The Environmental Protection Agency’s (EPA) forthcoming climate change regulations for new and existing electricity generating units have been appropriately labeled the “war on coal,” because the proposed limits for carbon dioxide emissions would essentially prohibit the construction of new coal-fired power plants and force existing ones into early retirement.
However, the casualties will extend well beyond the coal industry, hurting families and businesses and taking a significant toll on American manufacturing across the nation. Congress should stop the EPA and all other federal agencies from regulating carbon dioxide and other greenhouse gas emissions.
Driving Energy Prices Up, Economic Activity Down
Coal provides approximately 40 percent of America’s electricity generation. By significantly limiting the use of an affordable energy source, the EPA’s regulations will increase electricity prices for American households. Since low-income families spend a larger proportion of their income on energy, a tax that increases energy prices would disproportionately affect the budgets of the poorest American families.
Higher energy prices as a result of the regulations will squeeze both production and consumption. Since energy is a critical input for most goods and services, Americans will be hit repeatedly with higher prices as businesses pass higher costs onto consumers. However, if a company had to absorb the costs, high energy costs would shrink profit margins and prevent businesses from investing and expanding. The cutbacks result in less output, fewer new jobs, and less income.
Heritage Foundation analysts modeled the economic effects of a phase-out of coal between the years 2015 and 2038. Using the Heritage Foundation Energy Model, a derivative of the federal government’s National Energy Model System, we found that by the end of 2023, nearly 600,000 jobs will be lost, a family of four’s income will drop by $1,200 per year, and aggregate gross domestic product decreases by $2.23 trillion over the entire period of the analysis.[3 ]
Manufacturing Hit Hard
America’s manufacturing base will be particularly harmed by the EPA’s climate regulations. Manufacturing accounts for over 330,000 of the jobs lost. This occurs for a number of reasons.
As more coal generation is taken offline, the marketplace must find a way to make up for that lost supply. The Heritage Energy Model builds in the most cost-effective means of replacing the lost coal through a combination of consumers decreasing energy use as an adjustment to higher prices and increased power generation from other sources.
Manufacturing is an energy-intensive industry, and the impact of the higher energy prices on manufacturing averages to more than 770 jobs losses per congressional district. However, not all regions are affected the same, as districts in Wisconsin, Ohio, Indiana, Michigan, and Illinois are especially hit hard. In fact, 19 out of the top 20 worse off congressional districts from the Administration’s war on coal are located in the Midwest region. In those districts, the manufacturing industry, on average, will slash more than 1,600 jobs by 2023. The table at the end of the paper shows the estimates of the decrease of manufacturing employment per congressional district by 2023.