EPA's costly rules will cost jobs and setback nation's economic recovery

Posted: Friday, December 17, 2010

Our nation is in a high stakes race with China to develop clean energy technologies but we are falling behind. It may be hard to remember now, but we surprised the world years ago by overtaking Russia in the space race, and we can surpass China now if we make some small but important changes in government energy policy.

While our industries, universities and research centers have achieved great technological advances through innovation, some of our energy policies are slowing progress, and we are currently stuck in neutral.

The Obama Administration seems committed to the idea that in order to achieve breakthroughs in the development of technologies for low-carbon energy sources, we must raise the cost of fossil fuels.

Thus, the Environmental Protection Agency is preparing to regulate carbon dioxide emissions from power plants and large industries beginning in January. The agency maintains power plants and factories can reduce emissions.

Since coal accounts for more than half of the electricity produced in the United States, and no technology for capturing and storing carbon power-plant emissions is commercially available yet, the EPA would force utilities to shut down many coal plants and use alternative energy sources instead.

EPA's plan is troublesome. Our nation is finally beginning to emerge from one of the worst economic downturns in many years, and raising the cost of burning coal and other fossil fuels will stall the recovery.

The cost of switching fuels for utility companies will be in the tens of billions of dollars _ and it will be passed directly to businesses and households in the form of higher electricity prices. Thousands of U.S. jobs could be in jeopardy.

If the EPA proceeds with carbon regulation and power plants are forced to close, energy costs will climb and companies will have less money available for the very research on clean-energy technologies that we need in order to stay competitive with China and other countries.

The Obama Administration's policy of picking winners and losers in energy development is really not helpful. It should stop subsidizing renewable sources like solar thermal power, wind energy and biomass that can't compete in the marketplace. Solar and wind energy can only provide energy intermittently at best, and even with heavy subsidies, they still account for only a small fraction of America's energy production.

The need for energy technologies that are reliable and affordable is too great to allow ideologues and government bureaucrats to stop the country from doing what needs to be done.

Private industry needs the freedom to innovate and discover new technologies. Over the past five years, oil and natural gas companies have developed safe and efficient techniques to drill through shale. Through a combination of hydraulic fracturing and horizontal drilling, companies can now reach enormous deposits of natural gas in Appalachia, Texas, Louisiana and other regions of the country. And some of the same techniques are now being used to access large deposits of oil in western North Dakota.

This advance in drilling technology has reduced market prices dramatically and made natural gas the new fuel of choice.

Because natural gas produces 60 percent less carbon than coal and no mercury or other particulate emissions, its use as a fuel for electricity production is certain to grow. It's reliable. It's clean. And it's ushering in a low-carbon future at a fraction of the cost of government regulation.

A free market can deliver the energy Americans need. Congress needs to make sure the EPA doesn't sabotage that process with costly, ideological rules.

• Mark J. Perry is a Professor of Finance and Business Economics in the School of Management at University of Michigan-Flint and a visiting scholar at the American Enterprise Institute in Washington, D.C. Readers may write him at UM Flint, 4173 WSW Building Flint, MI 48502-1950.



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