How Utilities Fail to Predict the Economic Effects of Environmental Regulation

Tina Casey picks up on the findings of a recent report from the Center for American Progress (CAP) that responds to recent outcry by the coal and utility industries over the new, perceived threats in the “war on coal”—namely, “a pair of divisive E.P.A. regulations that are to set new limits on carbon pollution from coal-fired power plants.”

Casey describes the report as “a history of similar warnings about coal regulation”—predictions which failed to account for the positive impact of innovation, including the economic benefits of improved public health. A few examples:

• 1977: "Utilities and related industries predicted an 'economic disaster' from new pollution scrubber regulations. By 1981, the National Commission on Air Quality determined that was wrong, and the bipartisan group had the figures to prove it. The estimated cost of installing new equipment was $16.6 billion in 1978, while the economic benefits of improved air quality ranged from $4.6 billion to $51.2 billion per year."
• 1989: "In response to the acid rain bill, the lobbying group Edison Electric Institute (EEI) issued a detailed report predicting a dramatic rise in electricity rates over a 20-year period. CAP’s own analysis of actual utility rates in 2009 — 20 years later — showed that the prediction was 'flat-out wrong.'"

In response to recent claims by the coal and utility industries that new regulations by the EPA would pass the cost of implementation down to consumers, casey and CAP describe a different reason for potential increases in utility rates: “the main driver of utility rates will not be the power plants or the fuel they use, it will be the urgent need to overhaul the nation’s aging, badly outdated electricity distribution and transmission grid.”