It’s just a three-year span, but from 2010 to 2012, U.S. CO2 emissions declined while both gross domestic product and the number of U.S. jobs rose. (Sources: <a href="http://www.eia.gov/totalenergy/data/monthly/archive/00351309.pdf">Energy Information Administration [pdf]</a>, <a href="http://www.multpl.com/us-gdp-inflation-adjusted/table">multpl.com</a>, and the <a href="http://data.bls.gov/pdq/SurveyOutputServlet?request_action=wh&amp;graph_name=CE_cesbref1">U.S. Bureau of Labor Statistics</a>)

Obama’s New Carbon Rules: What Price Regulation?

June 10, 2014
7 min read

Can good economic times roll while carbon emissions decline? Maybe so.

CO2 and the Economy
It’s just a three-year span, but from 2010 to 2012, U.S. CO2 emissions declined while both gross domestic product and the number of U.S. jobs rose. (Sources: Energy Information Administration [pdf], multpl.com, and the U.S. Bureau of Labor Statistics)

proposed new rules

under the auspices of the Clean Air Act

Four Key Takeaways From Proposed U.S. Power Plant Rules

But not everyone is waiting for the official comment period to weigh in. And the feedback so far has been predictably varied.

Many in the green community have hailed the proposed rule as an historic step in the right direction although some (see here and here) have criticized it as not going far enough. Even some not in the green contingent have praised it. And overall, a Washington Post-ABC poll indicates that an overwhelming majority — 70 percent — of Americans favor limiting “the release of greenhouse gases from existing power plants in an effort to reduce global warming” (a result similar to the percentage of Americans recently polled who consider global warming to be a serious problem). (See related: “Key Question on Obama’s Push for Climate Change: Will It Matter?“)

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There are also lots of folks who are very, very unhappy with the proposed rule. Their primary complaint being that the rule will spell economic disaster — slow the economy, kill jobs, and raise electricity rates.

“We will introduce bipartisan legislation that will prevent these disastrous new rules from wreaking havoc on our economy in West Virginia.” —U.S. Representative Nick Rahall (D-WV)

“Today’s announcement [about the proposed power plant rules] is a dagger in the heart of the American middle class, and to representative Democracy itself.” —U.S. Senate Minority Leader Mitch McConnell (R-KY)

“Today’s proposed rule by the EPA to cut greenhouse gas emissions from existing power plants will cost Americans a fortune, to the tune of $51 billion in lost economic activity and 224,000 lost jobs per year. While the President and EPA will tout the plan’s flexibilities, it will result in cap-and-trade through regulation, one of the largest tax hikes that the American people have rejected for over a decade.” —U.S. Senator James Inhoffe (R-OK)

“The New Anti-Coal Rules Will Cut Jobs and Hurt the Economy” —U.S. Senators John Barrasso, (R-WY) and Heidi Heitkamp (D-ND), in an opinion piece in the Wall Street Journal

It’s interesting to note that many of the people decrying economic doom from these new carbon rules are the very same people who for years and years have denied the scientific facts of climate change. What a coincidence, huh?

The idea that forcing a reduction in CO2 emissions will lead to economic distress is not unreasonable. We live in a world fueled by fossil fuels, and weaning ourselves off them is going to be difficult. True.

But How Difficult? And Does Difficult Mean Too Costly?

A number of very smart people have been using facts and figures to argue that it probably won’t be that difficult at all nor too costly. Chief among them has been New York Times columnist and Nobel Laureate Paul Krugman, who has dismantled much of the naysayers’ arguments. Perhaps his best is the undressing he does on the Chamber of Commerce.

Chamber of Commerce Takes Aim

The U.S. Chamber of Commerce, whose motto is “Standing Up For American Enterprise,” has rarely if ever seen an environmental regulation it liked. The group’s “Environment” web page claims that

“an avalanche of environmental regulations has made it increasingly difficult to build and develop in the United States.”

And so it’s not all that surprising that the chamber is opposed to the EPA rule. To bolster its opposition, the business-friendly group commissioned an economic analysis [pdf] of the impact of the new rule, which it released before the proposed rule was actually proposed. Slick. The analysis, conducted by IHS Global and based on a plan that the Natural Resources Defense Council had proposed, concludes [pdf] that the

“rules threaten to suppress average annual U.S. Gross Domestic Product (GDP) by $51 billion and lead to an average of 224,000 fewer U.S. jobs every year through 2030.”

Yikes, that sounds really bad — it can never be good when something “threatens.” The thing is, as Krugman so deftly points out, these numbers are not threatening, they’re paltry. The $51 billion cited is about 0.3 percent of today’s GDP; and 224,000 jobs represent less than 0.2 percent of the total number of U.S. jobs today. Keep in mind, this is from the Chamber of Commerce.

If these are the most dire statistics the anti-regulation business organization can come up with to shoot down the new regs, I’d say they’re shooting with blanks.

But Consider What’s Happened Right Here in the USA

Of course, all the predictions on the economic impact of the new rules are just that — predictions based on highly fallible economic models. Is there any real data to turn to that might be instructive? As it turns out, there is.

A recent blog post on the New York Times showed that the nine states in the Northeast that have been participating in the Regional Greenhouse Gas Initiative (RGGI), an interstate cap-and-trade system for power plant emissions, have experienced greater rates of economic growth while also having much greater decreases in emissions than the other states in the union. Specifically:

“Since 2009, the nine states have cut their emissions by 18 percent, while their economies grew by 9.2 percent. By comparison, emissions in the other 41 states fell by 4 percent, while their economies grew by 8.8 percent.”

And there’s the little three-year snapshot above of the American economy from 2010 to the end of 2012, when the nation as a whole saw GDP rise, jobs grow, and emissions decrease. A little trend even the conservative American Enterprise Institute took note of as a “real American triumph.”

Now, you can argue that this is cherry-picking, that this has been a special time — a time when the nation switched from a high-carbon fuel (coal) to a low-carbon fuel (natural gas) because of technological breakthroughs (fracking and horizontal drilling), when Americans elected to drive more fuel-efficient cars and drive less, and when we made major investments into renewable energy (see here and here). And you know what? You’d be right. These are special times. Let’s let the special times roll.

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