PRESIDENT OBAMA’S global warming strategy will cut the country’s climate-change-inducing greenhouse emissions significantly — but at some cost. That’s the upshot of a new Energy Information Administration (EIA) analysis of the Environmental Protection Agency’s landmark Clean Power Plan, which, once finalized, will be at the core of the president’s strategy to reduce U.S. carbon-dioxide output.
The report underscores a fundamental truth about the U.S. stance on global warming: The nation’s plan has merit, but it is a second-best policy that the country is stuck with because Congress is too cowardly or unwise to endorse a better one.
The Clean Power Plan will set emissions targets for every state’s power sector, and the EIA reckons that they will be effective. The sector’s carbon-dioxide emissions will drop to 34 percent below 2005 levels by 2030. The country will see a broad move away from coal, the biggest environmental villain in the electricity industry. Though many coal-fired power plants are scheduled to close anyway because they are old, inefficient or in violation of other clean-air rules, the plan will roughly double the retirements. To pro-coal politicians, that sounds like a nightmare. But it is a necessary transition, because coal-fired power plants are dangerous to the atmosphere as a whole and to the local air.
Utilities will replace coal with cleaner burning natural gas, especially in early years, and carbon-free renewables, which will become increasingly prominent in later years. This shift won’t be easy. The EIA projects that electricity prices will increase between 3 percent and 7 percent in early years as utilities invest in new, cleaner technology. As time goes on, average prices will return to around the levels they would have been without the plan, though the effect will not be even across regions: A band of states in the South will see a more persistent increase in electricity prices.
These figures don’t necessarily translate into higher energy bills. States will invest in efficiency programs that reduce energy use, and people will waste less electricity, too. The bottom line, the EIA finds, is that electricity bills will be slightly lower by 2040 than they would have been otherwise. There will be economic costs over the next several decades, but they won’t be prohibitive: The policy will shave off 0.17 percent to 0.25 percent of GDP between 2015 and 2040 — and that’s a cumulative figure, not an annual loss.
This picture is more negative than the one the EPA painted when it proposed the Clean Power Plan. The agency projected that energy costs would be lower, and it calculated substantial public health benefits that offset the economic costs, which the latest analysis doesn’t attempt to quantify. By either calculation, though, the policy appears to be an acceptable path to significant emissions reductions.
Acceptable, but not ideal. Any economist will tell you that the most efficient way to reduce emissions is to put a price on them and get out of the way, allowing consumers and businesses to wring carbon out of the economy without grandiose central planning or favor to preferred interests. Congress would have to approve such a plan, and lawmakers have dodged the climate issue for decades. Until that changes, the Obama administration’s approach is the only option.
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