EPA’s Rules Need to be Rationalized

Last December, the Environmental Protection Agency unveiled new standards that sharply limit emissions of mercury and other toxic pollutants from the nation’s coal- and oil-burning power plants. Shortly, EPA will be issuing similar rules for industrial boilers. If the Utility Maximum Achievable Control Technology Rule (U-MACT) is implemented as proposed, more than 60 coal-fired power plants, currently generating enough electricity to supply 22 million households, will likely be shut down because retrofitting would be uneconomical.

EPA itself has estimated that U-MACT would impose costs of about $11 billion annually on the U.S. economy. National Economic Research Associates (NERA) puts the costs at closer to $18 billion per year for the next 20 years.

The utility industry is already laboring to comply with a myriad of other EPA mandates including greenhouse gas emission reductions, revised air quality standards for sulphur dioxide and nitrous oxide, and new standards for ash and other residuals from coal combustion. Taken together, these regulations will affect about 400,000 megawatts of oil- and coal-fired power generation—almost 40 percent of currently available U.S. capacity. Should all of the proposed implementation deadlines remain unchanged, the reliability of the entire U.S. power grid could be compromised.

With the growing prospect of a double-dip recession, it makes little sense to impose additional costs on the utility sector at this time since these will simply be passed on to businesses and households. Energy-intensive manufacturing industries, one of the few sectors of the economy currently creating jobs, would be especially hard it.

A better approach would be to allow industries and utilities more time to make a smooth transition to the next generation of emissions control technology. A more deliberate schedule for promulgating standards, coupled with a more realistic compliance schedule, would ease the strain on the utility sector and reduce risks to consumers. In addition, a longer compliance timeline might allow for the development of lower-cost control technologies.

It is also imperative that EPA reconcile the various overlapping regulatory requirements affecting the utility sector. A serious cost impact assessment would not merely examine each proposed rule in isolation but instead consider the cumulative cost impacts of all proposals. Anything less could put at risk the economic growth and job creation that depends on reliable and affordable electricity.