Energy Policy is Taxing Manufacturing
Our focus on energy in June again shines a light on the impact of proposed government policy on industry. It’s hard to cover it all in one page, so I’ll try to focus on what’s most important. Reviewing past June editorials will help remind readers about whether science supports green policy.
A review of the President’s $4 trillion 2015 budget helps us to see the priorities of the Obama administration’s last two years. The budget calls for increased spending ($7.4 billion) for renewable-energy research and development, which is an increase of 14% over what Congress had enacted. Additionally, tax credits would be extended for the wind and solar industries. A new $4 billion fund would be enacted to help states cut emissions. The White House also wants to provide $1.29 billion to advance the Global Climate Change Initiative.
In addition, the budget proposes tax increases on U.S. oil and natural gas development. Doesn’t extending tax credits for wind and solar and increasing taxes on oil and gas help pick winners and losers? The government should not be in that business. The budget also proposes a 6.2% increase in funding for the EPA and 9.5% for the Energy Department.
Awash in Regulations
The EPA may need that additional funding to keep up with all of the proposed rules and regulations. These rules include cutting CO2 as well as ozone. The Obama administration plans to require states to reduce CO2 emissions from power plants by 30%. EPA estimates the energy industry will spend $8.8 billion annually to comply, but independent consultants believe the cost will be $177 billion by 2020 ($680/year for a typical household).
We need to look no further than New England to see the impact of this type of regulation. As utilities there move from coal power to natural gas – 15% in 2000 vs. 46% in 2013 – the infrastructure has not even had a chance to keep up. The costs of these changes also must be passed along to consumers, so electricity costs this winter at the largest utility in Massachusetts were up roughly 60% from the previous winter. Analysts say three things are making electricity more costly: retiring coal plants, wind and solar power and aging/inadequate infrastructure.
These increased costs are not only affecting consumers in New England. Businesses are feeling the impact, and power plants in Wisconsin are another example of the EPA’s burden. Alliant Energy’s energy-generation costs have gone up since 2011 due to EPA rules requiring pricey pollution controls. Last year, Alliant installed scrubber systems to filter small amounts of mercury. By 2017, Alliant expects to spend $1.4 billion ($1,400 per customer) to meet air-quality rules.
The results of policies such as those proposed by our government can be seen by looking to Europe. Germany has moved so far toward renewables that viable sources of clean power – the country’s 17 nuclear plants – have been shut down. Unfortunately, solar and wind cannot keep up with the demand, so Germany has reverted to generating electricity by using brown coal. In 2013, they used more coal than any year since 1990. In spite of this (and because of it), Germans are paying three times as much for residential electricity as Americans.
The British steel industry is being impacted by green policies, which is increasing energy costs by 33%. While demand for steel in Britain rose by more than 10% last year, imports rose by 20% because foreign producers were able to provide it more cheaply.
The EPA’s new ozone standard – 60-70 parts per billion (ppb) – would be “the costliest regulation in U.S. history,” according to a National Association of Manufacturers (NAM) study. The report estimates that reducing the current ozone standard of 75 ppb to 65 ppb would cost $1.1 trillion between 2017 and 2040 for compliance. They estimate the rule would reduce U.S. GDP by $140 billion and result in the loss of the equivalent of 1.4 million jobs per year.
As a reference, the proposed ozone standards are below those naturally occurring in the Jackson Hole, Wyo., area.
We urge those in our energy-intensive industry to do your diligence and be vigilant.