EPA’s Math: Coal Regs = Coal Jobs

by David Bier on April 3, 2012

in Blog, Features

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The most absurd aspect of the Environmental Protection Agency’s War on Coal is their repeated denials that it’s happening. No matter how many onerous rules they release, each time they claim that the regulation will not only save the environment, but also create jobs in the industry. For example, EPA’s Regulatory Impacts Assessment (RIA) for their mercury regulation known as the Utility MACT—which was (until possibly this week) the most draconian of the coal regulations—argues that the regulation will create almost 10,000 coal jobs.

Specifically, EPA’s Utility MACT regulation requires plants to install “maximum achievable control technology” (MACT)—otherwise known as scrubbers—to remove mercury and other toxins from exhaust. The rule is one of the most expensive in history: EPA estimates it will cost almost $11 billion annually to implement. Already, these compliance costs have led to the shutdown of dozens of coal-fired power plants. Yet, EPA supporters parrot EPA’s claim that this regulation will create thousands of jobs as if it had scientific authority.

EPA’s science is based on a Resources for the Future (RFF) study (Morgenstern, et al) of environmental expenditures in four industries in the 1980s—pulp and paper, plastics, petroleum, and steel—which found “a net gain of 1.55 jobs per $1 million in additional environmental spending” in those industries. EPA then took this formula and just multiplied times the estimated cost of the Utility MACT—$10.9 billion adjusted for inflation—to get their result. They show their work in this footnote on page 9-8 of the RIA:

Highly scientific! In other words, EPA took someone else’s paper, which studied environmental expenditures over three decades old (1971-1991), and applied them to a totally unrelated sector of the economy, the coal industry, and then utilized the old “plug and chug” method. This work wouldn’t survive peer review in a kindergarten class.

Nonetheless, the proposition that industry employment might increase as the result of environmental regulation isn’t totally asinine. The Morgenstern RFF study notes two reasons why environmental regulation might increase employment. First, “environmental regulation raises production costs. As production costs rise, more input, including labor, is used to produce the same amount of output.” Second, “environmental activities may be more labor intensive than conventional production.”

There’s some truth in this analysis. The Utility MACT would require coal plants to hire new workers to install scrubbers and would increase total production costs, one of which will be labor. RFF notes that “less competitive industries with inelastic demand may be less concerned about cost increases associated with regulation.” But coal isn’t a “less competitive industry with inelastic demand.” It, in fact, isn’t an industry at all, as Morgernstern defines it. It is a subsection of an industry, the electricity-generation industry.

Coal is in constant competition with an immediately presentable substitute good in natural gas, while industries like petroleum, for example, have no substitute. Further, Morgenstern writes that “most plants should not be worried about losing business to other plants facing the same regulation,” yet natural gas generators aren’t included under the Utility MACT rule, which gives them an advantage. One study by Exxon Mobile Corp. has found that natural gas will have replaced coal as the leading electricity generator by 2025 due in part to environmental regulation.

Given these facts, it’s hard to see how the Morgenstern study is applicable to the coal industry, and anecdotal evidence about plant closures throughout the U.S. is already supporting the conclusion that RFF’s model doesn’t fit the facts at least in this case. American University professor Michael Hazilla and RFF’s Raymond Kopp have found that in at least some industries, environmental regulation can have a dramatic influence on employment. “All industries experienced declines in labor productivity,” they conclude, “and some sectors experienced declines in employment. These impacts can also be substantial; for example, employment falls 7.6 percent in the motor vehicle sector.”

All this analysis, of course, obscures the more important issue of what the employment and economic impact will be on the rest of the economy, and this, of course, ignores the most important issue of all, which is whether the Utility MACT is necessary at all. As my colleague William Yeatman has pointed out many times in the past, all these economic impacts have been imposed by EPA in order to protect pregnant subsistence-level fisherwomen who consume more than 300 lbs of self-caught fish from the most polluted streams in the United States.

Not only will the children of these theoretical women be saved, says EPA, but they will have jobs at coal plants twenty years from now. Not likely, I’m afraid.

Mark April 3, 2012 at 10:15 pm

Well, let me ask one question having been closer than most on this issue. What happens when you increase the cost of energy? Oh wait, you CREATE jobs… in other countries you EPA idiots! That’s right, why are manufacturing jobs leaving the US? Cost you dimwits, go ahead, save the non-existant fish eating lady. Clowns all of them, but we’ll have to pay the price. Nice article, GW, too bad Americans don’t read!

