Republicans Demand EPA Ditch Economic Studies That Are ‘Divorced From Reality’

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Michael Bastasch DCNF Managing Editor
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Republican lawmakers are demanding the Environmental Protection Agency do a thorough economic analysis of its proposed rule to limit carbon dioxide emissions from coal-fired power plants.

Republicans have slammed the EPA in the past for underestimating the economic costs of agency rules and using shoddy data. In August, a lead House Republican sent a letter to the EPA demanding better analyses of their carbon dioxide rule. Now that same Republican is again demanding the EPA ditch its economic models and thoroughly study the carbon rule.

“EPA’s sweeping mandate requires a fundamental restructuring of our nation’s energy system; it transforms how electricity is both produced and used,” Texas Rep. Lamar Smith wrote in a letter to the EPA. “The broad new authority EPA claims raises critical questions about our ability to meet demand for reliable, affordable electricity.”

“Systematic biases and major omissions in EPA’s limited evaluation produced a cost-benefit analysis divorced from reality,” Smith, who chairs the House Science Committee, wrote in his letter. “Consequently, EPA’s Regulatory Impact Assessment fails to assess whether the proposed rule will achieve meaningful benefits and, more importantly, whether the benefits are worth the heavy cost.”

Since the EPA released its rule cutting carbon dioxide emissions from existing power plants 30 percent by 2030 back in June, independent studies have come out showing the agency underestimated the economic impacts of the rule. A recent report released by NERA Economic Consulting on behalf of the energy industry found that EPA’s rule will cost $366 billion over 15 years and cause electricity price spikes in the double digits in 43 states. These compliance costs and electricity price hikes are much larger than EPA estimated for its carbon rule.

The EPA has also been slammed for using outdated data to estimate the impacts its rules will have on employment. The GAO found in August that EPA was using 20-year-old employment data that may not have even represented the industries being regulated.

The GAO also found that EPA underestimated the impacts of its mercury regulation, the Mercury and Air Toxics Standard. EPA originally estimated the rule would only force 4.7 gigawatts of coal-fired power capacity to shut down, but now GAO says that 42 gigawatts have shut down or announced plans to shut down since 2012 due to MATS and uncertainty over other rules.

EPA also said its MATS rule would only cause electricity prices to spike between 1.3 and 6.3 percent, but some areas are facing 21 percent electricity price rises due to MATS. Other government estimates say MATS and other EPA finalized rules could cause power prices to rise seven percent and natural gas prices to jump 150 percent.

“The American people deserve the facts,” Smith said. “This is impossible without a comprehensive, real-world analysis of your proposed regulations. We cannot afford to ignore inconvenient details when the truth hangs in the balance.”

The EPA responded to Smith’s August letter in September, saying the agency used complex economic models to come up with the costs and benefits of its rules. The agency also said it was committed to making its models better by getting feedback and input from a wide range of sources.

“The modeling platform the EPA uses … is reproducible, transparent, and peer-reviewed,” Janet McCabe, head of the EPA’s air office, wrote back to Smith last month. “The EPA has used it for over two decades, and states, industry, and non-profit groups use it as well.”

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