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The EPA as Energy Master
The agency sees itself as central planner of the new clean-energy economy.


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Kathleen Hartnett White

The imperial EPA has once again raised its scepter, this time proposing the first hard caps on carbon dioxide emissions from coal-fired power plants. The proposed coal rule merits a deeper assessment than it has yet received. The impacts of this and other EPA rules targeting coal go far beyond the coal industry. The EPA is undermining the very foundations of economic productivity.

The EPA’s first group of greenhouse-gas rules, which were hastily promulgated in 2010, require only a relatively light increase in the burden placed on power plants for the purpose of increasing energy efficiency, for now. By contrast, the coal rules proposed on September 20 — called New Source Performance Standards — are the EPA’s first direct regulation of carbon dioxide (CO2). The rule’s numerical limits for emissions of CO2 from any new coal-fired power plants are commercially unachievable and lay the groundwork for the final blow to coal: the future demand for an impossible reduction of CO2 from existing power plants. In essence, the EPA is proposing the de facto elimination of the coal-fired plants that have provided 40 percent of America’s electricity over the last twelve months.

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The EPA’s standards for coal plants are unachievable because use of the much-ballyhooed technology called carbon capture and storage (CCS) is infeasible on a large scale. The EPA’s own studies agree that CCS is not commercially viable. But never mind, says the EPA, CCS has been adequately demonstrated.

No one in the business of generating electricity believes CCS is anywhere near commercially demonstrated — no one, that is, who hasn’t just received a federal loan guarantee of half a billion dollars. Several heavily subsidized small pilot projects already have failed miserably, and the remaining projects, supported by more of those millions in loan guarantees and grants, are incomplete without evidence of viability. When a carbon-control technology must utilize 50 percent of the electricity generated by the plant, the enterprise simply is not viable.

The EPA is no longer acting within its authority to protect the environment and human health. Instead, it has arrogated to itself the right to dictate the nation’s energy infrastructure. Shirking the role prescribed by Congress when the agency was created in 1970, the EPA is taking on the more exhilarating role of central planner of the new clean-energy economy. The EPA concedes that the CO2 rule will not reduce CO2 emissions but claims that it is still justified because it reinforces the market’s trend toward investment in clean energy.

This trend, however, was created by government subsidies and EPA regulation, not by consumer demand. When pressed to justify the rule, Administrator Gina McCarthy said it will enhance the United States’ position in negotiations for a global treaty. So now federal agencies promulgate rules with no benefits in order to quash a major American industry because this will facilitate global governance of energy?

In his new book, Knowledge and Power, George Gilder coins the term “regnorance” (“regulatory ignorance”). The EPA’s CO2 regulation reflects the bureaucracy’s ignorance of the basic function of the energy economy. As Gilder distills it, regulation replaces the market’s knowledge with government power.

This kind of regulation is far more damaging to markets than any direct compliance costs for industry. The EPA’s new coal rule — which, according to the rule’s impact analysis, does not entail explicit compliance costs — turns the generation of electricity from an enterprise focused on productivity, efficiency, and innovation to an industry that must first and last serve the government’s purposes regardless of cost or productivity. And even if the regulatory dictates were pricey but achievable, the regulatory morass forces businesses to operate more like the bureaucracy that imposed the regulation than like competitive enterprises.

Production increasingly must defer to the tail-chasing administrative work of certifying records and then certifying the certifications for the federal masters. Title V of the Clean Air Act requires bizarrely detailed and repetitive records of compliance with “all applicable regulatory requirements,” which turn out to number in the thousands. A minor deviation in record-keeping can spur criminal penalties against a CEO for unintentional administrative omission. Entrepreneurial creativity and risk-taking have little room to maneuver in the straitjacket of centralized economic planning.

At least the Clean Air Act reflected an assumption of economic freedom in a capitalist democracy. The law, enacted more than 40 years ago, allows private actors — not the EPA — to choose energy source, product, and process. The EPA’s authority is limited to imposing the best pollution-control technology that is commercially achievable for the industrial process in question — not potential technology on the drawing board or heavily subsidized pilot projects in limbo.

Around 1800, as the Industrial Revolution got underway in England, global income per capita, population, life expectancy, and emissions of CO2 began a dramatic increase that continues to this day. In 1800, human life expectancy was 25 to 30 years, because 30 percent of children died before they were 15. Today, global life expectancy is 68 years and, in the most prosperous countries, 79 years. Global income per capita has increased at least elevenfold, and for the U.S. perhaps 18-fold.

It is impossible to explain these gains in income and human well-being without acknowledging the productivity unleashed by fossil fuels. Fossil fuels have vastly improved the material conditions of human life. Before coal was harnessed in the European and American Industrial Revolution, mankind’s source of energy was severely limited to what living plants produced through photosynthesis  – and our quality of life was limited too. Energy-dense fossil fuels, derived from ancient plant and animal life compressed in the earth for millions of years, exploded the supply of energy available to man and remain essential to our prosperity.

Renewable energy accounts for a small sliver of global energy consumption, is dependent on fossil fuels as a backup because wind and solar power are inherently intermittent, and may generate more CO2 than what they replace as a result of the emissions in the course of manufacturing and transporting wind turbines and solar panels. Natural-gas or coal-fired generating units must idle so that they can ramp up if the wind stops blowing or the sun stops shining. The electric grid melts without steady-state generation of electricity. Where renewable energy has been imposed by government regulation, most aggressively in Europe, electricity prices have risen so sharply that, according to Der Spiegel, electricity is increasingly viewed as a luxury by middle- and low-income families.

Richard Stewart, a founding trustee of the Environmental Defense Fund, noted in the Columbia Journal of Environmental Law in 1988 that the “EPA’s regulation has grown to the point where it amounts to nothing less than a massive effort at Soviet-style planning of the economy.” After 25 years of incrementally increasing its interference with the economy, the EPA is now imposing central planning by decree.

— Kathleen Hartnett White is distinguished senior fellow and director of the Center for Energy and Environment at the Texas Public Policy Foundation.

 



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