This newsletter addresses EPA’s proposed Clean Power Plan regulatory and compliance developments.
Welcome to West Monroe Partners’ Clean Power Plan Regulatory Tracker – where we track and preview federal and state regulatory policies and developments as they affect the power sector. The newsletter addresses continual coverage of EPA’s proposed Clean Power Plan regulatory and compliance developments.
The criticism of US EPA Administrator, Gina McCarthy’s claim that the Clean Power Plan will not increase costs or cause the loss of US jobs is part fact and part fiction. The Clean Power Plan (CPP) sets an overall target of reducing US carbon dioxide (CO2) emissions from electric generation by 30% from 2005 levels by 2030. EPA’s proposed “best system of emissions reduction” (BSER) strategy is being applied in CPP to identify “blocks” of measures for states to consider in developing their compliance plans for meeting CPP CO2 reduction goals. In the past, BSER had referenced specific technologies and equipment for reducing Clean Air Act named criteria pollutants and demand reducing “softer” technologies or operating strategies. The measures included in the building block definition of BSER are low- and no-cost technologies (defined on a net basis – with benefits exceeding costs), and technologies and strategies traditionally more costly than the status quo e.g., using natural gas and renewables in electric generation in place of coal. With low natural gas prices and renewable resources costs continuing to decline, the coal industry is experiencing disruptions not contemplated even a few years ago.

By some estimates, job losses in the coal mining industry alone have dropped by over 20% in the past two years due to low natural gas prices and the chilling effect on markets of CPP. Murray Energy Corp. recently announced a planned 20% workforce reduction, representing a loss of 1,800 jobs due to market conditions. So yes, jobs are being lost, but such losses are not single-handedly the fault of CPP for which rules are not final and court challenges continue. By some accounts, jobs created in the clean energy industry including energy efficiency, renewable energy and supporting business have exceeded 80,000 in 2013 alone. So yes, jobs are being created, but the net effect of jobs lost and jobs gained resulting from the transformative change in the energy industries will undoubtedly soon be known.

What we are witnessing is a structural and transformative change in the energy industries. Markets adapt quite well to advances in technological and regulatory change – but it takes time. So to criticize EPA and CPP for job losses and cost increases might be a first reaction to the changes occurring, the longer-term play here is a cleaner more resilient economy, but it will not be without economic dislocations and transformation in the near-term. 

Paul A. DeCotis
(646) 998-9147