The Consumer Case for the Clean Power Plan

September 28, 2016
Guest Post

In February, the Supreme Court of the United States stayed implementation of the Clean Power Plan, which provides the EPA with its best chance to cut future greenhouse gas emissions. On Tuesday, Sept. 27, the United State Court of Appeals for the District of Columbia Circuit will hear oral arguments in a consolidated case, known as West Virginia, et. al. v. EPA. This case will determine whether it is within the EPA’s power to regulate air quality by setting strict standards for carbon emission. ACS invited experts to explore the issues that will be presented before the Court.

by David Arkush, Director, Congress Watch, Public Citizen

We are often told that environmental concerns are akin to luxury goods that we cannot afford. Protecting the environment has a cost, the story goes and we will pay it in higher prices. Opponents of the EPA Clean Power Plan have made this type of claim, in some of its more extreme incarnations, central to their legal challenge in West Virginia v. EPA.

According to a group of local chambers of commerce and manufacturing associations, the Clean Power Plan will cause “economic disaster”—largely due to higher electricity prices—in which “thousands of businesses” will “lay off workers or close their doors entirely.” Local Bus. Br. 23–24. In the words of the 60Plus Association, a Koch-Brothers-affiliated group that purports to represent seniors, the rule will cause people on fixed and low incomes to “suffer greatly” from “grinding, day-to-day deprivations.” Id. at 12–13. I will turn back to these arguments in a moment. But first, it is worth raising something important that the challengers and their amici completely ignore: the harms of climate change.

Climate change is already damaging American consumers and businesses and it threatens massive future harm. By spurring more extreme weather events, climate change will cause trillions of dollars’ worth of damage to property and infrastructure. A 2014 analysis projects $525 billion in damage to coastal property alone, in just the next 15 years. The damage from extreme weather will, in turn, force businesses to raise prices and governments to raise taxes. Drought, floods and other weather events will raise the price of basic needs like food and water while lowering their quality. In addition to being poorer, we will be less healthy, burdened by more heat-related and food-, water- and insect-borne illnesses.

Similar harms will occur abroad—indeed, far worse harms in many places. And some of it will likely reverberate back to the United States. In some areas, land that hosts millions of people will become far less hospitable and or even uninhabitable. Extreme weather, food and water scarcity, increased illness and the other harms of climate change will lead in some parts of the world to mass migrations, government instability and increased terrorism and other forms of violence. It is no wonder that the Defense Department said in 2014 that climate change poses “immediate risks to U.S. national security.”

The Clean Power Plan will reduce these harms by mitigating climate change. The challengers ignore this wider view. But it is senseless to discuss the rule’s effect on consumers or businesses without considering the grave harm that they face from climate change.

Even if we limit our empirical inquiry to the challengers’ preferred ground and consider only the Clean Power Plan’s effects on electricity costs, their arguments against the rule are meritless. Part of the problem is faulty accounting. The challengers rely heavily on a discredited, industry-funded “study” that is riddled with basic flaws like using outdated cost numbers and treating the purchase of emissions allowances as costs to the electricity sector without acknowledging that for every buyer of an allowance, there is a seller receiving the money. This is akin to claiming, say, that my annual cell phone bill costs “the economy” hundreds of dollars without recognizing that a wireless provider—very much part of “the economy”—is receiving the money.

Another problem is incomplete analysis. The EPA projects that electricity prices will rise modestly under the Clean Power Plan. The 60Plus Association wants the conversation to stop there and for that reason it goes on at length about the terrible harm of higher prices like a magician working a misdirection trick. To find the rule’s actual effect on business or consumer electricity costs, we need to look further and consider how much electricity people will use. Not coincidentally, they will use less. The rule will spur improvements in energy efficiency, which means using less power to do the same activities. Indeed, these energy efficiency improvements are one of the things that higher electricity prices will fund. As a result of better efficiency, people will use less power—so much less that electricity bills will go down even if the price of electricity is higher.

We analyzed the Clean Power Plan on a state-by-state basis and found that electricity bills will be lower under the rule than a business-as-usual scenario in nearly every state by 2025 and in all states by 2030. The amount of savings in a given state will depend on a few factors. One is whether the state chooses to meet its Clean Power Plan goal by measuring the mass of carbon pollution emitted or the rate of carbon pollution per megawatt hour of electricity produced. In the mass-based scenario, we found that a typical household in the best-performing states would see a 7.3 percent reduction in bills, which means paying about $60 to $80 less for electricity annually. Under the rate-based scenario, the reduction is 19.9 percent, for a savings of $190 to $272. (It is also worth mentioning that our analysis is conservative in several respects. People may see even greater benefits.)

Another important factor is how states choose to implement the Clean Power Plan. The rule allows states to choose how to meet their carbon-reduction targets. Our studies consistently suggest one particular strategy: States will get the most bang for their buck by focusing foremost on improving energy efficiency. Using less power is by far the cheapest and most effective way to curb carbon pollution and mitigate climate change.

The answer to whether we can afford the Clean Power Plan is a resounding “yes.” In fact, it will make money for consumers and businesses by lower electricity bills. What we really cannot afford is climate change.