NRDC Report on Benefits from Forthcoming Carbon Regulations Makes Outrageous Assumptions

Report-image

On Wednesday the U.S. Chamber of Commerce published a devastating report detailing the negative economic impacts of the EPA’s forthcoming carbon regulations, widely considered to be the most costly and significant environmental regulations in the county’s history.  It is estimated that they will cost the economy on average $51 billion and 224,000 jobs annually through 2030. They will also make U.S. consumers pay $289 billion more for electricity and reduce their disposable income by $586 billion through 2030.

The next day, the NRDC came out with its own report maintaining just the opposite. This report claims that the regulations will bring more than $50 billion in health and environmental benefits, create 274,000 jobs, and save Americans $37.4 billion on their electric bills in 2020 (its test year).

So why the huge discrepancy between the reports? You don’t need a master’s degree in economics to understand that burdensome regulations hurt the economy, kill jobs, and increase prices. To the NRDC’s credit, it doesn’t completely deny this truth and factors some “compliance costs” into its analysis. However, it also makes giant assumptions to try and demonstrate that environmental gains in the form of reduced carbon emissions will vastly outweigh – in terms of economic outcomes – any costs incurred.

To make this point, the NRDC trots out various billion dollar estimates on the social and economic costs of carbon, which it claims the forthcoming regulations will ameliorate. Even if we accept the premise (for a moment) that such a reduction in carbon could have the stated incredible economic impact, there is virtually no chance that such a reduction could occur in the first place. The report’s assumptions that bring about such a low carbon world are utterly fantastical, thus completely undermining the report as a whole. For example:

  • It assumes there will be no additional gas-fired power generation between now and its test year of 2020. This runs up against establishment consensus, which says that the domestic fracking boom and these regulations’  impact on coal power generation will lead to a big increase in gas-fired power generation over the coming years.
  • It assumes widespread use of carbon capture and storage (CCS), a process in which carbon is captured and sent to underground reservoirs for safe storage. However, this technology has yet to be demonstrated at any commercial power plant, and many experts say that the technology is not ready for implementation.
  • It assumes widespread implementation of end-use energy efficiency programs that essentially cap the amount of energy one can use at peak times. Such programs would reduce carbon emissions and keep energy prices low, according to the NRDC.  But it’s highly unlikely that the American public would submit to such controlling energy measures—voluntarily, anyway.

All told, the report assumes that regulations will reduce coal-powered generation from 39 to 29 percent of the country’s energy mix by 2020. What’s going to fill the void? In the NRDC’s telling, “efficiency” will make up the difference. But that’s just a pleasant way of saying “we’ll use less energy.”  That’s a supposition, not a solution—and it’s not rooted in reality.

Filed Under: