuttered firms or lost opportunities, there are plenty of reasons why America’s small business owners and entrepreneurs oppose the president’s Climate Action Plan.

It’s time for the president to change course and pursue a different strategy, one that encourages domestic energy production and investment in new technologies that will help drive efficiency and innovation.

And he should enact policies that support private enterprise, entrepreneurship, and improve the capacity of America’s businesses to compete in the global marketplace.

Karen Kerrigan is president and CEO of the Small Business & Entrepreneurship Council. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions for editorials, available at this link.
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