New EPA Air Toxics Regulations

Will they create jobs?

By Jason Hayes, American Coal Council

At the 2011 Spring Coal Forum in Clearwater, FL, we heard the Environmental Protection Agency’s (EPA) perspective on new environmental regulations that are set to impact the coal industry in 2011 and beyond. Then, on March 16, EPA officials released their new “air toxics” rules to mixed reviews from industry and financial experts. While many are concerned that the new rules will strike another blow against a struggling power sector, costing jobs, and requiring massive outlays of capital for upgrades and/or the closures of many existing plants, all for minimal environmental gains, others are claiming the rules will provide a stimulating effect and on balance will actually create new jobs.

PERI & CERES

A recent study by CERES and the Political Economy Research Institute (PERI) at the University of Massachusetts sides with the notion that the incoming EPA regulations will be a boon to the power industry and the national economy.ⁱ The study authors claim that the incoming air toxics rules will create hundreds of thousands of jobs as industry budgets approximately $200 billion for upgrades to emissions reduction equipment on the 1,300+ boilers operating around the country. The study authors claim that this new industry activity will require 1.46 million person years – 640,000 years of direct and 820,000 years of indirect jobs – of labor over the next five years, enough to create approximately 290,000 full-time jobs.

The authors assert that industry “investments,” which are driven by the EPA’s new air quality rules, come at a “critical moment for a struggling economy.” They also claim previous investments in emissions reduction equipment have improved the environment with little to no impact on electricity costs.

Investments in emissions reduction have certainly improved air quality over the past forty yearsⁱⁱ, The reality, however, is that electricity rates in many states were kept stable through a mix of industry-wide efficiency measures, stable fuel pricing (from the coal sector), a growing reliance on coal as a low cost baseload fuel across the countryⁱⁱⁱ, and continued depreciation of existing generation stock.

Arguing that the imposition of strict and expensive regulation helps keep electricity prices low and create new jobs, however, is nonsensical. That argument ignores the basic fact that utilities are producing goods and services and that by making the production of those goods and services more difficult and costly, the EPA is, by definition, making the output more expensive and less efficient. One cannot reasonably claim that a more expensive, less efficient operation can produce more jobs, at the same prices, as an efficient, low-cost operation.

Moving from that point, the argument about whether or not society wishes to have higher or lower costs, and more or fewer energy generation options in order to make the local environment some degree cleaner can be taken up. If the study authors had argued that, although expensive and costly in terms of overall employment, strict new environmental regulation is a worthwhile investment for environmental reasons, they would have had a defensible policy argument, which one could engage on a sensible risk/benefit, moral, or philosophical basis. However, that is not what they have done. It would appear that the authors overlooked some basic economic realities when preparing their study.