BobRGeologist April 3, 2012 at 10:16 pm

The EPA is incompetent due to of its seeming disregard of the science involved in its decision to demonize the tiny component gas, carbon dioxide (CO2) by classifying it as a pollutant in our atmosphere, 390 ppm at present. It takes 10,000 ppm to = 1%. Recently I have read that EPA will try to reduce CO2 95% or 20 ppm. This is insane because the technology to do so does not exist and if it were possible , it would have starved all land animal life because Co2 is as essential to plant life as oxygen (O2) is to animal life. Now elemental carbon (soot) Is real pollution. I would recommend defunding this out of control organization.

Leo April 6, 2012 at 6:45 am

Not only power jobs, but what about the supporting trades. We have local pump shops that rely heavily on power plant work. There are truck drivers and train engineers that move coal and flyash for a living, the boiler makers in the Cleveland area…. All but on coal plant is shutting down on Lake Erie in Ohio, what will those people do?

And not to mention the coal miners themselves. If they don’t close the mines down then the only other answer is to put that coal on ships and sell it to guess who? China and guess what they will do with it? Burn it without enviromental controls! Pssssstt! There is no barrier between our sky and China’s. Very nice article!

Ray Smith April 6, 2012 at 4:08 pm

This is my Response and Comments to the E2 Wire – The Hill
Friday, April 06, 2012 on;

“Green groups sue EPA to force coal-waste rules”
By Ben Geman – 04/05/12 02:11 PM ET

The below listed organizations have done a good job of Killing Coal, and have coerced EPA to develop massive over regulations, that will prevent a very inexpensive means of Generating massive Electrical Power here in the U.S. as well as stop factories and home owners, from using coal as a heating source. Without even considering the tremendous financial consequences they will cost, past on to the American consumer!

Because the earth needs a good lawyer
1625 Massachusetts Ave. NW, Suite 702
Washington, DC 20036
Telephone: (202) 667-4500
Fax: (202) 667-2356
Web: http://www.earthjustice.org

Physicians for Social Responsibility
1875 Connecticut Avenue, NW, Suite 1012
Washington, DC 20009
Telephone: (202) 667-4260
Fax: (202) 667-4201
E-mail: psrnatl@psr.org
Web: http://www.psr.org
US Affiliate of International Physicians for
The Prevention of Nuclear Warention of Nuclear War

Some where, hidden in this “study” and the plan to kill Coal, coincide with President Obama’s promises to create millions of Jobs. By converting Coal Fired Generators to N.G. and building more Nuclear Power Plants. Let me say this…..

1. North America has sufficient Coal reserves to last for hundreds of years.

2. Nuclear waste products are 1000 time worse than pollution coming out of a Coal stack.

3. Obviously, some smart people in the above Two organizations has discovered that Coal fired smoke stack exhaust “Fly ash” contains some good metals and toxins in that we can use safely.

4. .All the “Fly ash” that comes from all coal fired Power plants can be put into concrete or gypsum board, or other safe products.

5. I want you all to think of a good worthwhile investment you can make, by hiring a Company such as “Emerson” etal. To formulate a study on how to remove all the suggested toxins and metals from the Coal fly-ash. Which could save the American tax payer billions, perhaps trillions of dollars, before EPA takes the

6. “Fatal leap”, of banning Coal fired power plants? What do you have to lose by putting a Company, such as ↓Emerson in charge, after all, this is what they advertise on TV, with a reputation, and technical staff to go with it, I personally believe they can solve America’s problems, such as we discuss above! After all this administration, over the last couple of years have thrown away billions of dollars on ideas that don’t work! I trust that those people from the group who put together the “Report from Physicians For Social Responsibility and Earth Justice” would agree with my suggestions, before they allow the EPA, to bankrupt America!

I await hearing from you,

Ray P. Smith

Oatley April 12, 2012 at 5:23 am

Rep. Ed Whitley, KY., is building support to review the Clean Air Act in 2013. We should be ready to assist the effort. Certainly, among the variety of issues to “clean up” this runaway agency is the requirement that all analysis cited in their proposed rules should suffer the transparency of Congressional review. Start drafting your list…

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