This blog was written by Laurie Johnson, Chief Economist at the Climate Center of the Natural Resources Defense Council in Washington DC and was originally published on May 28 via NRDC’s blog Switchboard.
Since EPA was established in 1970, our economy has more than tripled, life-threatening pollutants have been reduced 80 to 90 percent (and some entirely eliminated), and dire predictions of electricity price increases and job losses have never materialized. Clickhere for the evidence, and the reasons why predictions like those being made by the Chamber are always wrong.
The Chamber’s sole purpose is to scare people into believing that carbon standards will cause electricity prices to skyrocket and bring devastating job losses. But if EPA issues common-sense carbon standards like those proposed by NRDC, we will actually reduceour electric bills by billions of dollars and create hundreds of thousands of new jobs. Tomorrow NRDC will be releasing an economic analysis of our proposal showing exactly that.
The reasons for these positive impacts are two-fold. First, the economic activities spurred by energy efficiency investments employ a lot of workers. That math is simple. Second, reducing energy waste saves money on consumers’ electricity bills. When this money is spent on goods and services produced economy-wide, it creates more jobs than if the same amount of money had been spent on unnecessary fossil fuel generation. That math is also simple. Here is one of many examples of these principles at work.
Turning to the particulars of the Chamber’s analysis, here are some key errors that drive its concocted results:
1) The Chamber claims that energy efficiency is not available to deliver big savings. It simply asserts the energy efficiency gains we have analyzed can’t be achieved, and that their much-smaller efficiency gains are twice as expensive. In addition to our own analysis, here are some other credible studies not funded by the fossil fuel lobby:
- A 2013 study by the United Technologies Corporation, in collaboration with the Rhodium Group, analyzed the impact of a 30% improvement in US building efficiency by 2030. They found that such an improvement is possible with existing technology and design practices and that it would generate $65 billion dollars per year in savings, net of investment costs, for American households, businesses and governments.
- The American Council for an Energy-Efficient Economy (ACEEE) just released a new study demonstrating that energy efficiency efforts alone can reduce emissions to 26% below 2012 levels at no net cost to the economy, and would avoid 600 million tons of carbon dioxide emissions or the equivalent of 494 power plants. ACEEE noted their study was conservative and only looked at a few policy areas: national building and appliance standards, an energy savings target, and combined heat and power systems.
- The electric utility industry’s Institute for Electric Innovation, in their annualSummary of Electric Utility Customer-Funded Energy Efficiency Savings, Expenditures, and Budgets includes forecasts of utility efficiency program investments increasing from about $7 billion in 2013 to $10-14 billion annually in 2025—and that’s business as usual, without carbon standards providing a new reason to expand these programs.
2) The Chamber’s analysis rests on inflated and deceptive electricity growth demand assumptions
- The Chamber artificially inflates US reference case electricity load growth (i.e. how much more generation will be needed to meet future demand), assuming a growth rate of 1.4% per year through 2030. This is 40% higher than the U.S. Energy Information Administration’s (EIA) latest projection of 1% per year through 2030.
- Compounding this manipulation of electricity demand, the Chamber assumes that even with an ambitious carbon policy in place, electricity demand growth will slow only very modestly, to 1.2% per year. The result is that the Chamber assumes a demand growth rate in its policy case substantially higher than what EIA projectswithout a carbon policy. This skewed specification of demand flies in the face of every credible analysis of the effects of programs to cut power sector carbon pollution. Carbon standards mean that more energy efficiency is deployed to replace dirty generation because it is a much cheaper way to meet demand for electricity services.
3) The Chamber’s analysis assumes that markets won’t respond to a strong target, contradicting every credible economic analyses and fundamental economic principles. In the Chamber’s world, the markets it claims to honor either don’t exist or don’t work. When confronted with a constraint, markets almost always find other ways to do the same thing, and often better. That’s exactly what energy efficiency promises. And that’s exactly what protective standards over the last 40 years have given us: cleaner and healthier ways to make things without electricity price increases.
4) Unfounded cost and technology assumptions
- The Chamber assumes high costs for new generation capacity.
- The Chamber assumes $30 billion for “coal unit stranded costs.” This is wrong: these are costs incurred regardless of a carbon policy, i.e. they are not incremental to the policy case. By including them, the Chamber is in effect double counting coal losses, because the cost to replace this capacity is already included in their cost estimate.
- The Chamber assumes there is no opportunity for retrofitting coal units with CCS. In our analysis, we found this to be a modest, but important, contribution to compliance. The Chamber assumes CCS is available, but instead of allowing retrofits to existing coal and gas plants they force the retirement of coal plants. On top of this, the Chamber replaces this capacity with new gas plants with CCS, further driving up their power plant construction costs.
While our proposal projects that energy efficiency will be the primary method to comply with the new standards, hundreds of thousands of jobs would also be created from investments in new clean electricity production. Every year, costs are coming down dramatically for renewables. Wind is now competitive with natural gas and, according to a recent Department of Energy report, solar is rapidly becoming competitive with wind.
The US Chamber of Commerce is the odd man out, dedicated to protecting the fossil-fuel old guard, but out of step with the many others who see the imperative and the opportunity in confronting climate change, including:
* Science: hundreds of public health organizations, thousands of the most respected scientists in the field, and scientific bodies, e.g. the American Public Health Association, the American Lung Association; the National Academy of Sciences, and the International Panel on Climate Change
* The military: national security experts, including the CIA, the Department of Defense, and senior military leaders
* Thousands of small and large corporations whose bottom line has been hurt from climate disruption
* Organizations representing minorities and the poor, groups most affected by climate change with the fewest resources to cope with it
The Chamber wants to make Americans afraid of protecting their lives, the future, and the economy. But protecting our future is our greatest our moral responsibility. The good news is that we don’t have to trade today’s economic well-being to protect a brighter future for our kids. That is the news the Chamber doesn’t want Americans to hear.
Thanks to my colleagues Pete Altman, Aliya Haq, David Hawkins, Dan Lashof, Derek Murrow, and Starla Yeh for their valuable contributions to this blog.